17th December 2018
Hotel experts toasting growth in 2018, and an even bigger 2019
The UK’s leading independent hotel management company, RBH, has experienced a successful year despite the market pressures brought about by political and economic uncertainty.
And Andrew Robb, the company’s Chief Business Development officer, believes the business is in a strong position to top this in 2019 as it heads into the New Year with more new-build hotel openings than ever before – and a keen eye on the challenges and opportunities that lie ahead.
A year of two halves
This year, RBH has fought against a host of external factors impacting on the hotel industry, welcoming substantial growth. And while this has made for an exceptionally busy year that has not been without its pressures, it is a year we can look back on with immense pride. Our team of experts has effectively integrated the extensive, 26-property QHotels portfolio, has overseen the opening of two brand new hotels and has also completed five rebrands to DoubleTree by Hilton within a six-month period.
The latter really has been the stand-out success story of the year, and it has without a doubt set the tone as we head into the New Year. We are focused on building on this success across 2019, with even more growth and a push against some of the more negative forecasts that have been laid out with regards to the industry for the year.”
However, Andrew is not denying the challenges the industry has faced throughout 2018 and accepts that caution must be exercised alongside such optimism, adding: “The industry itself has seen a real mix in fortunes across the last year. RevPAR has been exceptionally strong in some areas, like Birmingham [5.3%], Gatwick [8.5%], Glasgow [5.6%] and Liverpool [6.6%] whilst Edinburgh [-0.3%], Bristol [-1.6%], Heathrow [-0.9%] and Manchester [0.6%] have remained relatively flat, or experienced decline.
Cost pressures are also apparent, with rising property rates and salaries putting pressure on profit margins. However, this is where the demand for hotel management companies begins to increase, as owners look for experts in maximising cost efficiencies and generating strong returns whilst offering guests a first class experience, and that’s what we do best. We’re helping owners navigate challenging times and will continue to do so.”
Looking forward for growth
And in 2019, Andrew highlights, RBH will be helping even more hotel owners deliver returns through forecasted challenging times, resulting in even more growth for the company.
Next year is all about our business growth. We’re set to open seven new-build hotels – the most we have ever overseen in a single year – including the prestigious 200-bedroom Hilton Aberdeen at the new TECA development. The level of activity is testament to the strength and depth of our capital team, and shows the recognition of our vast experience in this area – with more than 40 new-build openings under our belts in the last 20 years.
We’ll also be looking to broaden the already high quality among our wider teams of specialists to ensure we can really make the most of the opportunities that present themselves to us.”
In order to make the most of potential opportunities, and mitigate any possible risks, the team is already reviewing industry trends and expectations for next year.
The impact of Brexit is a complete unknown at the moment, and we will ensure we are able to react quickly to any major economic changes – whether they are positive or negative. If Brexit was to have no major bearing, I personally predict an overall trend similar to 2018, with UK RevPAR growth at around two percent and London at around one percent.
I would expect to see further consolidation among brands and, as the franchised hotel model continues to grow in success, and would also predict mergers among smaller hotel management companies.
One potential challenge that does concern me going forward is the lack of quality hotels available for sale. The appetite for the UK hotel market amongst investors is huge at the moment but, due to Brexit uncertainty and high pricing expectations from sellers, opportunities for these investors to get the returns they are looking for are few and far between.
If, as an industry, we cannot suitably feed this demand then there’s a real risk that another country or sector could attract this investment, leading to an overall decline in investment into the UK hotel sector across 2019.”
Staying true to the heart of the business
But RBH will be ready to meet any challenges it faces head-on, as the company focuses on what lies at its heart.
Investors come to us for advice, and we pride ourselves on providing consistent, good quality counsel – and on being transparent at all times. So, whilst growth is firmly on the agenda for 2019, we would never risk our reputation as trusted advisors in order to engineer any ill-advised expansion that could put investors at risk.
These poor investments – whether through lack of robust due diligence or projects that have suffered from too much financial engineering – put the whole industry at risk. So, although we believe our investor partners will continue to acquire hotels, RBH is a business that is confident enough in its own expertise to also advise when deals shouldn’t be done if the returns are not sufficient – even if that means a slower rate of growth for ourselves.”