City Centres Hotels Must ‘Pivot To Prosper’ Says RSM

City centre hotels must change their route to market to help secure a greater share of pent-up demand says RSM.

The predicted sustained increase in consumer spending over the coming months will see country and coastal operators better placed to enjoy a staycation boom. But city centre hotels, who rely more on the corporate and foreign market will face bigger challenges, particularly with international tourism curtailed.

With less options than their regional counterparts to help offset the many hurdles that face the sector, and with corporate bookings looking likely to stay muted during 2021, city hotels must update their offering and aim to broaden their appeal.

RSM’s call comes just days before hotels in the UK start welcoming guests back after existing lockdown restrictions end on 17 May.

Chris Tate, partner and head of hotels and accommodation at RSM, comments: ‘City operators must pivot their approach to prosper in 2021. Subdued business travel, virtual corporate conferences and reduced inbound tourism will undoubtably impact city hotels. How they adapt to the new market dynamics will be key.

‘Whilst the sector has not seen the wave of corporate failures that many predicted last year, businesses will face many pressure points and so strong management will be needed first and foremost to steer a course through to better times.’

Summer 2020 offers a sign of similar challenges in 2021. Greater London saw the largest fall in room occupancy of any English region from 2019 to 2020, with just 20 per cent of rooms occupied in July 2020 compared with 90 per cent in July 2019.

The challenges are many, including the gradual reduction in government support; departure of EU national workers; increases in national minimum wage and pension costs; supply and demand imbalances; and of course the continuing Covid-safe hygiene requirements.

Chris Tate continues: ‘Local councils and consumer facing businesses in cities will need to work together to boost domestic tourism. Short term initiatives backed up by longer terms plans to invest should give confidence and inspiration to hotels and other retail and consumer businesses.

‘With entrepreneurial spirit and fresh ideas cities can attract visitors once more. This release of pent up demand will also allow for competitive pricing, boosting average room rates for some operators.

‘Whilst operational challenges will be front of mind for the next few months, focus should also be given to the Chancellor’s recent budget and key measures which may bring significant cash savings to the sector. Hospitality grants will be easier for many hotel groups to access considering the change to State Aid Rules thresholds which increased from £3m to £10.9m. The extension to loss carry back from one year to a maximum of three years should also deliver direct benefits to the sector along with the new Super-Deduction relief which will give relief of 130 per cent of costs incurred on capital expenditure as well as 50 per cent first year relief on integral fixtures.

‘Use of the VAT Deferral New Payment Scheme and Time to Pay arrangements should also be maximised and negotiated so businesses agree repayment terms with HMRC.’