U.S., European hotel companies 'adapt' to trends: Fitch Ratings

Melia Bilbao
Meliá hotels, like the property in BIlbao, benefit from brand recognition, Fitch Ratings noted. Photo credit: Meliá Hotels International

In its European and US Hotels: Peer Review report, American credit-rating agency Fitch Ratings said European and U.S. hotel companies alike are "adapting their supply and strategies to the shifting inbound and outbound travel flows as well as changing geopolitical and consumer trends." 

The report suggests uncertainty in key regions such as the U.K., which is dealing with the Brexit crisis, and expectation of decreasing domestic travel within Germany could affect European operators like Whitbread or Accor. Other groups, however, benefit from diversification outside of business travel, such as Meliá Hotels International, which the agency noted is supported by brand recognition in resort properties, Fitch indicated. 

In the U.S., strong corporate travel is expected to benefit upscale operators with an asset-light business model such as Marriott International or IHG, although these companies are "subject to business confidence," the report said.

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Asian operators, influenced by the "promising and affluent customer target" from the Asia-Pacific region, are stepping into the European market with the acquisition of companies like NHH and Radisson Hotel Group. "These operators are in the process of redefining the scope of the combined operations and synergies with their new controlling Asian partners," the report said.

A range of factors, including geographical diversification, the ability to adapt with with limited CapEx, the development of direct channels and "prudent financial policies," all remain fundamental to help hotels maintain margins and control leverage metrics.

Fitch expects limited positive rating headroom in the current scenario.

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