MIPIM is a real estate exhibition and conference in Cannes that welcomes more than 24,000 international property professionals to the French Riviera every year. Its content, discussions and conclusions have wide implications for the property world. Impression looks back at the four-day event and reflects on some of the key lessons for the hotel and leisure sector.
Cannes do attitude
According to international property firm JLL, the global hotel real estate market has an estimated value of £570 billion. This makes it a hugely important slice of the overall global property market. With travel and tourism now thriving, hotels have become one of the top options for property investors. A recent survey by online real estate investment platform, BrickVest, in fact, found that more than a third of UK institutional investors believe the biggest property investment opportunities lie in the hotel and hospitality sector.
In recent years, however, a new player has emerged that threatens the dominance of traditional hotels, in the form of online platforms that offer short-term lodgings. Airbnb, undoubtedly the most famous of these new companies, today has close to 5 million listings in approximately 81,000 of the world’s cities. Recent estimates place its value at more than £22 billion. The company is disrupting the traditional hotel space by keeping rates in line with the market and making additional rooms available in in-demand destinations in peak periods – thereby challenging the conventional hotel model of increasing margins during busy months.
In one of the stand out panel discussions at MIPIM, Amal Del Monaco, Head of Sector Specialists at AXA Investment Managers – Real Assets, said it was essential for investors to learn about key drivers in the hospitality sector to generate the income and opportunities forecast. Del Monaco claimed that people are becoming more comfortable with the property business, while management contracts are opening up. She said that the rise of services like Airbnb is putting more focus on the guest experience, changing customer expectations and highlighting the need for more sophisticated regulations. Despite their surge in popularity, however, she told delegates that this had not slowed down investment in hotel real estate – with cities like London, Paris and Berlin presenting investors with the most exciting opportunities.
On that same panel, John Ozinga, Chief Executive of AccorInvest Group SA, the hotel investor business, echoed Del Monica’s points. He claimed that there is a real opportunity to invest in hotels – more so than workplace, – because it is an area where there is a genuine opportunity for ‘uplift’. He said that Airbnb is giving far more capacity to travellers, including 65,000 units in Paris; and although it is a cool new trend that has many positives, it is creating new challenges that are fiscal and social in nature. Ozinga claimed, however, that big cities are now aware of these problems – putting limits on how often a landlord can rent out a space in an effort to curb illegal lettings, for example.
Jochem-Jan Sleiffer, a Senior Vice President of Operations, full-service hotels, continental Europe, for Hilton, said that the world was now in a ‘golden age of travel’, with 1 in 10 jobs in travel and tourism and 1.3 billion people travelling each year, and reminded delegates that all of these people will need to stay in hotels. Sleiffer named Eastern European cities like Bucharest and Warsaw as the top investing hotel and leisure hotspots, where there is a growing market for hotels. As a leader for one of the biggest and most prestigious hotel brands in the world, Sleiffer said that he is yet to see any notable impact from the disruptive Airbnb threat.
Impression sat down with Jochem-Jan Sleiffer, Senior Vice President, Operations, Continental Europe, Hilton, to find out how the hotel giant is responding to increasing demand and building a business fit for 21st century travel and tourism.
One session at MIPIM offered a look at the changing face of hotel investment – is there still an appetite to invest?
Appetite for investment into hotels as an asset class across Europe is growing, and this is reflected in the popularity of Hilton brands and our development pipeline. Across eight brands operating in Europe, we have nearly 200 hotels and more than 30,000 rooms under development. We partner with a range of owners, including local and national operators, high net worth individuals, and family and institutional investors – and their interest in collaborating with Hilton and investing in hotels is stronger than ever. The result is that a more diverse pool of investors is looking at hotels as an asset class for investment.
What are the main drivers for the hospitality sector?
Each year more than a billion people travel internationally, and in the next decade that figure is set to double – while travellers’ appetite for quality accommodation and Hilton’s world-renowned hospitality is not showing any sign of abating. Our strategy is to seek to develop everywhere our guests want to be, and we are expanding into new locations all the time. In France, for example, we are opening new hotels in six new locations, and Hilton is set to open hotels in three new countries in Eastern Europe this year – Albania, Macedonia and Serbia.
What would you say are the top three investing hotspots?
It is hard to select just three. Central and Eastern European markets are active in terms of development, particularly in Poland and the Baltic states. More established markets such as France, Germany and Italy are performing well. Further afield, Africa offers so much potential. Last year, we launched our Hilton Africa Growth Initiative, committing $50 million over the next five years towards the expansion of our Sub-Saharan African portfolio – which is expected to add up to 100 hotels in the next five years to our portfolio.
There have been whispers about ‘the death of the hotel’ in light of Airbnb’s popularity. What is your take on that?
Our industry is competitive, dynamic and growing – as the number of global travellers grew in 2016, we added more than one hotel a day to our network on average. We also welcomed a record number of guests. Home sharing has been around for decades, but the fundamental difference is that these sites are lodging companies and Hilton is a hospitality company.
In some markets, we have seen unregulated commercial operators taking advantage of short-term rental platforms to run illegal hotels without adequate public health or safety standards. Concerned communities and private property owners are rightly responding. At Hilton, we take pride in offering our guests consistent, safe and secure accommodations, on top of exceptional hospitality. We are also proud to contribute to the economic and social fabric of the communities where we operate, by opening hotels that create real jobs and have a positive impact on local economies.