On June 23 Britain will vote to decide whether it should leave or remain part of the European Union. The nation has been fairly evenly split on the issue—until yesterday, when an alleged proponent of the so-called "Brexit" murdered Labour MP Jo Cox, who had advocated remaining within the union. Analysts are now suggesting that the murder may sway public opinion toward the safety of a unified economic bloc.
"[Cox's murder] may change the psychology of the campaign. Those who are pro-EU may benefit from this tragic event...it could boost their chances," said Fariborz Moshirian, director of the Institute of Global Finance at the University of New South Wales.
If the British people change their minds on the issue, they may find themselves allied with the country's hospitality sector, which is overwhelmingly in favor of remaining part of the EU.
Why Britain's Hotels Don't Want a Brexit
There are several ways that a Brexit could affect the hospitality industry in the UK. For starters, lenders may wait to offer funds until Britain's role in the Union is more secure. And from a travel perspective, Britain's departure would make international visitation from existing EU member nations more difficult.
So it comes as no surprise that a strong majority of hotel property and investment professionals favor a remain outcome for next week's UK EU referendum, according to a straw poll conducted among hotel professionals in London yesterday.
At the second annual Market Connections event organized by hotel consultancy HVS, which ran simultaneously with similar gatherings at HVS offices around the globe, an audience of around 80 investors, operators and property developers discussed the referendum. The majority felt that the impact on the UK hotel sector would ultimately be neutral, but pointed out concerns over the issue of finding enough staff "of the right calibre" to operate hotels if immigration became more complicated.
"The overwhelming feeling from our audience was that Britain should remain within the EU, not least because it removes huge uncertainties as to what will happen if there were a vote to leave," said HVS London managing director Charles Human, who presented a positive outlook for the global hotel investment community, regardless of the referendum result. Hotels, he said, represented the fastest-growing category of property investment, rising 40 percent between 2013 and 2015 compared with non-hotel property investment up by 26 percent.
Last month, Joe Stather, information and intelligence manager EMEA at CBRE Hotels, said that if the UK remains in the EU, it could drive "a surge in business confidence" that’s been lost over the last few months. "That might drive demand forward, and we might have a second wave of growth across some of the markets that are starting to stagnate somewhat."
Europe's Hotel Investment
At the event, Human offered a snapshot of Europe's hospitality scene. Last year, some €25 billion was spent on hotel real estate across Europe, he said, compared with €14.4 billion in 2014. Global hotel transaction volume rose by 61 percent to €73 billion.
Human said that while the majority of the institutions and private equity companies investing in the European hotels market are based in Europe (43 percent) the strongest investment growth is currently stemming from Asia. Between 2007 and 2015, investment from Asia rose by 1,262 percent, with investment from the Middle East seeing an 87-percent rise over the same period. Investors from China, Singapore, Thailand and Hong Kong have helped push total Asian investment in European hotel property up more than three-fold, from €1 billion (January 2012 to June 2013) to €3.2 billion (January 2015 to June 2016).
While there has been much speculation that the UK, and in particular London, has reached the tip of its hotel property cycle with RevPAR starting to slow, Human pointed out that demand for hotel assets in London is still outpacing supply. London is ranked second in the top-five most popular cities for hotel investors, just behind New York and followed by megahubs like Los Angeles, Hong Kong and Paris.
In the shorter-term, Human said that economic uncertainty—combined with issues such as terrorism, the forthcoming U.S. Presidential election and the Brexit vote—has prompted a 60-percent decline in global hotel investment volume in the first quarter of 2016—and the year is expected to end with around €11 billion worth of investment, compared with €25.8 billion in 2015. This, however, is expected to improve in 2017—but the referendum vote could slow some of this down.