Ortus Secured Finance: Don’t call us experts, but…

Don't call us experts, but…




I can't say I've read much by Plato, but he is (apparently) responsible for one great quote: "I am the wisest man alive, for I know one thing, and that is that I know nothing.".

It therefore makes me a little nervous when I see Ortus brochures and publications where we describe ourselves as leisure industry experts.

However, as we’ve built the leisure-focused part of our loan book, we have developed our research capabilities. This sometimes uncovers intriguing facts and statistics that are interesting to share.

Most recently, we have seen that the UK’s hotel sector has increased by 9% in just a year, from £16.5bn in 2014-15 to £18.3bn in 2015-16 (year ending 31st March). This is part of a longer trend, as the turnover of UK hotels has risen steadily over the last five years, up by 26% from £14.4bn in 2010/11.

The rise in turnover is in part driven by the continued success of budget hotel groups such as Travelodge and Premier Inn. At the other end of the market, boutique hotels have benefited from increased investment, attracting and increasing spend per guest. This continued growth has come despite increased competition from new competitors such as Airbnb, suggesting an encouraging versatility in the UK’s hotel sector.

UK hotels have increasingly been targeting visitors from non-EU countries such as the US and Asia, who typically stay longer and spend more. Visitors from North America and Canada increased by 9% in 2015, staying an average of 8.5 nights and spending on average £885 per visit. Visitors from Asia increased by 10%, spending on average £1,322 and staying an average of 15.5 nights. Whereas by comparison, visitors from Europe rose by 4%, staying an average of 5.9 nights and spending an average of just £416 per visit (source: Visit Britain) Therefore, non-EU visitors are becoming an increasingly important market for UK hotels, particularly in light of Brexit.

Speaking of Brexit, when UK hotels start releasing their financials for the summer period, it will be interesting to see whether the fall in value of sterling after the referendum has boosted their turnover. It will also be interesting to analyse the reasons behind any increased turnover. In the first 28 days following the vote, the number of inbound flight reservations to the UK increased by 4.9% compared with the same period in 2015 (source: ForwardKeys), suggesting that foreign visitors are booking cheap holidays in Britain. However, it also seems likely more British people will have chosen a staycation instead of an overseas holiday. 

Turning a short-term spike into a longer-term benefit is likely to depend on hotels capitalising on the growing numbers of visitors from outside the EU. This may cause them to rethink how they go about marketing to these visitors. For example, guests travelling from further afield are more likely to stay in the UK for longer periods of time – so hotels that offer spa facilities and entertainment may be more attractive. Visitors from Asia and the US are traditionally higher spenders, so opening a boutique within the hotel may encourage more to stay, as well as offer an additional source of income.

However, before targeting these guests, hotels will often need to secure funding in order to carry out the necessary refurbishments and improvements. This is where specialist lenders like Ortus could have an important role to play.

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