How the hotel and leisure sector is preparing for survival in a post-Covid world
The global pandemic has caused major disruption in many industries, but perhaps none more so than in the hotel and leisure sector. Last week, Leeds law firm Clarion hosted a webinar to share the experiences of Rob Paterson, CEO of Best Western, James Mason, CEO of Welcome to Yorkshire, and Ben Lamb, partner in real estate at Clarion, of the impact of the crisis and their plans for the future.
With a network of 300 hotels across the UK, Best Western was at the sharp end when the lockdown was implemented on 23 March. Fortunately, in the early days, there was regular engagement with ministers and, after hearing Matt Hancock suggesting on the Andrew Marr Show that hotels could be used to house vulnerable people such as the homeless, the company took the initiative to offer accommodation to those in need. In fact, 51 Best Western Hotels continued to trade through the lockdown, providing accommodation for the vulnerable and for NHS workers, with two being used as hospitals.
Rob’s experiences illustrate how businesses must be nimble and ready to adapt to changing circumstances. As well as lobbying Government on behalf of its member hotels about the CBIL Scheme, the company also urged staff to write to shielded people to help combat loneliness.
“While the industry has been hit hard by the health crisis, it’s encouraging to see 97% of our hoteliers gearing up to reopen when they can,” says Rob. “We still don’t know for sure that hotels in England will reopen on 4 July and we also lack detail of exactly what will be required. For example, we’ve ordered signage advising 2m distancing and this may now have to be changed – these type of changes are costly and make planning difficult. We’re currently pretty challenged and are lobbying for clarity.”
Rob continues: “As the outlook for the sector is so uncertain, we’re also working hard on alternative uses for our hotels. For example, we may be able to extend accommodation of vulnerable groups and we’re also in discussions about the NHS taking space for consultations and day surgery to ease their backlog.
“Overall, forecasts for the sector are pretty grim with RevPAR likely to fall by 50% in 2020, but our main focus is getting through this crisis and retaining as many jobs as possible.”
James Mason of tourism agency Welcome to Yorkshire which represents thousands of retailers, hoteliers, restaurants and visitor attractions across the region, explained how the organisation has gone from marketing Yorkshire across the world as a place to visit, to being forced by the pandemic to change the message to ‘stay away from Yorkshire’!
“The region’s retail and hospitality sectors have had to innovate,” he said. “Yorkshire’s tourism is built on small B&Bs and hospitality providers which saw their revenue streams obliterated overnight. As many didn’t benefit from any of the Government relief measures, we had to take on the role of lobbying.”
James adds: “Tourism is currently worth about £9 billion in Yorkshire and employs around 225,000 people, not to mention the huge knock-on effect down the supply chain. Our focus is now on the future as we launch our strategy for the region called ‘Reopen, Recover, Rebuild’ which aims to preserve, attractions, locations and businesses while keeping interest high in Yorkshire as a visitor destination. “While it’s particularly difficult at the moment as we don’t know when all types of venues will be allowed to operate again, we are buoyed by the huge potential of the staycation market. Our website normally has around 10m visits a year and we’ve seen a 47% rise in visits in the last month, mainly from people who have never been on our website before. Like Rob, I believe that businesses need to focus on innovation, positive leadership and dexterity to find their way through this crisis, and, in Yorkshire, we have plenty of those qualities.”
Ben Lamb, partner in Clarion’s real estate team, who advises a number of clients in this sector including a large bar chain, takes a look at some of the challenges facing his landlord and tenant clients.
“Rents are usually an operators’ biggest outgoing after salaries” explains Ben. “Lockdown started just before the last rent quarter day with leisure operators seeing revenues switched off overnight. The next rent quarter day on 24 June is fast approaching and the need for both landlords and tenants to reach accommodations in respect of rent payments is becoming more pressing.
“While tenants have insurance policies or the wording of their leases to cover the pandemic, it appears there is no easy way to avoid paying rent and, even if they have negotiated deferments, it has continued to accrue.”
Ben continues: “Initially there was a reluctance by landlord’s to reach an accommodation over rent suspensions and deferments with tenants. This was in part due to landlord’s hoping that they would receive some government assistance for non-payment of rents and not wanting to prejudice access to this having cut deals with tenants. However, as the lockdown has progressed landlord’s have generally taken a more collegiate approach to negotiations with tenants especially given the moratorium against taking any meaningful actions against tenants for non-payment of rent at the moment. Increasingly, we are being asked to document agreements between landlords and tenants in respect of rent suspensions and deferments. Often landlords are seeking a quid pro quo arrangement where a six-month suspension will be traded for the push back of a tenant’s break date or the an additional lease term of, say 12 months, added on to the end of a tenant’s current lease.”