Next Generation of Hotel Leaders: Bird & Bird Panel Discussion

In late 2024, Bird & Bird London and Cushman & Wakefield co-hosted a panel discussion with future hotel leaders from a range of key players in the hotel industry including a global hotel brand, a UK lender specialising in hotel finance, a global commercial real estate services firm and a specialised hotel investment firm.  The event offered a fresh and dynamic space for the young leaders in the hospitality sector to give their voice on the market and its outlook for 2025. Below we outline the key topics and themes that were discussed. 

Consumer and investor trends

Following a bumpy 2023 for the hotel sector, consumer trends have changed, with travel and tourism reaching pre-Covid levels in 2024. The speakers highlighted that consumers want a unique experience that sets them apart from their family and friends (with consumers looking for something more experiential and niche). This is backed by data that shows an uptick in the demand for luxury and mid-market hotels, and a decline in budget hotels. 

It was noted that hotels operating under major international brands continue to perform exceptionally well, as international travellers want to pay for a product that they trust will deliver.

As an investment model, the international hotel brand was seeing a profitability boost in conversion and adaptive re-use hotels. They have predicted growth this year in assets that can be converted quickly, evidenced by the company’s own current pipeline containing 90% conversions, 60% of which are owner-operated (with favourable fee structuring in respect of conversions as an added incentive to owner-operators). 

Managing efficiency in operating models

Running hotels is an expensive business and, coupled with a challenging regulatory environment, there was an acceptance that costs need to be managed and (where possible) reduced without impacting quality. Cost optimisation can happen from the ‘ground level’ and can be as simple as cutting down on linen and laundry costs by reducing the number of pillows from four to two when a customer purchases a single occupancy room. Or, introducing water dispensers on each floor instead of providing bottled water in each room. 

For the international hotel brand, maximising the energy efficiency of buildings with a sustainability focus is another important consideration in cost management. An example was given of a particular hotel at which the chefs have developed a banana peel burger to address issues of food waste. This highlights the creative ways that hotel leaders are leaning into this area, whist maintaining a consumer focus.

The panel agreed that, for all of the cost-saving and efficiency measures, one of the largest issues in terms of cost management revolved around finding ways to improve staff retention and reduce employee turnover. Greater flexibility and investment in upskilling and retraining were offered as solutions to this.

The investor perspective

In the last few years, the hotel space has become increasingly attractive to lenders (bucking the struggles of a number of other real estate asset classes). This has led to increased competition, new alternative lenders and borrowing costs (finally) coming down. The speaker from the UK lender explained that regardless of the current market, the key fundamentals for a lender will always be the same:

• Sponsor strength: lenders will favour brands with a proven track record of operational success.
• Asset location: major city centre locations are more attractive to lenders, as factors such as transport links provide comfort that the hotel can reach its trading potential. 
• Operating structure: a good, strong structure, such as franchising or owner-operated is favourable as they are proven to be profitable.  

The panel discussed how investment strategies are changing; when looking for debt investors aim for high leverage and low margin whilst keeping covenants as light as possible. 

The biggest challenges in 2025 

• High construction costs means pipelines are limited. In addition, the introduction of the Building Safety Act (which affects buildings over seven storeys) was likely to raise further challenges. Whilst many hotels do not reach this threshold, the Building Safety Act is fairly new and more hotels could fall within is ambit as it becomes more established. 
• The challenging new regulatory environment in the wake of EU Directives that will force hotels to report heavily on data, and this will be a big challenge since many organisations are not ready for the level of reporting, nor the consequences of not reporting. 
• Employment costs, particularly in the UK following the Labour government’s Autumn Budget where national wages were increased as well as national insurance contributions. 
• The use of AI for marketing purposes as well as statistical analysis in hotels, which can be seen as a challenge but also a driver for success.

Author: Thomas Stofer and Yasmine Barakat

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