The hotel sector can be a challenging place at the best of times with many economic and geopolitical factors determining the number of room bookings. Then along comes Brexit.
Adrian Burrows, CFO of Interchange and Consort Hotels Ltd, which represents 260 UK hotels in the Best Western Hotels and Resorts group and its purchasing group Beacon, says there are multiple issues to be aware of in the build-up to the UK’s exit from the EU.
The group works like a franchise operation, tied to the parent US-based Best Western International- one of the world’s largest hotel groups- from which he says the UK operation can draw support, especially as it prepares for challenging times ahead: “We work closely with our group of suppliers to understand what their contingency plans are in the event of a no-deal Brexit and how they will actually go about procuring products which they can only get from the EU such as food and drink, in the event of the supply chain drying up.”
For the hotels, which Interchange and Consort provides sales, marketing and revenue support, Brexit has so far had a relatively positive impact due to the decline in value of sterling. “It created an increase in the number of visitors to our hotels, especially in the ‘honeypot’ locations such as London, York and Edinburgh.
“We have seen an increase in overseas bookings, the US for example is up 10% year on year, China and Hong Kong is up 36% and Australia is up 7%, so the devaluation of sterling is having a positive impact on room nights sold. That coupled with the fact that people seeing an overseas holiday as a little bit more expensive than it used to be, might encourage them to stay in the UK and have a break here. In terms of occupancy levels, it’s been quite stable, even though the whole country started pretty flat year on year, our hotels are slightly up and our owners are optimistic about the year ahead,” he says.
But the biggest challenge will be determined by the effect on the hotels’ staff, many of which are drawn from EU countries. “The biggest cause of concern is the softer issue of employment. If the government tightens its restriction on allowing freedom of movement post-Brexit, it could have a serious impact on those properties.
“We’ve worked quite closely with UK Hospitality, which is a group that represents the hotel sector, lobbies government to try and ensure that our sector’s interests are looked after,” says Burrows.
Scenario planning for different Brexit outcomes has been undertaken, factoring in impacts on the operation from each Brexit outcome. The biggest finding is that may hotels across the group may need to ratchet up the numbers of staff they hire. “In certain parts of the country you wouldn’t necessarily envisage a huge impact in labour because they have a lot of local people working in hotels, its locations such as central London that would be exposed to any sudden loss of resource. Those are the ones that we are working quite closely with labour agencies to mitigate that threat,” says Burrows.
Broad skill set
Burrows arrived at Best Western after a career mostly spent in the food industry. After graduating from Leeds University, he trained as an accountant at the frozen foods business of consumer good giant Unilever which had brands such as Birds Eye and Walls.
He joined the Ross Youngs seafood division at United Biscuits before becoming the financial controller and briefly finance director of the UK bakery division of cake giant Sara Lee. At Uniq, the chilled food business which came out of dairy group Unigate, he developed further his skill set before joining the sweet ingredients division of Irish giant Kerry Group.
But the route into the hotels industry in 2012 followed a diversion into a tomato grower supplying the likes of Sainsbury’s and Waitrose. “I was brought in because I had quite a lot of experience dealing with ERP implementations. Best Western had just gone through an implementation that hadn’t gone as well as they had hoped, so they needed someone to come in and help deliver that project and because the FD was about to retire,” informs Burrows.
He joined as director of finance and has since added responsibilities that include the group’s insurance policy, business projects and technology as well as core finance and treasury functions.
“There is a proliferation of competition out there and the consumer has the luxury of a wide range of properties to look to stay in, so therefore our offering to the consumer needs to be as competitive and as engaging as it can be” he says.
A key task of the group’s Treasury function is hedging $2m against currency swings over rolling 12-month periods. “That amount represents what we’re transferring between here and Best Western International. That clearly has become more of a challenge in the post-Brexit world because of the depression of sterling,” says Burrows.
Another priority is investing in technology to continually improve occupancy levels. “Technology has advanced considerably in that space. We’ve invested in a revenue management system, giving an offering to our hotels to help them manage inventory and pricing by day and month, factoring in what the competition is doing. This is to try and ensure our hotels are competitively priced and trying to maximise our occupancy over that period,” he reveals.
“We’ve also invested in the last couple of years in tools such as Microsoft Power BI to give us a better understanding of what the costs are across the portfolio of properties, and also the other side of the business,” he adds.
Adrian Burrows is participating in a discussion on Brexit at this year’s CFO Agenda.
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