Hotel sector growth at mercy of banks

Hotels remain a major customer base for the catering equipment industry, but the success of the sector in 2012 will depend largely on the availability of debt to fund hotel transactions and complete long overdue refurbishments, a new report has suggested.

Hotel consultancy HVS London says the hotel sector has had “mixed success” this year, with a modest rise in trading offset by a continued dearth of available finance for transactions.

It insists investment is vital for hotel operators and may come from traditional sources such as banks or new sources, such as institutional investors.

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But HVS Director Tim Smith warns that unless the European economy experienced a significant upturn, traditional lenders were likely to continue taking a hard line on hotel investment, making it more important for new sources of debt funding to be found.

“Lack of available debt financing will be an ongoing constraint for many transactions, both in the UK and across the European market,” he said. “New full service hotel openings in 2012 will be mainly limited to key gateway cities such as London and Paris.”

“Banks with loans that need refinancing will either continue to ‘extend and pretend’ or lose patience and force a sale, possibly via insolvency,” he added.

During 2011, trading among hotels in London and much of the UK has shown an improvement on the previous year, with RevPAR (rooms revenue per available room up 5.3%). Occupancy rates are also said to have risen 1.7%, while room rates have grown 3.6%. Similar increases in operational costs mean net operating income has remained flat for many hotels, however.




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