Cost pressures and ESG to stimulate innovation and capital investment

Industry veteran John Brennan, Chairman, Klarent Hospitality was guest speaker at our recent 2022 Irish Hotel Sector Briefing co-hosted with JLL on Tuesday 4 October 2022 at the Intercontinental Hotel in Ballsbridge, Dublin 4.

He shared his insights into the Irish and UK hotel sectors and spoke about the relative stability of the Irish sector compared to the UK’s, which is struggling through a period of increased volatility at present. He expects that occupancy levels in the UK will decline, and while he is is more confident about occupancy levels in the Irish market, there is a danger that what is happening in the UK could be a forebearer for the Irish market. 

He noted that over the next year the sector would be impacted by ongoing cost pressures and concerns that reductions in disposable income will cause a pullback on travel, which would limit revenue growth at a time when costs are rising. He believes the main gain for average room rates has been achieved for 2022 and, while there was scope for further increase in 2023, the level of increase was unlikely to cover the cost increases that businesses are anticipating.

Brennan asserts that hotels remain an attractive asset class for investment and coming out of the Covid period are seen as more resilient than retail or offices.

With the current cost pressures the industry faces, he stressed the need for greater innovation and capital investment to tackle the demands of inflation and the ESG agenda.

The energy credentials of a hotel property are now crucial for investors. They are not just looking at the point when they acquire the asset, but how it will rate in terms of ESG credentials when it might be time to sell.

He noted that energy-saving projects are having a faster payback period – in some cases reducing from four years to 18 months – due to the current spiralling energy prices. This highlights the priority of these types of projects to bring cost savings into the profit and loss as quickly as possible.

Finally, he outlined two key factors for successful hotels in the current climate as being people and culture. Hotels will need to deliver a strong customer experience for their guests and a people-centric ethos will be important if they are to trade through the current challenges. 

Read more about our 2022 Irish Hotel Sector Briefing and download the Crowe and JLL presentations. 

For more information about how Crowe’s dedicated hotel, tourism and leisure team can assist you with any hotel or hospitality project, contact a member of our HTL team.