The question we need to ask ourselves post-COVID is not, ‘Has the hotel industry become more elitist?’ or ‘How are hotel and hospitality brands securing returning custom through customer loyalty schemes?’

but ‘Are luxury hotels exclusively the preserve of hired assassins?’

InterContinental Group’s ‘Mr and Mrs Smith’ discount seems to support this widely held truism, and indeed the group reports the majority of new business comes from last-minute bookings vs long-term reservations.

An analysis by Investors Chronicle of the extent to which the 5-year to 10-year Treasury spread was correlated with the Manufacturing PMI, and the extent to which this was an indicator of pro-cyclicality, found signs of a bounce back meaning pro-cyclical industries such as travel and hospitality now worth a look for investors.

But an upstart contender threatens the dominance of the top 5 hotel providers. Airbnb has made a good recovery in the last quarter of 2020, and consolidated its financial position by a convertible share offering to its Host Community through an SPV known as a Host Endowment Fund.

This has enabled it to write off its exorbitant $136,969 ‘restructuring charge’ of 2020 as a ‘stock-based compensation expense’ over the last 5 years’ accrued earnings, as it shed unnecessary admin and monthly costs, and had to shell out compensation to hosts for cancelled bookings.

Airbnb concedes that the 9.2m newly issued class H common stock, convertible into Class A common stock on a share-for-share basis, will only receive dividend distributions once the Host Endowment Fund exceeds $11.0billion.

It comments, “We intend the Host Endowment Fund to be a long-term investment in the future of our host community, distributions will be made over sole discretion as determined by our board of directors or a committee of our board of directors.

However, its 2019–20 annual report also highlights the fact it has consistently expanded with a business model which runs a loss in net revenue but with a readily available Free Cash Flow consistently reinvested in growth.

While total revenue fell 2019–20, from $3,698, 443 to $2,518,935, the cost of revenue fell concordantly, with a decline from $902,695 to $666,295 significantly decreasing outlay in sales and marketing from $1,154,506 to $545,510.

Airbnb highlights the high degree of customer loyalty during 2019, 69% of revenue generated through repeat guests. Growing percentage of traffic is organic — 91% coming through chat or unpaid adverts during the nine months ended September 2020.

The hospitality and hotel industry is changing its emphasis according to the UN World Tourism Organization (UNWTO) guidance which stresses local connections and working in tandem with the local economy.

According to its Recovery Tracker Dashboard, actual air reservations are down 90% year on year. Seat capacity has diminished 73% on international flights and 61% on domestic ones as airlines write off assets there is insufficient demand for. Short-term reservations have recovered better, down only 24%, and sentiment is reportedly up.

Smith Travel Research, in its US Market Recovery Monitor of 27 March 2021, reported that Spring Break had heralded the second-highest result of the pandemic era, after the previous week’s figure.

“More encouraging, the number of hotels in the Depression category is the smallest since the start of the pandemic.”

It stated that although US RevPAR remained in recession, the 4-week moving average is on an upward trajectory. According to CoStar Realty Information, Inc. Saturday’s 73.4% was the third highest daily occupancy of the past 15 months. “Weekly occupancy was 57.9% , down 1.1point from last week. A closer look revealed that weekday demand, particularly on Weds and Thursday, (lagged).. . However, weekend occupancy (71.1%) remained strong.”

A useful point of comparison is IHG, which has moved into the budget accommodation market, and the Holiday Inn branch represents half of all new signings for the last financial year, with 47.3k rooms opened and 26.6k signed.

Its total revenue before offsetting impaired assets was $992m, however after accounting for the removal of 16.7k rooms (102 hotels) associated with the SVC portfolio, and the termination of a portfolio management agreement with the Sevicus Properties Trust (SUC) in November 2020, meant the revised revenue sum was $2,394m, on 2019’s $4,627m.

“As an asset-light business, we focus on growing our fee revenues and fee margins, with limited requirements for capital. This enables us to grow our business whilst generating high returns on invested capital. Whether we franchise or manage hotels is largely determined by market maturity, owner preference and, in certain cases, the particular brand.

“ For instance, in more developed markets such as the US and Europe, ~90% of IHG hotels are franchised. These hotels tend to be limited service. In emerging markets such as Greater China, ~80% of our hotels are managed by IHG, where we look after the day-to-day running of the property on behalf of the owner. Over time, we expect the Chinese market to move towards a franchise model.

It notes in its annual report that the industry benchmark for Global Revenue per Available Room, based on a cross-section of hotel providers, had fallen 52.5% on 2019, suggesting a major shift into preference for budget accommodation.

IHG commented it had absorbed the net operating loss of $153m, and would maintain “Continual focus on our ambition to deliver industry- leading net System size growth, while protecting our long-term growth prospects by ensuring the health of our brands and consistent quality of the estate.”

It actively expanded its portfolio of the Voco and Avid brands, with respectively 18 hotels opened to the end of 2020; and for Avid, 17 new openings and 19 signings.

IHG has trademarked its owner-management proposition with AI to generate dynamic pricing and help automate bookings and purchases, as RevPAR (Revenue per Available Room) has suffered during the pandemic era.

“Optimising our Revenue Management for Hire (RMH) services using machine learning technology, to provide enhanced capabilities to help owners protect pricing and returns during periods of volatile demand. — Commencing rollout of digital check-in, implemented in over 1,000 properties, and digital check-out, implemented in 4,000 hotels worldwide, and piloted other mobile-enabled improvements including in-room dining orders.

Measures include dynamic pricing for Rental Nights, with rates now set daily, enabling over 80% of hotels to reduce their points pricing to deliver approximately 25% more value for guests outside of peak times; and enhancing its Owner Engagement Portfolio to provide real-time scorecard metrics, including Guest Love measures, RevPAR, financial and operational performance with recommendations for action. “

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