Industry overview
- Analysts report that investment in UK hotel assets hit £3.4b in 2016. Among the specialist sectors, only the private rental sector achieved better returns on transacted assets.
- In 2016, the numbers of overseas visitors also increased for the seventh consecutive year, with a final tally of 37.3 million – a new annual record. And UK airports also reported a record year with passenger growth reaching 270.7m, a year-on-year increase of 6.3%.
- A shortage of available sites and rising land values in London, plus robust regional trading, have seen the UK regions leading the field in 2016 with a 67% share of the new hotel supply. Knight Frank’s inaugural UK Hotel Development Index ranks Bath, Brighton, Edinburgh, Cambridge and Belfast as the top five UK locations for hotel investment and development for 2017.
- Research confirms the budget hotel sector now provides 25% of the UK’s total supply, and is set to make a further impact with another 11,600 rooms due to come on stream in the course of 2017.
Investing wisely in the hotel sector requires a subtle blend of skills and insights. Whilst it’s clearly important to understand the industry and know precisely what your competitors are doing, there is still plenty of room for prospective owners who have a good grasp of basic principles yet are keen to introduce some fresh ideas of their own.
Identify and detail your business model
The profile of your prospective hotel purchase will fundamentally influence the business model you plan to develop.
For instance: Are you looking to buy something in a prominent position close to an international airport? Or is your preference more for an attractive property within a busy tourist hotspot? Are you looking to provide affordable accommodation, or will your guests be offered a touch of luxury in a hotel with a more exclusive ambiance? And do you want to include distinctive features such as an upmarket restaurant, or even a spa and wellness facility?
How you choose and perhaps combine these options will determine your potential customer base, and this, in turn, will suggest a particular business model.
Once you have clarified your aspirations, you will be in a better position to formulate a strategy to grow your business and maximise your ROI.
Such informed strategic planning will also be essential to ensure you meet the lending criteria of potential financial backers. Your detailed business plan must specify what investment capital you will bring to the enterprise, and also include a financial projection with a rationale showing how you will achieve the profit margins you have outlined.
Never underestimate the importance of location for your business' success. Optimal locations include a site close to transport hubs frequented by business travellers throughout the year, or a popular hotel on a prime site in a picturesque tourist destination.
Your next task will then be to identify the particular services and facilities you plan to offer your guests to differentiate your accommodation from that provided by similar hotels in that town or region. These unique selling points will help you to secure a foothold in what is sure to be an ultra-competitive local market.
Know your rivals
Any hotel purchase must involve a thorough survey of your target market, which will, of course, include visiting your competitors. You will need to know their relative strengths and weaknesses in order to determine where, and how, you wish to compete.
In addition, you will be able to observe interactions with guests at first hand which may give you some ideas about how you could improve their consumer experience. For example, as well as good Wi-Fi connectivity, business travellers will appreciate facilities which include bookable rooms which come well-equipped with business technologies.
Thus a well-organised hotel could easily become a one-stop venue for training, conferences and seminars.
Human capital in the hotel sector
Your visits should also highlight the value of pleasant, sociable staff who are happy to help – nothing undermines your image more than a grumpy doorman and a frosty face at the reception desk. You can win the respect of a staff team by treating them well, making it clear you are happy to listen to feedback and rewarding behaviours and initiatives which align with your future plans.
A change of ownership can be destabilising for any hotel business, so it will be down to you to speedily evaluate the personnel you wish to develop and also move on any who feel unable to commit to your future vision.
While assembling your new team, remember that appointing new staff is your opportunity to acquire people with the skills you will need to shape your business going forward. For example, if you plan to offer a gourmet dining experience, you will obviously need a creative chef de cuisine.
Marketing initiatives
As part of any rebranding, your hotel may require an initial refurbishment, and if so, you should factor these costs into your purchase planning. Don’t forget too that your website presence will be a key part of your new image – for instance, your guests may appreciate a site which is also a tourist portal with links to other attractions in your region.
Good consumer reviews on social media are an essential part of building a strong identity, as are small touches such as tasteful branded items like towels and free toiletries. And finally, remember also to encourage repeat business by keeping your previous guests informed of all new promotions and discounted stays.
