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IHIF: Ernst & Young: Capital remains major focus for hospitality

IHIF: Ernst & Young: Capital remains major focus for hospitality

Ernst & Young has released Global Hospitality Insights: Top thoughts for 2013, its annual outlook for the worldwide hospitality industry.

This year’s publication highlights several key trends likely to have an impact on hotel development, financing and operations over the next 12 months.

Among the most crucial for the industry, according to Ernst & Young:

Finance: For the hospitality industry, 2013 will be shaped by an emphasis on controlling costs at all levels of the business as well as maximizing capital. This could mean continued deferral of overdue maintenance spending and the scaling back of capital improvement projects, as owners decide where best to invest limited resources.

Hotel companies are also looking at ways to restructure and reposition for tax purposes, with some again contemplating IPOs for REIT transformation as a way to both reduce the overall tax burden and also unlock value in their real estate. On the investment front, despite increased regulatory hurdles and constrained capital in certain markets, global private equity and sovereign wealth funds will find plenty of opportunities in the sector.

Cities: Increased infrastructure spending by city governments, especially in rapid transit to facilitate the movement of travellers from airports to downtown locations, appears to be paying off, as a new class of trendy travellers flock to statement-making urban hotels, many offering luxury and upper tier amenities to guests.

Development: While access to financing is still difficult in many markets around the world, new project announcements have risen to the highest level in 18 months, reflecting cautious but growing optimism among investors and hotel brands in the trajectory of the global economy.

Look for new hotels to rise in both emerging markets and prime downtown urban locations. New construction is also expected in all market segments, particularly in the upper end of the market and among select service brands appealing to the value conscious traveller.

Markets: Africa could be the next major focus for global hotel brands, as more investors target sub-Saharan nations rich in natural resources such as Nigeria, Gabon and South Africa, for expansion. Globally, most markets experienced steady growth in 2012, with the notable exception of Europe, where economic challenges have been, and continue to be, the greatest.

Commenting on the report, global hospitality services leader Michael Fishbin, said:
“Hospitality companies continue to evaluate the capital agendas and focus on the very basics of their businesses – maintaining stability and creating operational efficiencies.

Owners, investors and managers of hospitality assets who sufficiently addressed their capital needs and the changing preferences of guests witnessed an improvement in operating fundamentals over the course of the year; as a result, those companies will be in the strongest position to further capitalize on the upturn in the market.”