Hotels must focus on attracting locals if they are to survive the pandemic, the chief executive of the Nobu hotel and restaurant group has said, as the stumbling rollout of vaccines globally delays the recovery of international travel.
“That is where the business is now today. It is really about the domestic tourism and working with regional markets,” said Trevor Horwell, who has headed the luxury hospitality company since 2009.
Nobu, which operates hotels in major international hubs such as London, Las Vegas and Barcelona, has eight out of its 13 hotels open but said that in Miami, for example, 70 to 80 per cent of occupancy was domestic guests.
With cross-border travel likely to remain far below historic levels for most of 2021, the hotel sector has rushed to find alternative revenue streams from empty rooms. Accor and CitizenM have both opened up unused spaces as co-working areas and fitness studios, while Radisson is working with Zoom to provide remote conferencing for business guests to connect with others around the world.
For the hotels that are open, trade is tough. According to analysts at Morgan Stanley, average room rates across the UK, Europe and the US are roughly 35 per cent below last year’s levels.
Horwell said he expected most financial distress among large, functional hotels that target business guests as the corporate travel sector would take longest to recover. Some travel executives have suggested it may be permanently reduced by as much as 30 per cent thanks to workers becoming acclimatised to video calls.
Nobu was co-founded in 1994 by the actor Robert De Niro, chef Nobu Matsuhisa and film producer Meir Teper. Its restaurants became known as social hotspots for celebrities such as Kate Moss, Elton John and David Beckham.
The group does not publish accounts but said in 2018 that it aimed to reach $1bn in revenues in five years as it expanded its global hotel portfolio at a rate of about four sites per year. It has 47 restaurants and opened three hotels last year.
The company met its revenue targets for 2020, it said, but many of its 10,000 staff were on furlough for large parts of the year. It was forced to take 14 crisis loans totalling up to $28m in the US, government filings show, and owners of its hotels have suffered. Selenta, the Spanish hotel group that owns its newly built Barcelona hotel, sold the property for a reduced price of €80m to the German real estate fund ASG — €20m less than it was bought for, according to the Spanish newspaper El País.
In December its new hotel on Portman Square in London opened for just two weeks before coronavirus regulations forced it to close, while its recent Warsaw site only reopened last week.
“Everyone has hit the ground hard and we have all been affected. We had to dig deep in terms of making sure the business continues,” Horwell said.
Graeme Smith, managing director at the consultancy AlixPartners, said there was optimism around investment in hotels as other property assets such as retail and office sites looked set to come under more permanent pressure: “There’s a greater reallocation of money to things like pubs and hotels — that kind of operational real estate.”