The hotel industry is headed for a new crisis, although the timing is not yet clear, according to Russell Kett, chairman of consulting firm HVS London.
The hotel industry is headed for a new crisis, although the timing is not yet clear, according to Russell Kett, chairman of consulting firm HVS London.
‘The industry has a 10-year cycle, but only a five-year memory. All the mistakes that the industry has done in the past are coming back, again and again’ Kett told delegates at the the Hospitality Industry Dialogue: Hot deals in 2014: 2007 reloaded? conference held on the first day of the Expo Real fair in Munich.
Hospitality, which accounts for 9.3% of global GDP, has hit a new record in 2012 with over 1 billion of international arrivals. Paris and London ranked as the most visited tourist destinations.
In terms of real estate investment, the industry saw a total of around €8 bn of transactions in 2013, and is set to surpass the ?€10 bn mark this year. According to Kett, the increase in investment, linked with excessive growth of supply and overzealous valuers, are some of the conditions which will lead to a new crisis in the coming years, although the timing is not yet clear. ‘
The last downturn was preceded by a phenomenal amount of deals,’ Kett noted. In this environment, competition gets so strong that it leads to a number of unsuccessful bidders. Around 70% of investors behind hotel portfolio deals are institutional players and property companies and they can well decide to put their money elsewhere. Then you just need a new shock to the system a new war or increasing terrorism to put a halt to tourism and to create a new crash.’
