IHIF 2017: Hospitality elite gather in Berlin for annual investment showcase
The 20th International Hotel Investment Forum began today at the Hotel InterContinental Berlin, Germany.
Kerry Gumas, president of Questex, welcomed over 2,000 delegates from over 80 countries to the conference.
Gumas outlined that the programme for this year’s event was split into three distinct days, with day one focused on rethinking hotel investment over the last 20 years.
Day two will examine the various business models across the industry and day three would explore innovative in its various forms with the hospitality sector.
Providing the economic outlook was Roger Bootle, chairman, Capital Economics, who started his presentation stating: “The world economy was set reasonably okay.”
However, looking to the US, he predicted that president Trump’s promise of an increase in spending and a reduction in taxes would lead to a surge in borrowing and an increase in government debt.
Further uncertainties for the US include the rising dollar and whether Trump will stay the course of his term in office.
Looking to the Eurozone, Bootle noted major divergences between countries, with Ireland and Spain showing particularly strong growth, while Italy had very little.
He referenced the various significant political events on the horizon and said: “I can’t remember a time so fraught with political risk.”
He also noted that: “If there is a fracturing in the Eurozone, it is likely to spread.”
Looking at the UK, Bootle noted three quarters of growth at a rate of 0.6 per cent and reasons to be optimistic although inflation is increasing and earnings don’t look set to match this increase which will “result in a squeeze on people’s real incomes”.
The next session was 20/20 Vision - Looking Back 20 years, Looking Forward 20 Years.
The event was hosted by Michael Hirst, a consultant with CBRE Hotels, joined in conversation buy Alison Brittain, chief executive of Whitbread, and IHG chief executive Richard Solomons.
Hirst started with a retrospective look at their organisations and Brittain highlighted that: “Whitbread was born in 642 to brew beer and we are still brewing, albeit coffee.”
Both Brittain and Solomons hail from the banking industry and Hirst asked what skills they felt they had bought with them from this industry.
Brittain responded that she had experience across commercial, corporate and retail banking and these areas bought different skills but the retail banking side provided knowledge in high street management skills, digital technology, procurement and cost management.
When asked about the significant changes IHG has faced over the last 20 years, Solomons said the decision to adopt an asset light approach had been one which was “partly about returns but a lot about focus”.
He also said that the technology change was huge and thirdly that there was now a real focus on guests and IHG were developing brands around guests.
On expanding their brand offering, Solomons said: “It’s really important we continue to have brands that stand for something.
“We don’t want another “me too” brand - it’s got to deliver something to the marketplace.”
The next session on the programme was Hotel Investment Today, a collection of presentations from industry experts followed by a discussion.
Starting the presentations was Robin Rossman, managing director, STR who provided the hotel performance trends.
Salient points included that 2016 had been positive generally, in terms of RevPAR growth, but areas that had been affected by terrorism were clearly visible and suffering.
This year is expected to be a good year with hot markets including Amsterdam, Barcelona, Dublin and Madrid, recovery markets that are seeing stabilisation include Brussels, Moscow, Paris and Milan and over supply is affecting London.
Edinburgh, Manchester and Frankfurt. Demand significantly outpaces supply in Barcelona.
Jamie Chappell, global business director, Horwath HTL provided delegates with insight on hotel investment in the global economic and political climate and stated that 2016 was the third strongest year on record in terms of hotel transactions.
He said: “Banks are still lending, private equity is dropping off but we’re seeing a significant increase in funds, particularly in Europe, who are chasing after assets.”
Philip Ward, chief executive, hotels and hospitality group, EMEA, JLL, concluded the presentations with insight into cross-border investment.
He noted: “China has increased investment in the hospitality sector by 80 per cent from 2012 to 2016.”
He urged all present to “remember these global trends have been positive.”
The next session, Investors on the Spot: Updating the Fundamentals of Hotel Investment, was moderated by Nick van Marken, global head, hospitality, Deloitte in conversation with Coley Brenan, partner, head of Europe, KSL Capital Partners, Zachary Schwartz, vice president, European hotels, Cerberus Capital, Sanjay Singh, managing director, Fico Corporation, and Desmond Taljaard, managing director, hotels, London & Regional.
The session started positively with Singh saying he was “reasonably confident in the UK as an investment target for the next six to 12 months’ time”.
Taljaard said the EU referendum results in the UK created a “fourth quarter dip as people started to get nervous but this had now stabilised”.
Brenan noted that “the refinancing risk today was very different to that seen in the last cycle”.
The next session saw the presentation of the IHIF Lifetime Achievement Award 2017 to Arne Sorenson, president, Marriott International, followed by an interview with Tanya Beckett, business journalist and broadcaster.
After receiving his award, Beckett asked Sorenson about the recent acquisition of Starwood by Marriott.
Sorenson said: “The deal was a starting point for something we have to build.
“We need to create something better, not just bigger, than what there was before.”
Marriott have 90,000 hotel rooms opening in 2017 and currently run a $250bn property portfolio across 30 brands.
Asked about the biggest threat to the industry, Sorenson said this was “the global wave of populism” and he feels Hilary Clinton lost the US election, rather than Donald Trump winning it.