Amsterdam ousts London as top European city for hotel investment

23 June 2017

A study has revealed London has lost its reputation as the hotel industry investment capital of Europe, amid concerns at the terms of Brexit, while Amsterdam capitalised to seize the top spot.

In a new report from Deloitte, titled ‘European Hotel Investment Survey – sailing into 2017’, the consultancy firm found that while the European hotel industry enjoyed considerable inward investment from M&A activity last year, this year’s results have been somewhat more subdued.

Amsterdam meanwhile benefitted from fears surrounding trade and movement restrictions resulting from Brexit, as the Dutch capital surpassed London to become the city seeing the highest levels of hotel industry investment in Europe.

In their research, Deloitte also considered the outlook for the industry going forward into 2017, with analysis based on responses from 100 hotel industry players across the continent.

Outlook for the European hotel market

European investment market outlook

Initially the outlook for hotel industry investment looks bright. Deloitte’s document shows that the industry is expecting increased inflows from China, with 62% expecting the country to be responsible for the largest inbound investments into Europe, up from 51% last year. 46% of respondents expect the largest investments to flow from the North American market.

However, the research also finds that collective activity in the market has slowed this year – with 34% of hotel executives surveyed believing that the European investment cycle is 12-18 months way from peaking.

2016 was therefore a comparatively subdued year of hotel transactions, due to a number of converging factors, with the hotel sector having to contend with political and economic uncertainty in the UK and Europe, resulting largely from Brexit along with unpredictable general elections across a number of major EU nations.

European hotel investment

Amsterdam number one

52% of hotel investors cite European geopolitical instability as their top concern heading into 2017, while poor economic growth and increasing inflationary pressures take the number two spot at 47% of respondents.

The decision by UK voters to leave the EU was cited as a concern by around 25% of respondents, with 37% expressing greater concern – particularly in the wake of US Presidential election – for election cycles on the continent, with the Netherlands, France, Germany all going to the polls throughout the year.

In spite of the Netherlands playing host to a potentially volatile national election in 2017, however, Amsterdam particularly saw its reputation enhanced over the course of 2016, taking top spot as Europe’s most desirable destination for across the hotel industry. The Dutch capital city was cited by 34% of respondents as their ideal destination for inward investment.

London meanwhile fell from its two year perch as Europe’s top destination, receiving 32% of responses favouring the British capital, which suffered from concerns around supply and corporate sentiment. Barcelona came in third, cited by 28% of respondents as the most attractive, with 24% said Dublin as the most attractive. Berlin and Madrid both registered 18% favourability to round off the top five.

Spotlight on regional UK

UK market investments

While London remained the most attractive UK regions, others also saw considerable opportunities for growth in the poll. Edinburgh was cited by 47% as the most attractive hotel investment destination in the UK outside of London – placing the city at the same level of attractiveness as Rome and Lisbon. Manchester meanwhile registered 46%.

The biggest concerns affecting the industry in 2017 include slow economic growth (66%), increased employee costs (52%) and the UK’s decision to leave the EU (42%). Prices for portfolio additions in the UK is too expecting to rise, with 40% of respondents expecting to see multiples of 10x, while 20% expecting pricing to hit as much as 12x or more.

Leading up to the triggering of Article 50 in March 2017, continuing uncertainty surrounding Brexit meanwhile impacted badly on deal activity in the UK. According to researchers, activity was well been behind 2015’s record of £8 billion in transactions, and a number of deals that were in progress or anticipated to come to market were delayed due to the unknown terms of Britain's divorce from the EU.

After what promises to be a lengthy period of intense negotiations now, following the UK's inconclusive general election which further weakened the nation's bargaining position, any restrictions on the employment of EU nationals could prompt a tighter labour market with potential cost implications.

Nikola Reid, Director in Deloitte’s Hospitality Advisory team, commented that, “Whilst domestic buyers have dominated investment, there simply hasn’t been enough stock to repeat last year’s trend for large portfolio deals. Increasing labour costs have long been a concern to UK hotel investors."


Women remain underrepresented in UK's hospitality industry leadership

12 April 2019

Female engagement at the top level of the UK hospitality industry is still lagging, with the vast majority of decision-making roles continue to be held by men. Only 7% of the industry’s FTSE 350 CEOs are women; however, the pay gap in hospitality and leisure is far better than in other industries, at a median of approximately 7%.

The hospitality, travel and leisure (HTL) sector is one of the UK’s largest employers, with 3.2 million people working in its segments. Despite a poor 2018 in terms of tightening consumer spending, the industry is still one of the top sectors in terms of economic activity, hitting £130 billion last year – besting the UK’s automotive, pharmaceutical and aeronautical sectors’ combined activities.

While the industry is one of the country’s largest employers, it still faces considerable issues around diversity at the top. New analysis from PwC has explored the matter, as well what initiatives the industry has engaged to open up its top ranks to a more diverse background.

Female representation at board level for UK companies and HTLs

According to a survey of CEOs, Chairs or HR Directors of over 100 of the most significant leisure businesses across the UK, the hospitality industry has a relatively male-dominated top level. This lags behind the FTSE 100, where companies have female board level representation at 32.2%. Meanwhile, the figure for the combined executive committee and direct reports stands at 28%. This is well above FTSE 250 levels, where female board level representation stands at 22.4% and executive committee & direct reports stand at 27.8%.

For the hospitality industry as a whole, board level representation came in at 23.6%, with FTSE 350 for the industry performing slightly better at 25.1%, while non-listed companies performed considerably worse at 18.2%. The firm notes that the figures hide that while some companies are making strides to improve equality, others are not moving forward – with the positive result reflecting more often the good work of some, while others are not taking the issue seriously in their agenda setting.

Blind spot

The study states, however, that while the overall numbers are relatively strong, the industry has a number of acute weaknesses. These include CEO numbers, with only 7% of HTL FTSE 350 companies helmed by women and 11% of non-listed companies led by female CEOs. Meanwhile, female chairs at FTSE 350 companies for the sector stand at zero. In terms of wider diversity representation, only 1 in 33 leaders at industry companies is from a BAME background.

Pay gap for HTL and hospitality

The report noted discrepancies between FTSE 100 companies and FTSE 250 in terms of improving the number of women at executive level. The majority have met the Hampton-Alexander Review target of 33% women at board level, up from around 25% in 2016. However, the remaining ~40% are not on target, and are unlikely to meet the target by 2020. A similar trend is noted when it comes to executive committee and direct reporting numbers.

Jon Terry, Diversity & Inclusion Consulting Leader at PwC, said, "To make real progress in diversity and inclusion, businesses need to elevate it onto the CEO’s agenda and align diversity & inclusion strategy to the fundamentals of the business."

Tracking progress FTSE 250 level

However, one area where hospitality travel and leisure companies are outperforming other companies in the wider UK economy, is the mean and median pay gap between men and women. PwC found that the median of the wider UK economy comes is approximately 14% – with upper quartile companies noted for a gap of low 20%, and lower quartile companies noted for differences of around 2%.

The median pay gap for HTL comes in at well below 7%, with the median close to parity. There are considerable differences, however, with hospitality at 7%, while travel comes in considerably higher, at 22%. The latter figure reflects fewer women in higher paid pilot and technical positions within the industry.