Profitability and indebtedness are issues to keep an eye on
For future expansion, Luca Monti (UBI) believes it is useful to focus on digital reputation and “bankability” of investments
A healthy turnover over the last two years, with interesting growth prospects and growth dynamic of 2% a year for the 2015-2016 period. The UBI Banca picture of the tourism sector leaves room for hope. “The sector of accommodation services has
taken advantage of a stable turnover, despite the adverse context of the economic recession”, See Italy is told by Luca Monti, head of private & corporate and investment banking at UBI Banca. A trend that has allowed the sector to join the average of the twenty-eight total areas analysed (see table below). According to this manager however, the sector will have to continue to face the following critical points: “The profitability profile”, comments Monti, “because in terms of ROA (return on total assets), the sector shows a relatively low profitability of 1.9% (average for 2012-2014), below the average of the goods areas analysed. And then it must control its indebtedness profile. This aspect”, he emphasises, “was shown by the ratio of financial debts with net assets. The sector reports a high level of financial leverage index, standing at 143.0% (average for 2012-2014), higher than the average of the goods areas analysed”. In reply to the question about which challenges Italian hoteliers will have to face in the short-medium term, Monti picks out four areas for action. The first is a hotel’s digital reputation: “One acceleration factor of the changes in competitive assets is represented by development of online bookings, which is favouring those operators who have most boosted their web marketing“, explains Monti. A very important aspect is, in particular, represented by your digital reputation on the social networks”. According to a survey carried out by the PhoCusWright site, 77% of travellers consult TripAdvisor before making a hotel booking. Furthermore, according to a survey by TripAdvisor itself, 93% of people think re- views are important when choosing a hotel and 53% would never book a hotel that had no reviews by others. A second aspect regards competition between operators, which limits profitability: “In a sector already characterised by poor profitability, competition between operators is growing due to tourists’ lower spending power and is focused on price and special offers that further limit profitability in the sector. What’s more, competition for hotel operators now also comes from non-hotels, with private homes in first place”. The third focus is on investments to be made. “The structure of hotel facilities in Italy is polarised", comments the manager, “with, on the one hand, the big foreign hotel chains and on the other a plurality of small Italian operators, often family run or with a local radius of action. However, over the past few years we have seen a gradual process of refurbishment in Italian hotels, with a gradual increase in the quality of services offered and average size of the players. One of the factors that hinder development of big hotel chains with Italian capital is represented by the heavy real estate investment needed; the sector is characterised in fact by a relatively low ROA, precisely due to the high ratio of fixed assets compared to turnover (229.5% the average for 2012-2014). The fourth issue is the “bankability" of investments. “Dialogue with the banking system is difficult. It is therefore fundamental that operators receive assistance with preparing documents, especially prospective business plans, to allow for better dialogue with the entire banking system”.