The lack, and misallocation, of capital expenditure (capex) could see a significant number of hotels miss the initial phase of a recovery, according to Christie +
The agency believes that a significant number of hotel owners either cannot afford or are ignoring the continuing need for capital expenditure.
At the same time, lenders and operators are increasingly taking an active interest in the capex, furniture, fixtures and equipment reserves of hotels that they are involved in.
Andreas Scriven, head of consultancy at Christie + Co, said: “Capex is often the first thing to be cut during a downturn, but owners who haven’t invested are likely to miss out on the initial upturn in trade when it comes. In addition, a hotel that has not seen investment is at risk of affecting a brand’s reputation, which is of significant concern to brand owners looking to protect their brand equity.
“Any lack of investment now will impact businesses at the beginning of the recovery and in the long-term, as they are not only competing against existing hotel supply but also new supply entering the sector. The list of underinvested, underperforming legacy hotels in the UK is already long, so owners seeking to avoid being added to that list need to ask themselves if they can afford to stand still. Similarly, lenders who refuse to release additional funding for capex programmes may find themselves with a permanently impaired asset on their books.”
annabel.dixon@estatesgazette.com
