Despite economic uncertainty and signs of sluggishness in the market, driving alpha in UK hotels is an achievable goal, delegates heard on Monday at the Annual Hospitality Conference 2025 (AHC) in Manchester.
“As an industry, we are really good at handling change,” said Hussein Sunderji, managing director and partner, EQ Group, in conversation with moderator Alexi Khajavi, group president of Questex. “We know UK GDP growth is muted, and inflation is higher than GDP. RevPAR is relatively sluggish across all UK markets. But in hospitality, we are able to continuously reinvent ourselves and find value – just look at the ways we were able to pivot during Covid.”
Revpar growth
Investor and operator EQ Group has invested in over 10,000 keys, the audience heard, and is able to create value by focusing on its hotels on an asset-by-asset basis. Its “decentralised model” also seeks to empower local general managers to improve profits. All this has proved essential in the tight-margin environment of 2025, Sunderji said. “Over 2022-2023, our cost bases increased as inflation rose, but we were able to pass that on to the guest. In 2025, we saw that slow down. Customers are saving more, and trying to find RevPAR growth in a relatively slow market is tougher.”
Yet he noted that the group has already achieved 13 percent RevPAR growth on a property purchased in Hammersmith last year. “We bought the hotel with mid-80s occupancy, and didn’t feel that we could push RevPAR,” he said. Yet by looking at the “optimal business mix across 365 days and taking strategic risks”, EQ was able to “generate 13 percent RevPAR growth by changing who we have in the building at certain times of the year”.
Challenging policy environment
This detailed approach has also stood them in good stead in a challenging policy environment, Sunderji added. The UK government’s increase to the rate of employer National Insurance Contributions (NICs) earlier this year is a case in point. “The hospitality industry felt disproportionately impacted by the NICs change,” he said. “We have a high proportion of part-time workers and entry-level staff members. We were looking at 6-8 percent increases across our UK payroll as a result of this, costs we knew we couldn’t pass on.”
However, EQ has actually navigated its nominal payroll down by 3-5 percent this year, he added. “We have been exploring different ways to boost productivity,” he explained. “You can’t cut costs to the bone – you need team members who are incentivised, delivering service. Also, the feedback loop in our industry is rapid, for example, from social media.” Instead, EQ has been deploying technological hacks such as using artificial intelligence (AI) tools to “automate the back end”, across aspects like routines and maintenance to successfully rationalise expenses. He admitted: “We are having to run really fast to take small steps forward.” However, AI is a promising area for business development, particularly for handling asset financials, he suggested. “It’s a two-way door – you can try it, and get back out,” he said.
Exiting deals
Another example of successful alpha generation lies in EQ’s efficiency in exiting deals. Last May, alongside alternative investment manager Ares Management Corporation, EQ inked a high-profile deal for 21 hotels across the UK from Landsec and AccorInvest. As part of negotiations, the partnership immediately traded three of the freeholds back to AccorInvest “to focus on the 18 hotels we wanted”, Sunderji said.
After achieving “ten percent yields on costs”, just a couple of months ago, Ares and EQ told the market that half of the portfolio was up for sale. “Just two weeks ago, we sold the Novotel London West, to Arora Group and its partner, Deva Capital,” Sunderji confirmed. “We had successfully added value to the operations and it was the right time to exit.”
Looking forward, Sunderji is positive about the parameters for inking further transactions. “Debt markets, especially for the UK, are in a very good place,” he said. “We have seen a lot of alternative lenders come in and senior lenders with a stable appetite. Debt is available and deals can be done.”