“Save our industry! Don’t rescue the zombies!”
We’ll get back to that. This week we have been wrestling with the sector-alarming idea that, not only might the corporate market not be haring back any time soon, but that the business travellers we do have might be ruining it for everyone else.
We developed these alarming thoughts after watching the Boutique Hotel Webinar ‘More stressed owners – more distressed assets?’, where Clare Anna, CCO London Rock Partners, told attendees that it was all very lovely seeing rates go up, but while the leisure market was happy to ride higher and higher, there was only so much the corporate market would tolerate.
This was sad news indeed. Companies throughout the capitalist world rely on the concept that people are happy to put costs on the corporate plastic which they might hold back on if they were paying themselves: fancy drinks, fancy magazine subscriptions, fancy rooms. But, with some tension in the global economy, it is not the personal pocket which is raising an eyebrow, but the business one.
Not all personal pockets, we clarify. There seem to be plenty of pockets out there lined with ermine.
Desmond Taljaard, managing director, L&R Hotels, added: “I feel we’re very much walking a tightrope. We’ve got strength in revenue and revpar, driven by rate. There are a great number of following winds in the luxury sector and our destination hotels, branded and ungraded are getting great rates.
“The rate acceleration isn’t being followed by occupancy growth, so we have less corporate business and group business and conferences are still suppressed.”
This takes us back to our opening comment, courtesy of Desmond, about whether all of this was going to result in the kind of distress investors on the sidelines have been swooning over since the were old enough to squeak out QUARTER OF RECKONING.
Desmond was eager to point out that the sector has been talking about the under demolished mid market for the past as long as anyone can remember and attributing it to as many different people as years it has been bandied about. Some of these hotels should be put out of their misery and stop clogging up the market.
He also sought to clarify what was and was not distress. He said: “There are some assets which are just bad, they’re in the wrong location or not relevant. Those are what I would call distressed assets. There are not as many of those around as what I would called distressed capital stacks, which are cause by increased interest rates, poor valuations and [in general] the financial infrastructure.”
So, like many of us who aren’t getting crowned next month, you may be suffering from financial distress, but this isn’t your fault.
Sabine Schaffer, co-founder and CEO Europe, Pro-invest Group, felt this was likely to lead to actual deals, commenting: “As for the banks, there is only so far this can been kicked down the road. We believe the worst is yet to come. Despite the better trading performance on paper, we expect to see more opportunities in the distressed space.”
So an end to pretend and extend, but the start of the Quarter of Reckoning? So many of the good catchphrases all in one place. But will there still be zombies at the end of it? And will one of them be corporate excess?