The "Leaves" have it.
The somewhat surprising outcome of the Brexit vote—UK's decision to leave the European Union—is sending shockwaves through global markets this morning, buts its impact on hospitality is two-sided.
The ramification in short: catastrophic for UK's on-the-ground hotel operations, advantageous for those looking to acquire property in the UK.
First, the bad. The UK's departure from the EU could mean a manpower crunch in the hotel industry. "It's going to be very difficult for the hotel industry to employ staff that are all U.K.-based," Aron Harilela, chairman and CEO of Hong Kong-based Harilela Hotels, said on CNBC's "Squawk Box."
Harilela owns the 85-room Thompson Hotel in Belgraves, which, of its 82 employees, only five are not EU citizens.
Most hospitality CEOs were in favor of the UK remaining part of the EU. One anonymous CEO in a British Hospitality Association survey said, "Being part of the EU has kept the sector going...migrant labor has been critical to us."
Corporate business, which hotels rely heavily on, could also suffer. Companies, particularly banks, could move some of their workers out of London, the financial capital of Europe. Reports say that London could lose as many as 40,000 workers in the wake of Brexit.
Goldman Sachs, which has 6,000 employees, for one, spent half-a-million dollars helping to fund the remain campaign.
HOTEL MANAGEMENT spoke to an international fund management professional who works for a major global bank on the condition of anonymity. He was adamant that this isn't a 2008 scenario. "This will shake out over two to three years," he said. "The financial markets, people are stunned, but no one is jumping off a cliff."
He is less concerned with the impact on global markets, but how this rise in nationalism, protectionism and anger is fueling a new paradigm. "Incomes have not gone up, and the Brexit, Trump—everyone is mad because there is no economic growth."
He points to Silicon Valley's impact on labor. "Automation is good but not good for labor productivity. Incomes don't go up," he said.
If there is a winner in all of this it is the U.S., he said, as uncertainty propels investors to seek safe haven, like U.S. treasuries.
On the flip side, buying property in the UK could very well be even more fruitful for would-be foreign buyers. On Friday, the British pound sterling plunged 8 percent against the dollar to $1.37. It's the lowest level it's been in three decades.
What the Experts Think
The fallout from the vote is still being felt, and the chief state appears to be uncertainty.
Kevin Mallory, senior managing director and global head of CBRE Hotels, described the Brexit thus: "A soft revolution without guns it appears," he said.
"The immediate impact is, of course, uncertainty. This will result in a negative impact on many asset classes—certainly in the hotel sector we have been experiencing contingent bids on hotels assets for sale in the UK—that is bids that reflected lower pricing on assets we had in the market should the UK have elected not to remain in the EU.
"The good news is that we had bids for these assets as we neared Brexit and that the market had a view as to the impact on value from a Leave vote—whether the prospective pricing adjustments were logical or emotional, I can't say."
Major global hotel operators are also chiming in this morning, but they, too, are still trying to wrap their heads around the vote and its impact.
Marriott International's statement read: "In light of the reported vote in Britain to exit the European Union, Marriott International will closely monitor the implications of the electoral decision. It is too early to know what potential impact the decision will ultimately have on our business. As the implications are more clearly defined over the coming months, we will work to adapt to any changes that may result while continuing to deliver the best experience for our guests and remaining committed to our employees."
David Kong, CEO of Best Western Hotels & Resorts," exclusively told HOTEL MANAGEMENT: "We are concerned with the fallout and uncertainty. The silver lining with the currency drop is it would probably mean more domestic and inbound travel to UK."
Around 5 percent of InterContinental Hotels Group's portfolio resides in the UK. Its Brexit statement read: "While the U.K. is an important market for us, it accounts for less than 5 percent of our overall global business, with Europe accounting for approximately 10 percent. At this early stage, there are still a number of uncertainties around what the U.K.’s exit from the European Union will mean for businesses, however, we are very used to dealing with volatility and will manage the situation as it evolves."
A Hilton Worldwide representative told HOTEL MANAGEMENT that the company "wasn't commenting on Brexit at this time."
In the UK, Ufi Ibrahim, CEO of the British Hospitality Association, which promotes the interests of operators, brands and owners across the hotel industry, had this to say about the result:
"The EU referendum question represented a profound moment for the future of our industry. Hospitality and tourism benefits from a flourishing economy and any level of uncertainty will have an impact. The United Kingdom’s withdrawal from the European Union is the beginning of a process which could take years."
Next week, the BHA is convening its members, industry and political leaders to discuss short-term ramifications.
Tom Magnuson is the CEO of Magnuson Hotels and is based in London. He sees the vote causing a short-term drag, but, long-term, the impact won't be a death knell. "The shock to the system of the Brexit vote will cause short term instability in global financial markets," he said. "However, we view that the Brexit will have minimal if any impact on UK tourism and the overall hotel industry because consumer travel and new hotel development are locally based decisions, independent of the vote to leave Brexit, or the regulations overseen by the EU."
In the wake of Brexit, the overriding sentiment is that this is a self-inflicted wound that could cause significant damage. From The Washington Post: "Brexit could well be the worst self-inflicted policy wound by a Group of Seven country since the formation of the G-7 40 years ago. It is a risk no prudent policymaker would take. And the risk is not confined to the U.K. In the current context, Brexit would unsettle the global economy and possibly tip it into recession."