The health and viability of the hotel industry has been severely compromised in the past two years due to the effects of a lingering pandemic. During this tumultuous time, hoteliers have been focused on one goal: keeping their doors open. Now, as the economy slowly re-opens and travel resumes, hoteliers are looking forward to building back better.
The good news is industry analysts believe the pent-up demand for travelling will mean occupancies will quickly return to pre-pandemic levels and higher rates will surely follow.
As we know, a vibrant industry is a prerequisite for hotel investment. To re-bound and remain strong requires confidence — in the market, the country and in the world. Of course, no one could have foreseen the eruption of war in Ukraine, which serves to further erode confidence in the stability of Eastern Europe and impacts the ability of hotel brands to re-bound in that specific region as well as plan further expansion in that part of the world.
Interestingly, as mentioned in this month’s article entitled “Renewed Appetite,” examining a global perspective on hotel investment, in 2021, global transaction volume totalled $66.8 billion, up 131 per cent from 2020, according to Jones Lang LaSalle’s (JLL) Global Hotel Investment Outlook report. The Americas was the most liquid region and accounted for nearly 60 per cent of global hotel-transaction volume, reaching $38.6 billion in hotel sales.
While Canada’s conservative stance and positioning during the pandemic certainly stalled activity here over the past two years, pundits are hopeful investment will return to pre-pandemic levels in short order. As Brian Flood says in this month’s article “Soldiering On”, investors are showing strong interest in certain hotels. “The pricing we’re seeing on good-quality assets is as good, if not better, than it was pre-COVID. There’s a lot of investment capital in the market looking for acquisitions.”
Investment can’t occur without strong confidence in the market. But it also requires confidence on the labour front and that appears to have been eroded given the shortages spurred by the pandemic. While analysts such as Mark Sparrow, EVP & head of Hotels and Alternative Assets – Capital Markets, CBRE, notes in this month’s article on “People Problems”, “In 2021, we did not witness a direct impact from heightened labour shortages in Canada in the transactions we were involved in. However, we are seeing investors spend more time through their underwriting and due diligence focusing on labour.”
Labour shortages will continue to create challenges not only for hoteliers looking to accelerate the return of business, but also for companies looking to invest in the hotel community, proving more than ever that the road to success starts with that important first step of investing in human capital.