Practical steps for a resilient hotel portfolio

At the recent Annual Hospitality Conference (AHC) held in Manchester last month, the theme of “Reset, Rebuild, Rise” served as a powerful reminder that the hotel and hospitality industry is still in recovery from the disruption caused by the pandemic when the whole industry was forced to shut down almost in its entirety. The industry has been using that as an opportunity to reset operations for a future shaped by climate, regulation and cost pressures. At the heart of that reset lies the concept of resilient buildings which is becoming increasingly critical to hotel owners, operators and investors.

A resilient building is one that can withstand, adapt to and recover from environmental, regulatory and operational challengers whilst continuing to deliver guest comfort, safety and revenue.

In the UK, there is a growing legal exposure to the physical assets themselves. Key factors affecting hotel portfolios include:

• Extreme heat and overheating, especially in cities (which was a major concern highlighted in the London Climate Resilience Review 2024).
• Surface water flooding and drainage overloads in dense urban areas.
• Tightening energy efficiency and building safety regulation. From 2027, the Minimum Energy Efficiency Standards are expected to require all let commercial property to achieve at least an EPC “C” rating and “B” on the horizon for 2030. For hotels (often older stock with complex plant and service systems) this presents both a capital expenditure challenge and a valuation question.
• System shocks or failures such as power cuts, supply chain disruption or plant failure that can degrade service or force temporary closure.

The 2024 London Climate Resilience Review warned that many buildings are already vulnerable to surface water flooding and highlighted that heat and subsidence are mounting hazards for the built environment. It called for urgent adaptation measures in buildings, infrastructure and planning and recognised that heat and water challenges are now material risks.

There are a number of practical steps that can be considered to begin embedding resilience into a hotel portfolio. These suggestions span across legal, technical, operational and financial areas all of which are important and prove just how much effort and investment it will likely take to achieve a truly resilient building.

1. Conduct Site‑Specific Hazard Mapping: it is possible to assess flood zones, surface water risks, overheating and subsidence risks for each property that will reveal the potential risks that may become a challenge for the hotel in the future as the climate risk challenges increase.
2. Use “Resilience Due Diligence” when acquiring and refinancing hotels: standard property and legal due diligence can be supplemented with climate and retrofit risk analysis, compliance gaps and regulatory exposure. This is particularly useful during the acquisition of a hotel to ensure that any potential liabilities are budgeted for and taken into account at the outset.
3. Review leases and Hotel Management Agreements: to ensure that landlord or management agreement allow for necessary upgrades (for example, insulation, glazing and heating ventilation and air conditioning (HVAC) replacement. There should also be a clear cost allocation and recovery for such upgrades. Many owners discover too late that lease drafting from a decade ago does not permit recovery of sustainability-related capex through the service charge. There is a real need to draft “green lease” provisions that balance recoverability with ESG integrity.
4. Strengthen the building itself: so that it can withstand heat gain, water infiltration and wind stress by installing better insulation, shading, double or triple glazing and exploiting thermal mass (the ability of the building material to absorb, store and release heat). These measures reduce the climate load and lower future energy costs.
5. Manage water and drainage proactively: prepare for heavy rainfall and use sustainable drainage systems (SuDS), install permeable paving and green rooftops.
6. Embed resilience in insurance & reinstatement clauses in leases: require that reinstatement after damage includes improved standards or adaptation (for example, to use flood resistant materials) and review climate‑related exclusions or premium escalation due to climate risks.
7. Use sustainability or resilience linked financing: green loans or sustainability linked debt can tie financing costs to performance (for example to energy, carbon and adaptation) provided that there is absolute clarity in the covenants imposed and the measurement of performance.

Hotels that undertake adaptation measures attract lower financing costs, reduced insurance premiums, a stronger reputation and greater investor confidence. In the coming decade, building and legal resilience will sit alongside location and brand as defining factors of long‑term value in the UK hotels and hospitality market.