It might seem that the UK news is dominated heavily by the impending implications of the activation of Article 50, which will officially trigger Brexit. Of course, the economy will change and be impacted, but predictions suggest a weaker pound could point towards increased international investment and business growth, merchant cash advances or business loans in 2017.
Hotel business growth
Real estate advisor, Savills, have released statistics showing that a total of £3.9 billion was invested into the UK hotel market in 2016, with the rate of investment doubling in the second half of the year following Brexit. This suggests that not only were investors not put off by Brexit, but that a weaker pound means tourists coming to the UK get more for their money, so are increasingly likely to visit.
Per the data, the investment activity in 2016 increase 152% in investment from private individuals and 65% from property companies.
What does this mean for UK hotels looking for growth
It is quite possible that 2017 will bring increased tourism to the UK, particularly at a time when Arab and African markets are seen as unsafe or unstable, and even other European countries are seeing the impact of terrorism on footfall. The Louvre in France last week announced a drop of 2 million visitors in 2016 could be attributed to terror attacks in the country.
What’s more, growth predictions put the UK hotel industry at 77% room occupancy in regional areas – a record high, with London maintaining an 80% ratio.
Further, a greater level of occupancy and tourism in the UK is likely to lead to a greater need for staff – whether these are experienced hotel staff or those trained will be based on an individual hotel recruitment policy.
In some cases, it may also be that hotels decide to decorate or revamp their offering in order to maintain or improve customer experience, keep up with trends or just freshen up the hotel in general, again this would need investment.
Finding alternative investment options
While there is a demand for investment into businesses and hotels in the UK, this also brings with it a need to give up a part of a business. Essentially, a cash injection from an outside source may not be worthwhile if there is not additional benefits – such as guaranteed booking numbers, access to support systems or contractors and a view of development within the hotel.
Using funding for hotel options such as merchant cash advances mean that hotels can pay a set fee on a loan and maintain control of what is coming in and out of a business in terms of finances, and pay back a percentage of this to the loan provider each month. So a slower month (should rooms be closed for maintenance) means a lower payment and the bottom line of the business is not impacted.
Looking ahead to 2017 and beyond
Of course, investment should not be considered for just 2017 in terms of financial gain, but what an investment offers in 2018, 2019 and into the future.
Understanding the long term implications of Brexit on the hotel market plays a huge part here and it is essential to take into account the change in the value of the pound and the impact this is having on tourism. A business plan allowing for variations based on market changes allows a hotel to keep ahead of the curve and improve as the world changes, as opposed to maintaining being reactive on the back of any change in the market.
365 Business Finance provide business and merchant cash advances to hotels and the leisure industry in general.