The old hits are the best hits, as anyone thinking about digging their baggy combat trousers from the back of the wardrobe can tell you and here at NewDog PR we are here for current trends. So we were very pleased to be listening to the Boutique Hotel News webinar on refinancing in a high-rate market with bingo pens in hand, looking forward to hearing the words ‘THE QUARTER OF RECKONING IS UPON US’.
So are the thumbscrews coming out? Are the tits now so far up that distress is all we have?
Consultant Philip Ward opened with the comment that there had been “a shift and last year the focus was on problem loans. This year liquidity has returned quite strongly and we are seeing more lender appetite, which provides a more favourable context for borrowers than we saw a few months ago.”
Lior Junger, VP hotel financing, Aareal Bank, was confident that no-one was going to be finding bargains on their books. He said: “Everyone has been waiting for NPLs for years, but our financing is stable. I don’t think there will be a wave of NPLs as long as the financings are being done on a solid basis.”
What Junger was seeing was new folks, pushed into our sector from, say, the office sector, with Dan Wood, partner, Hawsons, also seeing some fresh faces. What Junger was also seeing was the return of the mid market, which was more buoyant as the result of the return of the corporate market.
What’s going to change this chipper mood? The good news for those in the UK is that there’s scant chance that Liz Truss is going to be back at the helm any time soon, unless the political soap opera has twists of the magnitude of Emmerdale’s air crash.
For Junger: “Revenge travel helped many hotel markets increase their ADRs and I think we are at a peak. Are we going down? I don’t think so dramatically.” So for hotels who were happily bobbing along on the belief that the costs they were bearing all over their balance sheets were being covered, some pause.
And these costs? Wood added: “There’s about £43bn of hotel debt due tor refinancing by the end of the year. People have been sitting on their hands waiting for it to be more favourable, but they are running out of time. We expect to see more due diligence and deals taking more time.”
Gary Harden, director – corporate debt advisory, Christie Finance, added: “ Affordability of debt is the critical component of all our conversations with clients. The interest rate is adding to the pressure. Traditional versus alternative funding represents a risk curve – alternatives are willing to be a bit more adventurous. The pricing profile will rise with risk. There is a level of retrenchment from the traditional lenders. I have seen high street lenders ask for more equity or refinance to ensure that covenants are covered.”
We were sad not to see Barclays’ Tim Helliwell tell us about relationship banking at this point, but he was most certainly there in spirit.
For those of us looking for entertainment – and we’re not in hospitality for the free mints – more deals, if slow deals, were on their way.
Ward said: “We’re seeing the beginning of the unwinding of the process we went through when interest rates went up. The next shoe to drop should be more deal activity and we should see substantial transactions which will be relying on the debt market. It’s early days but anecdotal evidence suggests that there is an expectation that there is a trend towards more transactions.”
As Junger said, things are looking a bit more five years ago. Five years ago were thinking thoughts about how to merge Marriott and Accor – a thought we never really manage to move away from. It may be time to put the childish thoughts of the QUARTER OF RECKONING behind us, so is it time to start thinking about a gopping massive transaction?
We saw failed attempts with Wyndham and Choice, a fleeting mutter of Accor and IHG. The big brands remain desperate for growth and there’s a really fun way to do this. Something to consider next to the pool this summer? We need a new catchphrase, or at least a new word. Marr-Acc? Hy-Acc? They’ve got a ring to them.