Hotel shares fell after UK voters decided in a referendum to leave the European Union, raising concern about future employment costs in the British lodging industry, which relies on workers from outside the country, Bloomberg reported.
“It is too early to know what the potential impact the decision will ultimately have on our business,” Marriott International said in a statement. “As the implications are more clearly defined over the coming months, we will work to adapt to any changes that may result.”
Marriott, which is poised to become the world’s largest hotel operator when its acquisition of Starwood Hotels & Resorts Worldwide is completed next quarter, had about 8 percent of its rooms in Europe as of the end of 2015.
Starwood got 19 percent of its revenue from the region last year, according to analysts at Robert W. Baird & Co. That percentage is falling as Starwood sells assets, they said.
For Hyatt Hotels Corp, the combined region of Europe, Africa, the Middle East and Southwest Asia represented about 10 percent of Ebitda as of the end of the first quarter, according to Baird.
Lodging companies including InterContinental Hotels Group are heavily dependent on European employees, with almost three-quarters of workers in London’s hospitality sector being foreign-born, Bloomberg said.
But while the Brexit could lead to higher labor costs if restrictions are placed on employing foreign workers, who are typically paid less, InterContinental may also benefit from an increase in UK tourism if the pound continues to decline against the euro. The company has about 5 percent of its business in the UK, and about 10 percent in Europe.
One issue affecting hotels is that greater political uncertainty in Europe could cause a slowdown in spending by businesses, said David Loeb, a Baird analyst. “This could result in international inbound travel growth slowing further at a time when the industry is already grappling with sluggish domestic corporate demand,” he said.