PERSPECTIVE: A real estate consultant's view on expanding your hospitality business
As part of our series exploring opportunities for hospitality business owners to expand, we spoke to Julian Troup, Head of UK Hotels at Colliers real estate agents, about the current trends, challenges and opportunities in the hospitality sector.
How do you support hospitality business owners?
Colliers are global commercial real estate consultants with a specialist UK hotel advisory business that handles sales, valuation, consultancy and asset management.
We pride ourselves in spending time with our clients to find out their specific needs and delivering balanced and professional advice in all aspects of the running of their respective hospitality business.
What are the key current challenges facing hospitality businesses from a valuation perspective?
Every hotel business is unique and each should be considered on its own merits and challenges. The industry never sits still, and dynamics and drivers change on almost a weekly basis.
In recent years, the onset of the pandemic resulted in forced temporary closure, followed by a nervous return to trading, and this was then soon replaced by unprecedented demand for ‘staycations’, which was then replaced with a more balanced flow of business. Coupled with this was an increase in the cost base: energy costs, inflation driven excessive costs and staff inflation, exacerbated by a reduction in staff due to Brexit and the difficulty of securing affordable staff accommodation.
As a result, this saw unprecedented revenue and returns replaced with generally reduced profit margins due to the increase in the operational costs. This has left the valuer with the dilemma of trying to work out what trading figures to actually work from.
From your perspective, what are the opportunities for existing hospitality business owners looking to expand?
We have seen hotels located in places that nobody can find that are trading highly profitably and others located in prime and accessible locations that are hugely underperforming – however most of the hotel businesses we see are only as good as the operator. But there are always opportunities in any market for existing business owners to acquire a business and introduce their disciplines, expertise and business acumen.
What trends have you seen in the hospitality industry from a valuation perspective over the last 12 months?
Generally, we have seen a flattening out of the top line revenue numbers and an increase in the costs of running hotels. Once inflation and energy costs have come under control, we should then see profit margins returning to pre-pandemic levels. Attracting and retaining quality staff has come at a cost, however any changes in the availability of jobs could well see a return of staff wishing to work in the hospitality industry.
What trends do you expect to see in the hospitality industry over the next 12 months?
Although we remain in a period of general uncertainty there is no doubt that the private and corporate market will always want or need to stay in hotels.
Whilst the commercial market has seen a slower return to normality, the prospects for tourism or leisure-based business continues to remain positive. Pandemic driven staycations presented an expanded domestic audience of clientele appreciating what the UK has to offer. Even now that international travel has opened up, people still want to travel and explore Britain whenever they can. As a result, we have seen a significant increase in the number of corporate buyers looking to invest into leisure-based businesses.
How can you help hospitality business owners who are looking to expand?
We have a register of around 200 UK hotels and associated businesses available to buy at any one time. These include properties that are openly on the market as well as highly confidential opportunities. We also handle ‘off market’ transactions where our role is to put a willing and able buyer in front of an equally willing seller.
What are the common pitfalls that hospitality business owners experience when they are looking to grow their business?
Our top three pitfalls to avoid would be:
- Taking poor advice from an inexperienced valuer or other non-specialist third party advisor as this often leaves a buyer with many regrets.
- Buying just with the ‘head’ or the ‘heart’ can be dangerous, the two together should always be considered.
- Failing to undertake satisfactory due diligence or having a clear business plan. After all, failing to prepare, is preparing to fail.
When an owner is looking to expand, for those who do it successfully, what did they do which made the process run smoothly?
They introduced the successful disciplines they have in their existing business into their new venture, and once they became a multiple or larger business owner, they retained and employed quality staff in the key areas of the business, as well as making them feel appreciated and an integral part of the business.
Finally, if you were going to give one piece of advice to a business in the hospitality sector which is looking to expand, what would it be?
Think very carefully about the logistics of being seen and heard in all the hotels or a larger hotel that you own. Successful business owners are respected by their staff when they are seen to be competent and willing to lead from the front.
How The Cumberland can support your expansion plans
The Cumberland has supported hospitality businesses to fulfil their potential and realise their aspirations for over 20 years through its commercial offering.
By implementing a relationship managed approach with its expert team of advisors, and by putting people at the heart of what it does, The Cumberland has helped numerous hospitality businesses to successfully grow and expand their operations.
Scott McKerracher, Head of Commercial at The Cumberland said: “Supporting people and businesses has been at the core of what we do at The Cumberland since it began. We want to make a positive difference to people’s lives now and in the future, and we do this in a number of ways.”
For more information on how The Cumberland can support your hotel business, visit our hotels page.