MEDIA CENTRE - Events

CMS Hospitality Conference, London (09.26)

CMS Hospitality Conference, London (09.26)

Philip attended the annual CMS Hospitality Conference and brought back the following take-away nuggets.

Economic Overview

• Inflation is set to increase over next 12 months (due to rising energy prices) before falling back towards 2% by the end of 2027.
• In a rising inflation environment, cost discipline will be essential.
• Big divergence between the academics (economists) and the doers (the markets), whereby the markets are already pricing in interest rate rises over the next few years to a more settled level of around 4.5% and the economists predict more limited growth.
• Interest rate margins are higher than pre-C19.
• Anyone seeking to borrow money in such a fluid rate changing environment needs to get good advice.
• At a government policy level, the battle of spending v taxes continues to fuel uncertainty. The markets want to see less spending and more reform to lower taxes, but this may not marry with government policy.
• Is there an AI bust in the pipe? It is a risk but not a most likely scenario as it is a general purpose technology.
• An early general election is not factored into the forecasts.
• The US market is likely to grow faster than Europe, thus good for international tourism into Europe.

Cyber Security

• Hospitality placed 3rd behind Finance and Retail as the most targeted sectors globally by cyber attackers.
• Around 30% of hospitality companies were hit by a cyber breach in the last two years. Across all sectors, CMS handles 4-5 incidents per week for clients.
• Big breaches in hospitality in recent years included Marriott, MGM and IHG.
• Cyber breaches result in potential major reputational damage, not just operational and/or cost issues.
• Such breaches can have an impact on insurance and company values. Need to mitigate impact by putting in place relevant protections to permit continuous trading.
• Cyber security is a Top 3 issue for investors/markets.
• Risks in hospitality include: lots of consumer data, GDPR regulations, integrated systems with many other systems/parties increases exposure and who is responsible is still ambiguous in HMAs and FAs.
• It is a board-level issue, whereby senior staff have personal responsibility to ensure systems and protocols are in place and implemented as appropriate (managers and directors can no longer simply blame the IT department).

Investment Panel

• Prices need to adjust to the new world of higher costs and higher interest rates.
• There remains plenty of interest for acquiring trophy and prime assets in Central London (some of which defy economic norms).
• The current lack of transactions activity means high street banks are having to work harder to win deals, especially in an increasingly competitive lending marketplace (many alternative debt providers available).
• What is the best deal – value-add or income-play? The panel was split. Both deal types appeal to different types of investor and depends on each deal’s parameters. Perhaps deals that no one else will consider are the better deals to pursue.
• Whichever deal is done, it is vital to maintain a high level of vigilance and active management on the asset (music to the ears of all Asset Managers across the globe) in order to manage costs in this new “cost discipline will be essential” world.

Many thanks to Tom, his partners and support staff for their excellent event, knowledge sharing and refreshments. Well done and hoping to make it again same time next year.