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Hospitality Matters

Summer 2023

May 2023

Welcome to the latest edition of Hospitality Matters – the first edition since the start of the COVID pandemic, when we got out of the previously regular habit of producing this publication. I think that in itself is just one small example of why more gets done when people are able to meet face-to-face. This allows ideas to spark, people to work collaboratively on joint projects and there is simply more energy and dynamism in what we do, when we do it together.

This is relevant to the hospitality industry as this sector survives on people meeting face-to-face, whether for social or business purposes. Whilst it seems like the concept of being in an office five days a week is gone, concerns about long-term declines in travel now seem rather over-blown. Most hotel groups are reporting overall activity levels in line with pre-COVID levels.

Patterns of behaviour have changed though; and some markets or segments have gained at the expense of others. And the sector should not be complacent – we are yet to see the true impact of businesses looking to achieve their net zero carbon targets and the consequential effect that will have on travel, especially long-distance travel by air. Perhaps it is no co-incidence that many hotels have put more effort into seeking to integrate more into their local community and generate more revenue from those customers who do not need to travel long distances. This itself is one part of the ESG strategy of those increasing number of hotels who are putting ESG at the heart of their decision-making and strategic direction.

Cost pressures continue to cause headaches for our clients, whether that is financing costs due to higher interest rates, inflation for supplies or wage inflation for their staff. At least energy costs have come back down from their winter peak, but there is no guarantee they will continue to do so, especially while supplies continue to remain constrained. But the hospitality sector has managed to get price increases to stick and the resulting revenue increases are off-setting the increases in expenses in many segments.

On the positive side, other real estate sectors are struggling and many real estate investors continue to see hotel investment as a natural inflation-hedge, compared to other sectors. So there appears to be no shortage of capital looking for investment into hotels, as long as it is at the right price.

In every edition we seek to have one article focusing on a single country or region. This time it is the turn of Scandinavia. Since the last edition of this publication, the Norwegian law firm Kluge has joined CMS; and we very much hope that Swedish firm Wistrand will be able to do the same later this year, once they have local Bar approval. We are grateful to our new colleagues in Norway and our prospective colleagues in Sweden for their thoughts on the Scandinavian hotel market.

If you would like to discuss any of the issues in this edition of Hospitality Matters or wish to provide any feedback, please contact the author of the relevant article or your usual contact at CMS.

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Hospitality Matters - Summer 2023
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