Responding to changes in demand What do business and leisure travellers and hotel guests now want? How do established brick and mortar businesses respond to these changes? Five days a week in the office will no longer be the norm for many office workers, but working from the kitchen table has its limits – is adding co-working and wellness facilities to your hotel the right response? If COVID-19 has shown us one thing, it is that overreliance on a single market or customer base as a source of revenue is risky; diversity of income and focussing on multiple markets, as well an ability to pivot, is key. HMA vs FA vs lease Tenants and owners are increasingly looking to switch from fixed leases to hybrid lease models and hotel management agreements (HMAs) with lease-like characteristics. They’re also looking to move from HMAs to franchises to provide greater control and avoid hidden centralised and overhead charges. Labour shortages – where is everybody? Large swathes of employees left the sector during COVID-19 as businesses shuttered and moved to jobs in booming sectors like logistics and delivery, as well as working from home for the digitised economy. How does the sector tempt them back? Joint ventures Joint ventures can be solutions to businesses seeking an equity injection. Often the investment will be at both opco and propco level by owners and operators/tenants. These create a better alignment of interest between the parties though complex conflicts of interest arise as a result. Focus on ESG ESG is increasingly becoming the number one issue for lenders, investors, operators and consumers in the sector as they respond to climate change, net zero carbon goals, consumer demand and the need to comply with the UN’s Sustainable Development Goals. Challenges in the sector 8 Real Estate Investment 2022