UK: Though Big Ben did not bong, the deed is done. After years of uncertainty, the UK’s European Union withdrawal agreement finally went into force on the 30th of January.
The country now is moving into a transition period, where the full details of the relationship between the UK and EU will be hammered out. With trade deals still up in the air, hospitality is going to be an affected industry, serviced apartments in particular.
Insecurity has already made a mark on an industry which is known to react quickly to uncertainty. Tom Walsh, CEO and co-founder of Staycity said: “Last year was a difficult one for the hospitality sector overall, as confidence in the UK was weakened and the market softened due to the uncertainty surrounding Brexit.”
Leaders in the world of serviced apartments are already feeling that uncertainty. George Westwell, CEO of Cheval Collection, said: “There’s so many unknowns – we’ve left Europe but we haven’t negotiated a deal, and the nature of the deal may be critical as to where we sit both here and in in the future. And as to our workforce, so many of us in the industry have colleagues who’ve come from other countries, that freedom of movement is essential for us. “
These unknowns have already hit on both the economy and on travel. Research from Skift shows that Brexit may be a key factor in the 2019 slowdown in UK tourism, with arrivals falling by one per-cent and spending falling by two.
The most significant impact, however, may end up being on labour. Max Thorne, The MRP Group CEO, said: “We’ve already seen some workforce that’s gone. There’s data out there about white collar staff, particularly graduates, going back to Europe.”
UKInbound in 2019 released a report saying nearly half the tourist businesses in London rely on EU Nationals for over half their workforce. Thorne added: “I think it will all depend on the complicated or uncomplicated procedure for people to register, and nobody’s got sights to that yet.”
There is, however, the alternative view: a weak pound and a risky market makes for strong investment potential. Thorne added: “The good news is the delayed capital that was meant to be invested in the UK over the last 24 to 36 months is now being reconsidered for deployment, therefore we should see more investment coming into the UK.”
“We’ve had conversations with lots of capital entities who want to explore deploying capital before everything crystallizes and prices start to increase, as the exit deal is understood… The funds that have got a risk profile which is slightly more aggressive will be looking to deploy.”
He also predicted that the serviced apartment industry’s diversity will help it bounce back from a potential drop of corporate clients: “The smarter operators have already diversified into the transient business world and the transient leisure world.”
“Over the last decade I would say that the number of purely corporate focused housing providers has reduced by 30-40 per-cent, these operators realising the opportunity of blending the business revenue channels and taking short, mid, and long stay bookings; they are doing so successfully and disrupting the marketplace.”
Week2Week director Claire Parry echoed this sentiment, predicting further investment. She said: “There continues to be an increased awareness in the use of serviced apartments in the corporate market and interest from investors due to offering a greater return on investment. We also continue to see investment in the UK property market from overseas investors.”
She does, however, note that the international economy can be fickle when dealing with major crises, citing the coronavirus. She said: “The increased spread of the coronavirus is certain to impact this as international trade is bound to slow down which puts Brexit into perspective.”
The coronavirus has already made major impact on businesses in China, slowing the industry during the crucial Lunar New Year period. Earlier today, Airbnb announced that it was cancelling bookings in Beijing due to local regulations.
This level of insecurity may demonstrate that while Brexit can affect the tourism industry, more immediate concerns may dominate the impact of this year.
On a more positive note, tourism may end up having a bounce back effect for the time being. We’ve already seen proof of an increase in internal tourism among Britons, with 31 per-cent of holidaymakers saying that they planned to spend more time in the country in 2019.
Pan-European operators are similarly hopeful. Walsh said: “Despite the prevailing uncertainty in 2019, Staycity achieved its best occupancies to date, so this year we will look to boost our achieved room rates.
“It remains to be seen how the UK will forge new trading partners across Europe, and globally, but we expect the impact of this on our business to be relatively minimal.”
We may not know what the full impact is until we know the terms of a potential trade deal. Without knowing the specifics of how freedom of movement will change, what our relationship will be with potential European partners, and how this change will impact the industry makes judgement difficult.
Thorne said: “Economically, we are likely to have a tough year…. The next 12-18 months, I don’t think we’re going to go into a recession, but I do think it will be quite stagnant.”
He added: “I think serviced apartments continues to be a super strong contender- the boundaries set around what makes a serviced apartment are falling, operators are becoming more diverse in their offerings, and consumers are becoming more demanding.”
Westwell noted: “The gates are now open, and it’s not going to be a joyride all the way but there’s a lot of possible benefits.”
