What a No Deal Brexit Could Mean For Hoteliers Across the UK
Brexit, deal or no deal, is set to affect just about every part of life in the UK. Even now there are many uncertainties that can affect hoteliers. The latest government report acknowledges that short term disruptions in food and beverage supply are likely with a no-deal Brexit, but few specifics are given. With the uncertainty surrounding the deal, it’s not surprising that many people and industries are feeling uneasy about how the change may affect them. The hospitality industry is no different.
We’ll know for certain whether Brexit will happen as planned or be delayed on March 14th, when MPs are set to vote for an extension to Article 50. Until then, it’s a world-class guessing game.
Occupancy and RevPAR
The good news for hoteliers is that the numbers tell a story of top-line consistency. Hotstats reports that Occupancy and RevPAR are expected to remain level, even accounting for an increase in the number of rooms in markets such as London. PwC notes in their Hotels Forecast 2019 report that occupancy is expected to remain at an average of 76% consistent with similar measures from the last 5 years. RevPAR is expected to remain static (a change of 0.3%).
Many hoteliers are optimistic about 2019’s occupancy. Martin Evans, Managing Editor of The Tourism Business, agrees. “Brexit may help create another year of ‘staycation’ for UK hotels, with UK residents deciding to holiday at home, and overseas residents seeing that the exchange rate is good in favour of travel to the UK.”
The stability of long-term bookings projections is due mostly to how the value of the pound plays out in foreign and domestic markets. For foreign residents, the favorable exchange rate brings with it a strong incentive to visit the UK and indeed it’s shaping up to be an increasingly popular destination as compared to other major European cities. According to the 2018 London Hotel development Monitor Report, published by JLL and London & Partners, growth in London’s hotel market is expected to outpace that of Paris, Lisbon, and Berlin. Much of the growth is attributed to travelers from Southeast Asian countries, China most significantly. For citizens of the UK, that same exchange rate might be an incentive to stay closer to home.
Both support a healthy 2019 for hoteliers. Prudent hoteliers will plan ahead to capitalize on the likely trend, sending targeted campaigns to locals to focused on staycations. For foreign residents, campaigns could focus on the affordability and rising popularity of UK destinations.
The End of March
Some hoteliers have noticed a decline in the pace of bookings in the lead up to, and weeks immediately following, Brexit. This trend comes on the shoulders of a strong 2019 performance and stable long-term projections, but none-the-less does represent a potential dip in revenue for hotels.
The most prominent concerns hoteliers have is dealing with the immediate fallout of leaving the European Union. There are still some unresolved questions around trade that will likely affect the delivery of fresh goods, for instance, if the UK does indeed leave without a deal. This question around the continued delivery of fresh goods and other food items will likely affect everyone in the hospitality industry, from the small coffee shops to caterers. The silver lining is that this will be a temporary setback.
One area where Brexit may have long-lasting consequences for the hotel industry is staffing. The Guardian reports that “UK Hospitality’s chief executive, Kate Nicholls, said the £30,000 minimum salary proposed by the government would ‘shrink the talent pool and hit every aspect of hospitality from hotels, restaurants and bars, to the cost of people’s morning coffee.’”
Regardless of how the UK leaves, the number of visas given to unskilled workers is likely to decline significantly. The phrasing “unskilled” here is misleading, as Colin Neill of the Irish News points out, as many of these folks are indeed very skilled but lack the type of academic qualifications covered under the visas. This is expected to affect the entire hospitality industry. Chefs, servers and housekeeping in particular as expected to be affected.
No one knows what March 29 will bring. While hoteliers across the UK can feel confident that demand for rooms is expected to continue unabated, occupancy and revenue do not necessarily equal profit. As factors such as payroll and staffing challenges continue to weigh on the bottom line of UK hotels, steady revenue may mean shrinking profit margins. Hoteliers should consider getting ahead of these trends, leveraging their marketing to target potential customers with personalized messages that resonate and turning them into loyal, returning guests.