Operators must be ‘flexible, lean and react quickly’, advises HVS webinar

Financing the cost of re-opening the hotel sector was the focus of the latest HVS webinar with operators advised to remain “flexible, lean, and agile”.

The seminar, which is organised by the global hotel consultancy firm, legal firm Bird and Bird, EP Hospitality and AlixPartners, had nearly 350 industry executives attending.

EP Hospitality chief executive Chris Sheppardson, who kicked off the webinar, said that Covid-19 was “the greatest catalyst for change for the last 60 years”. Adding that it is “vital”, to share information and communicate as noone has ever experienced anything with “such a far-reaching impact”.

In addition, AlixPartners’ managing director Graeme Smith tackled the “crucial issue” of financial planning during the re-opening and advised hotel operators to develop three scenarios – a worst case, medium and best case.

He urged hotels to develop a 13-week and mid-term cash flow to assess cash impact, “keep support teams lean” by considering the minimum central team required, and be operationally agile as recovery was likely to be “volatile”.

He said: “Implementing a baseline 13-week cash flow forecast is critical to managing and tracking all cash outflows and inflows. With scenarios assessed and funding needs understood, operators can then engage with existing financial stakeholders.”

A discussion on contract negotiations and obtaining debt by Bird & Bird partners Karen Friebe and James Salford concluded that the overall impact on the sector was likely to be much lower gearing over the next two to three years, an increase in mezzanine finance, and a greater level of joint venture finance.

HVS chairman Russell Kett also chaired a discussion between five panellists with the importance of managing uncertainty being key, as the speed of recovery is unknown.

Kett also highlighted a concern for many when he raised the issue of companies deciding when, and if, to bring staff back from furlough, or whether to let them go. “It’s a tough decision but some hotels are going to have to rethink how many staff they really need and must be prepared to set new operational standards,” he said.

Looking at the longer-term changes on the hotel business panellists said that changes had already been made within their companies, including reorganising head office structures, clustering hotels, more flexible staff contracts and more support in various ways for hotels from head office.

Kett concluded: “Overall, we are all going to have to deal with a life of constant uncertainty and we are all going to have to adapt.”