Spare room: Q1 London hotel transactions fell 8.8% year on year

But with the global travel market on its knees, others are considering a move away from the hotel market. Last week, Colliers International proposed an easing of planning restrictions to allow hotel owners to repurpose their properties on a temporary basis under permitted development rights.

The question is: will such moves really be temporary or do they signal the start of a resizing of the hotel market – and what should those that elect to stay in hotels do to try and stay in the game?

According to Savills, transactions in London’s hotel market totalled £1.15bn in the first quarter of this year, reflecting an 8.8% decline year on year (with the key single deal being the sale of The Ritz). More recent data shows revenue per available room – or revpar, a key metric for the industry – was down in April by nearly 80% compared with the previous year.

To compound matters, law firm Boodle Hatfield says that the UK’s top 30 hotel groups also have debt levels that are 44% higher than during the credit crunch, making it more difficult for the sector to weather the crisis.

A lot of hotels offer great solutions [to] the housing crisis

Paul Barrasford, Colliers International

Many hotel groups have applied for loans through the government’s Coronavirus Business Interruption Loan Scheme to help them through. But Boodle Hatfield says that many smaller, independent hotels have struggled to access these loans, despite the government guaranteeing 80% of loans made to companies with a turnover of £45m or below.

With debts piling up and revenues tumbling, repurposing will seem an enticing option to many hotel owners. Colliers International argues that they could turn their empty properties into much-needed housing.

“We think a lot of the hotels – particularly smaller and mid-sized stock, for which the road back might be a bit more of a challenge – offer great solutions to feed into the housing shortage,” says Paul Barrasford, director of hotels agency at Colliers International.

Large city-centre hotels with a dependence on international visitors should also consider a change of direction, he adds: “If you’re a staycation hotel and you’ve got lots of open space where people can eat and drink, you’re probably chomping at the bit to open and cope with all this demand, but if you’re an urban hotel in a city centre reliant on international tourism, your flow of business into your hotel is going to be difficult.”

Weathering the storm

However, even with a relaxation of PDR, conversion is likely to be a costly, lengthy affair, with planning permission hard to come by. 

Many hoteliers don’t own their properties and, alongside those that do but can’t reposition their offers, will have no option other than to try to weather the storm.

They will have to adapt their offers dramatically if they want to survive when they do reopen. Short-term requirements for conferencing facilities are likely to plummet and a host of social distancing and health and safety measures will have to be introduced such as better ventilation systems, more health checks and a greater focus on cleanliness.

On the one hand, this will present opportunities to introduce more food and beverage spaces and accommodation. On the other, it will be a leap into the unknown. Nobody knows what level of business to expect and the prospect of further lockdowns will be ever present.

Hotels can open at the start of July, but don’t expect all of them to be in a rush to fling open their doors – not as hotels, anyway.