Pandox AB (publ) (PNDXB) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to Pandox Hotel Market Day 2023. Here's your moderator of the day, Victoria Hill.

Good afternoon, ladies and gentlemen. Please bear with me for this bit. [Foreign Language] Hope that was okay. Hello, and from me, welcome to this year's Market Day. It's a pleasure to see so many of you in the room today. And can I extend my welcome to everyone following us live via webcast. Many of you are veterans of this event, and you all know I'm new to the stage. My name is Vicki Hills, and I'm a partner at Freshfields, the global law firm. I lead their hotel investment team there when I've had the privilege of being Pandox's legal adviser since 2017. It's fair to say I could never have imagined the journey we would go on together. The acquisition and reorganization of the Jurys Inn portfolio was an early adventure, and we've been having fun in the hotel sector ever since. Our work together, including during the COVID pandemic, forward some really strong working relationships, but I'm pleased to say also some great friendships mostly because we talk a lot about our dogs. It's a real privilege to be hosting today. We're living through extraordinary times. Have you noticed the number of times we used the word unprecedented to describe the state of the world. We faced significant challenge and change. The fallout from the pandemic, we in the U.K. have suffered Brexit; there is conflict and geopolitical tension in multiple regions of the world; and we have a climate emergency to name just a few. As you'll see from the agenda, today, we're going to look at some of these macro trends, delve into the effect they're having on our markets today and challenge ourselves to consider what they might mean for the hotel sector and every one of us in the future, is going to be quite a ride. I'll be here to take you through it all and you can check the agenda at any time on Pandox' website. To kick us off, as is traditional, Pandox would like to welcome you and who better to do that than the Chairman of the Board.

A very warm welcome to Stockholm and solution. I know many of you have come from afar, and we are privileged that you are here. For us, the Hotel Market Day, it's like a mixture of the Christmas morning and the New Year's Eve. And to celebrate things like that alone, it's no fun. So thank you all for coming. Two years ago, I stood here, and I put on a pair of sunglasses. It was at the end of the pandemic. And I said that the future was so bright I had to wear shades so that I wouldn't be overwhelmed by all the good numbers that would come 1 year ahead. That turned actually out to be quite a good description. We reached in 2022, all-time high on most places in the world on the daily rate that we can charge from our hotel rooms and also from the revenue per available room. So you know it was a rather exact and good prediction. Last year, I took off my sunglasses. And why did I do that? Well, first of all, it was the war in Ukraine. Second of all, we already saw inflation increasing quite rapidly and the interest rates were to follow. So different, what am I going to do this year? Am I going to keep them off? Or am I going to put them on? And that's actually what this conference is all about. First, you will hear Liia, our CEO, tell you that Pandox is a different company. That's not really what she means to say, she means to say that Pandox is a fantastic company. And this is true, and you should believe her because self praise that comes from yourself that is really from the bottom of your heart. So you can believe her, and you can believe that Pandox is actually a very, very good company, even with high interest, high inflation, worse, everything. And then we're going to shift to the big part. We are going to shift to the global. We are going to hear that you should thrive on chaos and change. We are going to get it from the front line what is the global situation right now. We're going to dwell into the hotel market. We're going to dwell into consumers. And after all this, you will still be exactly as confused as you are today about where the world is going, but it will be at a higher level. And then I will divulge for you what I'm going to do with my sunglasses. I am going to put them on. And it serves a double purpose. One, we should not get distracted by the trouble in the short term too much. Sunglasses helps you avoid to see too much of the detail of that. And then second, we have to prepare for the really much brighter future to come with more peace in the world, with an inflation that is stabilizing, interest rates that are stabilizing and maybe even going down just a little, a little bit, so that our interest costs are a little bit smaller. And we see our values increase and increase and increase again. It was a nice time. I look forward to seeing this through the sunglasses bright and shining in 2024 and 2025, 2026 is going to be fantastic. Thank you. [Presentation]

Hi, and welcome, everyone. And I've been asked to ask everybody to take a seat. So don't stand there, come and join the crowd. And I'll continue talking meanwhile. I want to welcome you to Pandox's Hotel Market Day 2023. This is the 28th in order, and I've been here for 17. And I'm sure the people here who has actually been on the all -- the full 28. It's a great privilege to be here to meet you all. And it's a great privilege to soon listen to some really smart, brilliant speakers. And it's a privilege for me to have the opportunity to talk about my favorite company, Pandox. But before I start, I want to also say thank you to the Pandox organization, who's actually enabled this event and especially 2 people. I want to say thank you to Anders Berg, and also Jacob [indiscernible] who is somewhere here, there. Because these people -- these 2 gentlemen are the masterminds between -- to find a theme. And trust me, they already know what's going to be for the next year's theme as well. It's good to be ahead. My presentation builds on six investment highlights. I will cover the industry, I will cover a little bit our business model and I will cover the Pandox DNA. I can't stress it enough. We are part of travel and tourism, one of the world's biggest industries. It's 10% of GDP and 1 out of 5 new jobs are created in this industry. The drivers being the world is growing. I'm not old, but when I was in school, there was 4 billion people in the world. Now there's 8. And again, I'm not that old. Middle class is growing. And there's an ever-growing appetite for experiences, and that has not diminished after COVID. The state of the hotel market is in pretty good shape. This is Europe today versus 2019. RevPAR up 25%, prices ADR up 30%, and there's still some potential in occupancy because international traffic and large meetings have still a little bit way to go. New supply, new capacity coming in is moderate. We are used to have been seeing 4%, 5% previously historically. But now we see about 1%, 2%. What was decided and planned prior to the pandemic, that's put in place, that's come to the market, but it's not so many new things coming in. As our dear Chairman said, interest rates are hopefully peaking and economic growth has remained surprisingly resilient. We are specialists. We only own hotels. That's the only real estate class we own, and we have a unique, fantastic portfolio. We own close to 160 hotels, out of which, we lease out 139, that's 83% of our total portfolio. And then we have 20 hotels, which we own and operate ourselves. We have a very diversified portfolio when it comes to country, destination and the type of underlying demand. We are in 12 countries, we are in more than 90 destination cities and 80%, 8-0, our demand comes from local and regional demand. This is the robust, resilient backbone of the hotel market. This is you guys, we have one of the strongest network in the hotel industry. To name a few, our largest operator in the Nordics, Scandic, or the Hotel Group, the Leonardo Hotels, and I'm really honored to see you so many here sitting here today. And we have NH, Strawberry, Elite, the HR Group, the list goes on, you can actually see the list. And this is a fantastic asset in so, so, so many ways. It creates and drives value. We have, since the start, always been an active owner with deep hotel competence. And we are moving across the whole value chain. We understand both hotel business, and we do understand hotel property business. And that creates value. You will continue to hear me saying value, but this is my thing. I love value. Our core is property management. We acquire, we improve, and then we lease out our properties. And the keyword here is turnover-based leases, revenue-based leases. But we also develop our existing portfolio, invest and improve. And we also optimize our future growth and value by selling and buying the right assets. The turnover-based lease model, it's a fantastic innovation. We really love it. It provides upside, and it also provides protection against inflation and higher interest rates. And it also provides stability with a minimum guaranteed levels. Stability for both parties, actually. And it aligns the incentive between the hotel owner and the hotel operator, as we have the same goals, the same incentives, we drive revenue, we drive cash earnings and we drive value investments of the hotel. So it's a win-win. Hotel properties is an asset class that has higher yields than many other real estate classes. The average yield of our portfolio, of our 160 hotels, or 159, is 6.1%. And our average rate of debt is 4.2 [ billion ] leaving a good, healthy, strong positive yield gap of 2% -- close to 2%. And with more than 75% being hedged -- interest rates hedged, we have a pretty good view on how this will look both short term and medium term. And on top of that, we have long relationship with average lease tenure of more than 14 years. Sorry, I have to say this, being an old CFO in my previous life, this low refinancing risk. We only have bank financing. No market financing, and we work with close to 15 fantastic relationship banks. Despite pandemic, hyperinflation and a massive uptick in the interest rates, our financial position is stable and strong. Our LTV is on the lower range, close to 45%. Our ICR, and I see it's difficult to see, but it's never ever reached a level where it would be in a breach of any covenant, even during the deepest moment during the pandemic. That's there. And we have a strong cash position. We have more than SEK 3 billion in cash, and we have SEK 3.3 billion in unencumbered assets. A very important part of our value creation process is that we are investing for growth in our existing portfolio. This is a really important part of our strategy. We invest approximately 1 billion or more per year in our existing portfolio. And we do that by adding new rooms, extensions, product repositionings, et cetera, et cetera, value-adding investments. And we have very many exciting projects, which actually come to market in 2024 and 2025. And thus giving quite impressive growth in NOI, cash earnings, thus value. Some examples. We have finalized the renovation in Quality Grand Borrows, 158 rooms. We completed renovation of 252 rooms in our hotel in Stuttgart, and one of my favorite projects. We acquired a property in Nuremberg, Germany in 2019. It was a remaining 2-year fixed lease. We started renovating -- we closed down the hotel and started renovating in September 2021, actually, quite a good time to do renovations. And we kept it closed for exactly 2 years. And it has now opened up in September this year. I was there last week. [indiscernible] was with me. It's a fantastic hotel. We have large renovation ongoing in Glasgow, rooms, public areas, spa. Ready to go to market in the second half of next year. Another great example of value creation, Hotel Mayfair in Copenhagen. This is a lease, which we took back in April 2020, just when the pandemic started. And we have operated in our own operations since then. Now we have signed a turnover-based lease with Strawberry, Nordic Hotels & Resorts. So Mayfair is going Hobo in the second part of the next year. And another great example of creating value, we acquired a property at Fridhemsplan in Stockholm in the beginning of this year. Fixed lease runs until the end of this year. We started renovation in January, and it will open up in the second part of this year with this fantastic Scandic GO lifestyle economy concept, super exciting. And I know, Jens, you are somewhere here. So I know you are excited as well. And another great example of value creation, we acquired property in Central Brussels in the end of 2022. Closed for renovation since April this year. And it's going to open up as another lifestyle economy brand with Citybox, a lease -- turnover-based lease with CityBox in the second half of 2024. And I have to speak about our biggest ongoing project. This is in our own operations Double to Brussels. This hotel is 350 rooms, we own and run ourselves today. You can see me standing there or actually can't see me standing there, because it's not there yet. But you will see me standing there together with a lot of you people and having added 150 new rooms, having been added an additional ballroom of 600 square meters and also a great rooftop garden, bar, restaurant. And I'll be standing there in the end of 2025, perhaps January 2026, on the largest coolest hotel in Brussels. You should join me. ESG has been close to a heart for Pandox for many, many years. And we are now proud that we have validated and got approved our science-based targets for Scope 1, 2 and 3. Scope 1 and 2 for our greenhouse gas reduction in our own operations, and Scope 3 in our property management portfolio, a reduction of 42%, respectively, 25%. We have come for this with the -- we'll start with the investments in Scope 1 and 2 in our own operations. And we launched a program of close to -- or a little bit more than SEK 300 million, a 3-year program, which will phase out gas in 8 of our own operations, enabling us to meet our SBTI targets by 2027, 3 years ahead for the 2030. And a good thing. It has an ROI of double digit, more than 10%. So it's not only the right thing to do, it is the good thing to do. And we expect the same type of activities also in our Property Management. We are balanced optimists. What the heck is that? Well, I'm an optimist. Pandox is an optimist. But we are balanced in the sense that we base our view on facts, data, what we see and what we hear from our network and ourselves. And we see stable demand in the fourth quarter this year. And we see some growth for next year. But then we have geopolitics. That's the theme of today. Geopolitics used to be something that everybody talked about as a risk, but never had any effect. Today, it's unfortunately different, and that's why we are here today, to get some insight, inspiration, and thoughts and drivers what it means for the hotel sector for our hotel demand, hotel investments and consumer behavior. I hope you will enjoy it. I certainly will. And thank you for your attention.

Thank you, Liia. As ever, Pandox never stands still. Look forward to catching up later and we'll reflect a bit on what we've learned today. Now you'll notice that Anders is here with me on stage. Hello, Anders.

Hello.

Great to see you. You're in what we're calling the front office today, and you're here to help us engage with your lovely people out there. Tell us a little bit about the front office.

Yes. I mean it's a big desk, but it's a minor role. So basically, you've seen the QR code when you came in, and it should also be on screen now, I hope, because it takes you to the polls that we will put out during the day. And it also opens a channel for you to ask questions to the panels we will have later in the program. And please remember, no question is too small. And the more questions we have, the more questions we will get. So please be active.

And I think, in fact, some people might already have done some scanning of the QR code already as they came in.

For the word cloud, exactly the expectations on this event and why you're here.

Okay. People are here for inspiration.

Can you even see it?

I've got it. Networking, inspiration, it keeps moving, which is tricky. But the most important thing is I see the word fun there. So we have a lot to do, Anders. Let's say, we can deliver on that. We very much hope you enjoy it. But do you ask questions. We really want to involve you. There are some phenomenal speakers and they'd love to hear from you. Thank you. We'll see you later. So now it is indeed time to introduce our keynote speakers. They will be well known to some of you in the audience, particularly the Swedes. One of them is a researcher and a former lecturer at the Stockholm School of Economics. A prolific author, he describes himself as something of a rebel. The other is a super communicator with a background in both politics and industry. He was Strategy Chief for Sweden's Moderate Party and has held a number of Board roles. They are authors of the book you may have seen as you joined us today. And together, they are powerhouses at showing how we can take challenges and turn them into opportunities. Let's meet them. Please welcome author, speaker, economist and adviser, Dr. Kjell A. Nordström; and author, speaker, and advisor Per Schlingmann.

Think back 1996, London, shopping and f***ing was a play that had its premier the 26th of September in London. It was the first play of Mr. Mark Ravenhill. It was his first full length play, 5 people on the floor of a rather big apartments in London, playful, an open world, hedonist, really a playground in the making, considering whether you should go to yoga for -- take some yoga in Bali next week. Playful, open, that was the world at the time, 1996.

New York 4 years earlier, 1992. The American Political Scientist Francis Fukuyama published a book, the end of history in the last man. His idea was that we were actually reaching the end point of where the world was heading. We all will become Western open market economies. Let me quote from the book. I always had a marxist understanding of history. Democracy is a result of a broad modernization process that happens in every country. His idea was actually that now all countries is opening up, we will trade with each other, and we will go forward with the new liberal world order. So it was a little bit strange, a marxist, that ended up with a liberal world order, but anyhow.

18 years later, 2000 in Sweden. Here we are in the beginning of the biggest reorganization of the Swedish Armed Forces since 1925, initiated year 2000. The idea was to go from a conscript-based army to rapid deployment force, and reduce the investments in the armed forces with actually as much as 75%. Huge reorganization. And at the same time, Sweden was in the midst of a global expansion. Ericsson was in their heydays. Ikea was conquering country after country. Volvo was on top of their industry. Really multinational companies from this region, not only Sweden, were conquering the world. And Russia and China, where both of them using Scandinavia advisors nonstop for reforming their respective economies. That was the year 2000.

Let's stay 2000. That was an era of peace and profit. Maybe that was the most dynamic economic period in our history, 0 interest rate, long-term permanent growth. It all began with China, the open door policy, 1980s, the implosion of the USSR. India is looking to the world, and we actually saw a tsunami of growth, more than 3,000 million people went into the world economy. And what we maybe believe then was that we were in the era of an end of recessions. And maybe we thought then, this was the beginning of the end of history.

Helsinki a few years later, 2018, a sobering up, a sobering up. The [indiscernible] rather sober on the -- in the world view.

Not always, but on the world view.

Yes, in the evenings usually sobering up. Northwest office, a Finish thing tank lines up 4 scenarios for the future, trying to understand what is ahead of us. This is 2018. First scenario, Belt and Road. China overtakes United States of America, growth of the world economy, 2%. Second scenario, cyber world. Silicon Valley dominates the world. They become the technological engine of the world economy, growth 4%, 4% plus of the world economy. Remember, its 2018, third scenario, war, war, war. It's Fins. Protectionism, local unrest, catastrophes, more or less a disappearance of global growth, plus 1% maximum. Fourth scenario, a massive downshift, a shock comes to the world economy that we cannot foresee and that shifts down the world economy to probably below 0% growth. That was Helsinki 2018. And here, you and I are in Stockholm, it's 2023, and we have the benefit of hindsight. A new world order was to be born. We know that today.

Let's go to Wuhan, 2019. We all know what happened. In the beginning of 2020, people coming here maybe from a lot of more posh areas, the flights from the alps with a cold. A few months later, all planes were not in the air. One year later, in February, Russia invades Ukraine. 2 years later in March, the American company, OpenAI, launches chatGPT4. And at the same time, we were very reminded about a report published in 2006, the stern report about the climate change and the cost of climate change. So we evolved into crisis after crisis after crisis. And what happened when we are under pressure is that we showed up to be very good innovators. Unvoluntary -- involuntary innovators under pressure.

It's like time machine. There are lots of studies on us human beings. We are a lazy 8. Of course, we are. We are in energy conservation mode. Nature has made us that way, but we also know that this age, you and me, can get things done very rapidly if the pressure is high enough. Whenever there is a crisis in our private life or in our societies, we are able to do things surprisingly fast. Just look at the small life there in the beginning of the pandemic. 3, 4 weeks later, we had our kids on Teams, on Zoom and doing their studies on the platform. I'm not saying that it was good, but they were on the platform, hybrid work. Hybrid work, ladies and gentlemen, we have discussed hybrid work for decades.

But we also had our 90 years old [indiscernible] with our children, shopping...

E-shopping really. Elderly people on these platforms rapidly up and running. Even our doctors told us not to come to the clinic. Please take a Zoom call or something like that, the most conservative part of our society. We took huge leaps because we were under pressure in our small lives. But when we do that, when we change the way we live our lives, of course, we effect the architecture of the society, look at the cities, and you know a lot about cities. Look at the do not cities of the world. There is a hole in the middle, increasingly in London, Berlin, Stockholm, Helsinki, Chicago, why? Well, you know why. Of course, you know why. Less offices are needing. We are changing our shopping habits, the discussion among urban is today is what is going to happen to the absolute center of the city. That magic part of the city that we have had so much people trying to analyze and understand the do not city. And then look at the geopolitical landscape because that is something completely different. We are probably actually in a position to redraw the map of the world in a handful of years. But we come back to that.

The super models, and I think you all remember the song of Britney Spears, oops, we did it again. And the Nordic supermodels, we did it again actually. We are together 26 million people, the 9th or 10th biggest economic region in the world. And we're actually looking backwards to the pandemic, we only lost like 3% of GDP, much below the EU average. And why do you think that?

I think we know a little bit about why, it's not magic. The 5 Nordic countries are different. There are about 200 countries in the world, as you know. I say about because of Russia, they have some problems with the borders. Yes. But we are 5 tiny countries up here that have something in common. We are probably the prime examples of what in English would be called a high trust society. We trust our government. We trust the municipalities. We trust our grades. We trust Stockholm, we trust SIS, the airline company, even if they're almost bankrupt. But we trust our neighbors, and we trust everything. That is us. And we combine that with the relationship to new ideas and new technology that is kind of a little bit different to understand, but you can measure it. Our relationship to new technology, ladies and gentlemen, is bring it on, iPads for everybody, grand ma too, and the kids and everybody, iPad for everybody...

But also everything new is good.

Everything new is good. Bring it in, high-tech, high trust. That's us. And you know what? There is almost a whole library of literature that can confirm that this is definition of a dynamic governable system, high-tech, high trust, then you get things done, in a firm in a region, in a country, whatever unit of analysis you work, that's us, in this part of the world. And that, I think, might explain the super model.

Yes, I remember, I think it was 2012, we were in Davos at the World Economic Forum. And all the Nordic Prime Minister, we had a session on the Nordic way. Maybe that was the peak of the super models. That was about the quality, the Nordic welfare state, but also trust and technology. So it's fascinating. But maybe let's go back to the big picture. And all welcome to what we can call the fairytale society because as we also see as a consequence is that the preconditions for how we communicate, how we build brands, how we make decision is very much changing. And let me make a very fast-forward history lesson. In the beginning of mankind, we communicated one person to another person. And power was easy. If you disagreed, I just killed you. . And then we have [indiscernible] we have a commercial TV. We had what called mass communication. And the world view of mass communication is extremely strong. 1 center, 1 brand, 1 company, 1 nation, 1 leader who could communicate with a lot of people. But I would say since 10, 15 years, this is very much changing. Now many people can communicate with many people. Everything today is about conversations. Everything today is about stories and storytelling and ideas. So we're actually moving from mass communication to mass conversation. And this, I would say, affects everything. Politics, look at Trump. Consumption, leadership, brands. And what's happening is actually that new logic is arising that builds value, and I very much like the word of value. So this is happening at the same time that the fairytale society is actually here.

The future. The future of the story telling society, what is it? Well, we were talking about it this morning, again, that there are no whiches.

But you see one when you're looking in the mirror.

But you see maybe one when you look in the mirror and you have to know one. And there is actually which out there to look at because you can't do proper research on the future, you know that, too. What's the which? The which is an industry. It's an industry that employs 15% directly and indirectly of all the men on this planet. It's an old industry. It's super competitive, probably the most competitive industry on planet Earth. I'm talking about the automotive industry, of course, brutally competitive. They have, for 60, 70, almost 80 years defined what the rest of us will do. They do it and the rest of us will do it 4, 5, 6 decades later in many cases. Just look at lean introduced, by Toyota in the 60s, still introduced in some industries and countries as a novelty. The building industry is trying it now in several of the Nordic countries, Liia, and maybe we should do it lean. Personalization of a product that 1 car is different from the other, you have designed it yourself. It's your Mini Cooper designed by you. They started in the '80s with a complete personalization of a heavy engineering product still introduced as a novelty in many industries that you can have your personal track. Even universities are now discussing the possibility for your kids to design their own track when they study economics or business or law or what have you. The which shows the way. If you hang around with the which today and listening to what they are talking about, there are some interesting things in the air. And you can pick up urbanization, the 600 urban areas that will dominate the world economy, of course, to which is interested in that, 80% of the world population in 600 urban areas in 20 years, we will live on less than 2% in the land mass of this planet. Knowledge. Knowledge as a service as to which. Knowledge is a service, just like Spotify or Netflix. You plug in, you play and you pay and you get the knowledge that you need. We are transforming intelligence and knowledge to services the which. The which goes electric. You know that, too. The which understands that greenification is the competitive platform, but more importantly, to which must relate to the world. And when you listen into the world view of the which, 3 scenarios is probably there.

Yes. I think even though which is here, the crystal ball is somehow broken. And what can we do? We can actually look into where we maybe think the world is going. And we will let you now present 3 scenarios where we maybe think the world is heading, Kjell, what's your starting?

My country first, think Donald Trump. Think Erdogan. Think nation state, borders, fragmentization, the European community that is 2, 3 or 4 tier system more breakouts of the union, unrest, frozen conflicts and the world that goes into a state of actually nation states, something that we can recognize in a way from our history books. This is a world where multinational companies can prosper. Actually the multinational company is a consequence of the fragmented world. That's why we invented companies like Siemens, Coca-Cola, IBM, Colt, Ford Motor Company. We invented them actually to fit that kind of a world. My country first, and no centric world view is one possible scenario that the industry is preparing for.

The second scenario, we first, more polycentric world is growing. I think you all know the series of David Attenborough, 7 Worlds, 1 planet. And what we see is maybe 7 worlds are willing, a coalition of different willings. And what we see and that also what we are writing in our book that the idea of globalization is evolving towards more regions, more value-based region, not necessarily geographic but regions where we somehow share values, where we trade, where we travel, where our security policy perspectives, supply chains, where we accumulate capital. And what we will see maybe is rivalry between them instability. And we also see now actually the pattern of a new world, if you believe in this scenario. We are a part of like EU, U.S. Canada, Japan, South Korea, that part of the world. Beijing is heading up an umbrella and saying we are one of these oligons as we call them, a few is deciding. We see India. We see that Russia will try. So this is actually a new type of world with less globalization, more of regionalization. And maybe that will end up that we all will become more like Americans. We will stay in our own union or our own oligon.

Number three, Planet first. Planet first. China and India in a tug of war, drug camp, Poscandinarvisk and an internal tug of war. But also under the pressure to sort out a climate crisis that is raising is voice more or less in an ongoing fashion. And here, I think we should also understand that there will be a soft dynamic in addition to an economic and a military dynamic, but we will collaborate. We will be forced into stable collaboration. And here, ladies and gentlemen, there is something interesting. Industrialization is no more than 230, 240 years, if you think back. It all began in the 1780s in the U.K. [indiscernible] and all that. You can remember from your history books. We have, in principle, in 7 generation built all that, that you see out there. All the housing, all the value that Liia was talking about, all the infrastructure, machinery, equipment, our long life, it's 230 years. But in this geocentric planet first scenario, we will go into a state of rebuilding and reindustrialized this planet. In one generation, we're going to put what 7 generations did wrong, we're going to put it right. it's a reindustrialization of the planet that could and possibly will drive massive growth.

So maybe it's time to conclude. We presented 3 different scenarios: country first, we first and planet first. And the question is about your sunglasses. We're going to have them on or off or maybe protective glasses. Who knows? We talked about the Climate Express and how sustainability actually is a platform for competitiveness. The fairytale society, the which knowledge as a service. But ladies and gentlemen, and all in here, what are we really saying? What we say, Kjell? What is a real conclusion?

I don't know, let's have a chat.

Yes, let's have a chat.

What are we saying? We are pretty far away from that apartment in London, 1996, you remember, shopping and f***ing. We are pretty far away from that 2023. And we're pretty far away from that [indiscernible] very far away from that too.

We're very far away from that too.

We are not marxists.

But I'd say we're not determinists. We don't think that the future is given.

No, it's not given. We are probably driven by ideas, globalization. Your life, our life, 40 years from 1982 up and until 2019, was driven by an idea. Idea was basically go international, open up, travel, invest, go into China, sub supply from some part of the world, globalization, gave us Madonna, CNN, Lady Gaga, international financial markets and so much more. It's an idea.

And if we think globalization, the world will become global. And looking at the time we're living right now, a lot of us is thinking about sustainability.

And the which is thinking about sustainability, 22 years ago, a tiny little company that came out of the logic of Silicon Valley, Tesla. Everybody knows that it's Tesla, but it's an old company by now. Started to change the world's most competitive industry. Ladies and gentlemen, Volkswagen, 600,000 employees in 188 countries that indirectly employs 9 million people around the world. If they go green, it means something, and it's just an idea. It's just an idea.

So maybe that's a prediction from our side that because everybody thinks about sustainability. And we know that our world view is affecting how the world order will develop.

Yes. And exactly in that order...

And looking at the world view is maybe more important than looking into the world order. Because what is affecting how we make decision, but maybe the conclusion is that we make history, all us in here, Pandox hotel business, everybody and not the other way around.

It's not materialistic as a marxist will say. It's not the physical structure of our society that shapes us and history that shapes us. Actually, we shape much more than we think. And I think the last 40 years show that we are capable of doing a lot when we believe in an idea.

Yes. And the interesting thing today is actually that looking into -- let's go back to the idea about the green idea about sustainability. And where is that idea, the strongest? It's, of course, at all activists, we know [indiscernible] but it's also in the boardroom of BlackRock. It's among all investors. I would say it's among almost every entrepreneur today, where creating value for the society is the way of creating profit and competitiveness.

And in a way, it doesn't matter whether it's right or wrong, globalization is either right or wrong. It is like Dalai Lama used to say, it is what it is, things like that. And in a way, the greening, the which going electric and the fact that we move into this is -- whether it's good or bad, that's a completely different direction. We are doing it. We are doing it, and that's what's interesting, and it's just driven by a simple idea at the end of the day. We shape history.

So maybe the key conclusion is the key question for the future is which idea is a strongest today and will affect the decision of tomorrow.

Or maybe even ideas.

Ideas.

Thank you very much.

Thank you. Thank you.

What an engaging and powerful presentation. Thank you very much indeed. We could feel actually the whole afternoon, just unpacking some of that, but we don't have that kind of time. But some time for you to do some work now, Per and Kjell just proposed 3 scenarios of what we might be in control of bringing to life. My country first, nation states, we first, the regions or olegons or the planet first. Please scan your QR code, and choose which one you think is most likely to happen. And also you may find a second question there, which will be what effect do you think your chosen scenario will have on demand in the hotel sector? Again, please do choose. We will reveal the answers later. Gentlemen, I know you are going to join me a bit later on. But for now, thank you very much, everyone, Per and Kjell. Now we have something a bit different again for you. Hotel industry has seen many challenges in its time, but it's always been resilient and been able to bounce back and adapt in the way Per and Kjell were talking about to whatever was thrown at it. And we wanted to recognize and applaud that resilience and take from it the confidence that we can together come through the current circumstances we find ourselves in more strongly. Let me now introduce you to Kelly. She's going to share her thoughts on the resilience of the sector in her own style.

Thank you. Thank you so much. Do you want to hear a story? To be on the road is hard work, but it's a great part of my life. My name is Kelly, but my friends call me, well, Kelly. I've been to many hotels in my life. I love the atmosphere, meeting people from all over the world, the hospitality, room service and the feeling of not having to clean your room, it's a life to live. Usually, this place here is pretty crowded. But now it reminds me of a difficult time in my so-called hotel life. [Presentation]

Thank you, Kelly. I remember in the U.K. in the pandemic, when hotels opened their doors to the homeless people shielding and stuck in quarantine, not your normal guests, but the hotels were there, not the same, nonetheless. We'll check in again with Kelly a bit later on. Our next guest has some unique perspectives to share. A career diplomat, who has served in New Delhi, Moscow and Washington. He has also served as Sweden's ambassador to Afghanistan and most recently, Ukraine. He's been on the ground in parts of the world experiencing seismic geopolitical events, parts of the world that many of us would choose to go nowhere near. And on the 24th of February 2022, he was in Kyiv as the Russian tanks crossed the border. Let's hear a bit about his experiences. What he's taken from them and how he looks forward to our future.

Please welcome, Head of Department for UN Policy as Ministry for Foreign Affairs, Tobias Thyberg.

Welcome. Thank you for being here. It is privileged to share some time with you. Let's jump straight in. Take us back to February 2022. What was it like on the night of the invasion?

It was -- there was a strange feeling in Kyiv, which had been building up since October, November of the preceding year because we don't follow the Russian troop movements around the Ukrainian border, the Americans, at least since November, had been telling us that this time, it's for real, something will happen. And as some of you might recall, a lot of European countries, including my own, didn't quite believe it. And when we were sitting in that reality in Kyiv sort of hearing the mounting alarm from our American and British colleagues hearing our own intelligence community saying, this is not going to happen, feeling the atmosphere on the streets following the Russian mobilization all along the borders, it was weird. And yes, you asked me to take us back to the day itself. So on the 23rd of February in the evening, I was walking back to the Embassy from a meeting at the Ukrainian Ministry for Foreign Affairs. When I got a phone call on my cell. It was a representative of a country with which Sweden has very close and trustful relationships who said you guys are still in Kyiv, aren't you. I said, "Yes, yes, we are, because this country has already evacuated." And they told me, well, in that case, make sure to stay in doors after 10:00 tonight because tonight is when it happens. And so I rushed back to the Embassy, assembled the team. We figured that if we could evacuate within 37 minutes then we'd be able to be out of town before panic strikes, before the motorways and roads out of the city are clogged up by fleeing citizens. If we could leave the Embassy within the 37 minutes, we'd be able to make it, assuming the information was correct that 10:00 was the cutoff time. That was just our hypothesis. I checked with the foreign minister at the time. She gave us the thumbs up and we evacuated and we run our way.

Within 37 minutes?

Yes. But we'd spent a good -- so with my management group at the Embassy, I would say that a good 40% of our time in the proceeding 2.5 months and probably been devoted to crisis preparation. [indiscernible], as we call it in Swedish. And so we've made a lot of plans. And I think that experience basically brought home to me the truth of the well-known saying that plans are useless, but planning is essential. We, of course, didn't follow any of our plans point by point, but oh my God we were helped by the planning that we've done. So thanks to that, we could be out of there. Within those 37 minutes, we made it out. Our German colleagues were less fortunate. They got their get-go a few hours later, they got stuck in the panic that affected all the roads out of Kyiv, and they could see the robots flying over their convoys -- I mean the missiles flying over their convoys. So yes, so we were lucky. Just a nick of time.

That's incredible. It must have been a very high stress 37 minutes. And you've got to know the Ukrainian people a lot during your time there. They didn't have 37 minutes to get out. How are they coping with the reality on the ground?

So this takes me back to something which Kjell and Per mentioned in your absolutely fascinating presentation, which is this idea about the lazy human and the capable human. And I think just the same as we saw in response to the pandemic and then also in the great film that you showed us before this -- before this part, the way the hotel industry responded to the pandemic, the way our societies responded to the pandemic, basically the same fundamental dynamics applied to Ukraine as a society, as a country, as a state in response to this insane crisis. And I think my main takeaway, which is simply the incredible speed with which a country, which is traumatized in a way which not even the experience of the pandemic can begin to illustrate for those who haven't seen it, to imagine a collective of 35 million people who, from 1 day to the next reorient everything in their lives. I mean the pandemic fundamentally wasn't existential for any of us. It wasn't a question of life and death. It was a question of massive inconvenience and economic loss. But it wasn't a question of life and death. This, of course, is life and death challenge, but I believe that the fundamental human instincts that triggers and people is the same, whether we're dealing with a financial crisis or a health crisis or ultimately an existential military crisis. And to see that happen in front of your eyes, and I could sort of think of 100 million examples, but that was sort of the main takeaway for me to see the incredible levels of ability for collective action, imagination and purpose that sort of a whole nation can mobilize within hours. I think that was my main takeaway.

Incredibly -- incredibly impressive. I mean I wonder if we look just briefly at sort of how we got to this point. And if we go back to, say, 2014 and Russia's annexation of Crimea. Some would argue that the West was a bit too accommodating and letting that happen. I don't know if you think whether we could have done more at that point, we might not have got here?

So I'm going to allow myself to say something which doesn't, of course, reflect Swedish government policy, and it's certainly not the place of Sweden to have a view on this since we're not a NATO ally. So this is just me speaking. But I firmly believe that if Ukraine had been offered a credible path towards EU and NATO membership, back in the mid-2000s following on from the Orange revolution, then this would not have happened. That's my belief. And coming back to the question 2014, I'm certainly not going to pass judgment on the extremely difficult situation that world leaders, Angela Merkel; the French President, Sarkozy at that time, had to deal with at that time. But I think one thing which we can safely say now is that the hypothesis that Russia's objective is to reconquer Ukraine and eliminate Ukraine as a meaningful entity on the world map. The hypothesis that, that was Russia's objective ultimately back then, and that remains Russia's objective now. That hypothesis was not the basis for the decisions that were made back in 2014. If that was because of wishful thinking, or because of a lack of imagination when thinking about what's actually driving the Russians, I don't know. But if we would have based our decision-making back then on that hypothesis, then we would have had a different outcome today, I think.

That would have changed things. And what about the extent of the support that is now being provided? What's your view on the Western level of support?

So I think the thing that's so incredibly difficult to get your head around sort of emotionally is this, is the idea that the West, the collective West, Sweden, the European Union, NATO allies, the United States, Canada, South Korea, Japan, what we call the West, the countries that care about Ukraine ultimately. The idea that the unprecedented mobilization of military, political and financial support that we collectively have offered Ukraine and for which I think we have every reason to feel proud as citizens as taxpayers, nevertheless is, at this stage, not enough to achieve an ultimately acceptable solution to this war. And that is something which is kind of difficult to process almost on the individual level because like, my God, we're doing so much and yet it's not enough.

Yes. It's very difficult. And then you throw in the Middle East crisis that are up just a few weeks ago. What impact do you think that's having on -- there's a view that maybe the eye is being taken off the ball of the Russia-Ukraine conflict in order to help deal with the Middle East situation, what's your take on that?

I don't know, and I -- this -- obviously, the tragedy in Israel and Palestine is evolving in front of our eyes, and it's -- we're in such an early stage that I think it's very difficult to sort of make any predictions going forward. So what I say now is -- I say it with great humility that I might well be completely off the charts wrong with this. But number one, I don't think the developments in the Middle East are going to throw Europe, of course, as regards the war -- Russia's war in Ukraine of the simple reason that this is our immediate backyard. And it simply doesn't make sense to me that any state or union of states such as the EU would abandon an issue, which is manifestly of existential importance to their interest because of the development in the Middle East, no matter how a grave that is. So I don't think we have to worry too much about the European response. Now the European response might be insufficient, but I don't think it will be because of what's happening in Gaza and so. Second question is the United States. I'm more worried about U.S. maintaining its commitment on Ukraine over time, but not primarily because of what's happening in the Middle East, but rather because of strange domestic politics in the United States, as we've seen, among other things surrounding the disorder in the U.S. Congress in recent weeks and months. And the way Ukraine unfortunately has become a lightning rod in domestic U.S. political polarization. That was being more as regards Ukraine and as far as the U.S. is concerned. The third element, I think, where Gaza will play out is the global narrative. I mean essentially, we've been telling a lot of countries in the world in Sub-Saharan Africa, in Asia, in Latin America, Brazil, Indonesia, a host of African countries, Nigeria, South Africa, Ethiopia, you all need to care about Ukraine and caring about Ukraine means signing up under our basic positions because this is a global issue. It's an issue of international law. And that's a view that I firmly agree with because it happens to be true. But of course, what they tell us now, and I've heard this in New York in recent weeks and months is this is that, okay, so it was all good and well for you to sort of demand our support for your position on Ukraine because that happens to be a vital security interest for you, but where are you now on Gaza? Now what I'm saying now is not -- I'm not expressing a view of my own, definitely not, and I'm not sort of passing judgment on how fair that view that we hear from the so-called global south is all I'm saying it's there. It's very strongly felt by the countries in question, and I think it will make our objective to sort of convince the world that Ukraine is a universal concern so much more difficult.

Yes. Certainly no easy questions in your life rather. Looking at your 2 postings as Ambassador, Ukraine and Afghanistan. To the outside world, they may look relatively similar, 2 countries in conflict. I'm guessing that's probably a bit simplistic. How do those 2 situations differ in your view?

Whatever I say about this, I say in the spirit of huge humility because the suffering that the Afghan people and the suffering that the Ukrainians have been through and have been forced into by virtue of their neighborhoods is something to take very, very seriously. So it almost feels frivolous to say, "Oh, but Afghanistan was like this and Ukraine was like that." But with that sort of caveat, I would say this. I would say that we diluted ourselves in Afghanistan, and we diluted ourselves in Ukraine. In Afghanistan, we diluted ourselves into believing that the political, social and economic institutions that we were supporting since the 2001 U.S.-led intervention following 9/11, we diluted ourselves into thinking that all of these institutions were real and that they were strong and that they, thanks to our support over the years and ultimately over 2 decades, they would be able to maintain a secure peaceful Afghan state. It turned out that -- and this is -- again, I come back to that point about humility. But at some level, it ended up that they pretended to reform, and we pretended to believe that it was for real. In the case of Ukraine, we also diluted ourselves, but the other way around. One of the things that annoys me is that whenever you hear Ukraine, it's so often a glass half-empty story, too much corruption, not enough reforms, not enough social cohesion, too much polarization. It's never impressive reform. It's never remarkably well functioning state institutions. It's never true nationhood. Well, I would really, really hope that the experience from the 24th of February and onwards, would finally put rest to this conversation. Ukraine is absolutely unambiguously a glass more than half full. And that's the way we diluted ourselves as regards to Ukraine. We overestimated the value of our efforts in Afghanistan, and we underestimated Ukraine.

Amazing. Well, with that, thank you. You're saying to join us for a panel. So thank you, absolutely fascinating to hear from you. We're now going to have a short discussion with Per and Kjell, who will rejoin us. So please do come and join us, gentlemen. Hello please do. Welcome. Welcome. I'm glad we're doing this sitting because I am infinitely shorter than all of you. So -- fantastic to have you all here. Should we first just take a look at which of the scenarios you to presented our audience thoughts most likely and see you should be able to -- look at that -- you have completely split the audience. What do you think. Were you expecting that? What are you expecting?

I was expecting scenario 2 to dominate completely. Actually, with like 60% or 70%. I'm quite surprised by the numbers.

You guys just love hedging your bets. Tobias, did you pick one?

I didn't know.

I won't press you. Okay. Let's look at some different topics. I'd like to talk, if I can, first, about leadership. Per and Kjell, you talked today and in your book about story telling leaders who can, with their communication skills, bring people from diverse backgrounds together around ideas that could become reality. And Tobias, you have been in some pretty tough locations. Can I ask you what you think good leadership looks like?

I don't know what good leadership looks like. But there's a few things. Adaptability, obviously; agility. Those are popular words. But it's interesting when you're sort of really confronted with them in your day-to-day life and everything changes from one moment to the next. I think that will be one thing that I'd bring up. The other thing I'd bring up is the ability to separate prestige from authority. And what I mean by that is to always fully embody the authority, which is the responsibility of a leader without assuming that you have the answer. And to be able to separate those 2 mindsets and work as fully as you can on using the strengths of your team and on replacing your own judgment with the judgment of somebody around you, who you guess probably has a better handle, I think that's another important element.

That sounds pretty relevant when you're trying to get an idea where you're looking in the future, you don't know what's coming next, adaptability and trusting others sounds important.

Yes. And for the leader, the person that stands up and say, I would like to be in the forefront of this development, you shoulder to some extent, uncertainty, you do that, to put it on your own shoulders and say, I think this is the direction, follow me. And then you take a lot of responsibility when you communicate that to the rest of the group or the pack or the flock. So the shoulder uncertainty seems to be key, like Zelensky did there in the beginning. Pointed out the direction. "I don't need a taxi. I need ammo." The famous quote there in the beginning.

Yes. But I think another way of translating that is actually to speak about leaders as aspiring as to aspire to something. And of course, to say follow me, but also I believe in this. And I think that is very important. And I think, especially in times like this, it's important for the leader who really believes actually a better future. So I think that is something also important. Maybe that's why we had almost 30% having the Planet First scenario because you -- as a leader, I think you have to have this positive movement forward. I think you have this authenticity what you talk about. And while talking about political leaders, I think the dimension of acting in the public interest is very, very important, not to be special interest oriented, to be really public interest. And to have this like the long term, the positive actually attitude towards future. And I work with a lot of political communication, and we see that you can choose between hope, there is something better or threats. And I think leadership today, I think the hope dimension is really important. And I think it's important in business and company wherever you are, maybe as a parent as well because that's a leadership role we all have, yes.

Fantastic. I hope you're ready to be great leaders at the end of today. You described the era of globalization that has brought up to now. And in that period, we've seen the development of a number of global institutions, the World Bank, the IMF, the UN. I wonder, if we look forward, do those stay relevant those institutions?

Maybe, maybe not. I mean, under Xi Jinping, China has been pointing out a direction underlying the fact that China is not a country, never has been, probably never will be. Sweden is a country, France is a proud Republic, Finland is a country. China is a civilization. And a complete civilization with its own history, its own food, its own music. And by the way, twice as old as our own pointed out every now and then by the Chinese. This is a complete civilization. You can have your universal rights, your pride parades, you can have whatever you want, but not here in China. You have them over there, in your part of the world. And by the way, we are not subordinate to your civilization. We are in parallel to your civilization. And I see those civilizational claims in other areas in the world. And that worries me coming back to your question.

The institutions. Do you have a view on how relevant they remain?

Yes. We're in a challenging time coming back to the point that you just made, Kjell, because speaking of the United Nations, the Chinese, in recent years, have started catching up in the United Nations like there is no tomorrow. Every 3 years, the UN budget gets recalculated. And every time China takes a huge leap forward in this financial contribution to the UN. So next time the UN budget gets recalculated, I think China is projected to end up taking somewhere around 1/4 or somewhat less of the entire UN burden. That's just after the United States. At the same time, they're filling up the UN with their people. They're putting in people at every level and still they're underrepresented in terms of their portion of world population, they still have hundreds of positions to fill within the United Nations on every level before they reach what they "deserve." And your point on China as a civilization is something that they're really, really pushing hard. They're strategically working within the United Nations to redefine fundamental ideas about peace and security, about global development, about humanitarian support, about human rights after the Chinese model. Now that puts a country like Sweden in a very tricky position.

Puts us all in tricky position.

Because we were attached to our universal principles of human rights, development, et cetera. We like those. At the same time, we prefer to bring China into the existing order rather than China developing a competing order. And I don't think the Chinese have firmly decided yet which way they're going. I think they're putting their eggs in both baskets as it were?

Like our audience who like to have...

Do they have their friends in the U.S., what do you say?

I don't think the Chinese have friends, but I think that the Chinese are making it very difficult for very many countries using both carrots and sticks to act in a way which counters the Chinese interest. And I believe that the direction that U.S. politics is taking isn't necessarily making it easier for the collective West to offer a truly powerful counter way.

And I promised we would involve our audience. And we've got a quick time for 1 question.

Yes, we do. We've been talking a lot about China and the United States, but we also have India, which is a major power today and also rapidly rising up. So the question is -- from an [indiscernible] perspective, sort of where India will end up? Will they choose sides or remain more neutral or opportunistic in the new world order?

We haven't speculated a lot about this. But maybe you have, Tobias.

I mean India under Modi is we first kind of direction. You've probably noticed that, that India goes in its own direction. And India also has been able to do what the financial times recently called that a la carte kind of relation to the world. I go a little bit with the Americans and the Europeans, no Chinese could do something here. To play the fact that the world is fragmented and position their own interest. So...

Also, there's an economic momentum, I think, where, especially European or other countries are going out from China and going to like Bangladesh, Vietnam, India. That movement is very strong now. So I think that India maybe now has a very economic perspective in the decision-making.

So it's going to be fascinating to see which way it goes. We must pause there. We could talk all afternoon. But no. Thank you all, everyone, please thank Per, Kjell and Tobias. Okay. We're going to take a short break now. When we come back, we will start bringing some of these macro trends into the hotel sector -- sphere. So don't go anywhere. We'll be back in 30 minutes. We'll see you then. Welcome back, everyone. Hope you are nicely refreshed. You'll see that some agree and disagree signs have been placed on your chairs. Please keep a hold of them. We'd love to see you use them and get your input on some topics later. Now we are going to switch gears, and look at how the macroeconomic and geopolitical issues we were hearing about earlier are impacting travel patterns. And first, we're going to hear from a senior economist, who has developed some of the most respected tourism forecasting models used today. He will give us some insight into what's going on in the travel market right now and what might be to come. Please welcome him.

Please welcome Managing Director of Tourism Economics, Oxford Economics, David Goodger.

Hi, everyone, and yes, great to be here with you all today. And yes, I will be talking through some of the economic trends, some of the travel trends that we're looking at for the coming years and how we've got to where we are today. So we talked -- we heard earlier about when sunglasses on, sunglasses off, fortunately I've just got normal glasses on. I don't know what that means. But sort of thinking back to a year ago, we were pretty pessimistic this time last year. We were seeing inflation rising. We've seen the war in Ukraine, a lot of concerns, how are people going to react to the situation that was mounting. And you can see on the charts that we had a pretty pessimistic outlook on the red line there. What's actually happened since then, it's actually been pretty positive. We've seen growth far exceeding that. Not absolutely stellar growth. It's around 3%, 4% global GDP growth, but it's still been a much more positive growth outlook than we were expecting sort of this time last year. Does that mean we're now more positive? It's a sunglasses on time, not necessarily. We are -- I think the key words to boil this down into 2 words be cautious optimism. It's a word that I've heard used a bit last night, but this morning in various discussions. So I think one thing to take away, ignore the rest of my presentation, cautious optimism is sort of where we're looking out for global economy and for travel. Because as we look forward then on travel, what does the forecast look like? It's pretty poor. And we're looking at things sort of flatlining. We're looking at getting to the same global GDP outlook for 2024 as we were thinking a year ago. It's just that different path. It's the timing issue for slowing things down. Reason for this is that we saw, yes, inflation went up a lot last year. We were expecting very rapid policy response. We're expecting people to sort of really be cautious in terms of what they were spending. We actually saw that optimism remaining. How are people still going after spending. It took a while for the interest rates to go up. But unfortunately, interest rates did go up and they've kept on going up and they've stayed higher than a lot of us were expecting this time a year ago. And because that inflation is staying steadily high, arguably in a lot of the advanced markets, they weren't quite quick enough. This looks pretty dramatic. These slopes up, but I agree that could have been quicker, but putting the interest rates up to control the situation. It means because it's that a bit slower. It's taken harder work to get those interest rate inflation under control so these interest rates will remain higher for longer. Good news is they will come down. They will start to come down. Middle of next year is when we're expecting this to start happening in most markets. They will come down, but not quite to the same levels that we have got quite accustomed to, unfortunately, as I've been telling a few people I am moving house next week. And yes, I'm -- horrible mortgage. And as an economist, my wife is giving me a very hard time of why I didn't see this coming. But I'm far from alone in being this situation. I'll turn going back to the more macro view. Yes, what we're looking at is a slowdown in GDP, and it is much more in the advanced markets. So right -- yes, right-hand chart, as you're looking at it, is looking at emerging markets, things are looking fairly healthy there in emerging markets, slowdown going on in China, but that's sort of a much more long run structural issue. What we're seeing in terms of the cycle is there in the advanced markets. It's that slowdown. The slowdown that we're seeing in the U.S. a slowdown that's already there in Eurozone, in U.K. continuing. We're looking at starting to see that data already for the second half of the year in terms of the GDP. It's that slower growth. It's going to carry on into next year before things can start to get better. And that's just our baseline. We do look at alternative scenarios. We do look at uncertainty around the macroeconomic outlook, and there are risks to the outlook, risks very much skewed to the downside financial risks. We quantify different scenarios on a quarterly basis. We're looking at risks relating to asset prices, risks relating to tighter credit conditions, as well as all the geopolitical risks that we've already heard about what's happening in terms of Ukraine, we're also we can keep an eye on what's happening in terms of China, Taiwan. Any increased tensions there would be -- have issues for the global economy, but also what's happening in the Middle East quite obviously coming into sharp focus, giving us that downside. And just give a snapshot of what we think this could be. This is some of the scenarios that we've worked through for the Middle East of if there is an escalation benchmarking on what's happened in previous conflicts, the transmission to the global economy has been through oil price what if we see a moderate impact? What if we see a severe impact? This could have a significant impact on global GDP. We're less reliant on oil and on Middle East and oil, in particular, than we were back in sort of the 90s, so less of an impact than we were seeing in Gulf war. But still, given all the other weaknesses, this could still be enough to tip us into global recession, not just some of these regional recessions. So far, so gloomy, no signs of the optimism yet. I'm afraid. I thought I'd match the mood. I was met at the airport yesterday by a taxi driver, who proceeded to tell me, yes, it's dark outside. This is the most miserable time to visit Stockholm. This is a very depressing time of year here in Sweden. Everyone's really depressed. So I just thought to try and match the mood. But, there is a but. There is a very, very big but. There is an upside to all of this. Why do we see that there is an upside? Why do we see some optimism? We're looking -- there is still a lot of impetus behind spending. There's still a lot of savings that households are sitting on. When we're looking at sort of a lot of consumer trends, people looking at sort of what's been happening to travel, a lot of people do tend to focus on the U.S. just because there's some really good data. And the story is coming out of -- well, everyone's saved up during the pandemic, excess savings, they were saving so much more than they were ordinarily because they couldn't get out and spend. And what's happened since everything opened? Everyone's gone out and spent all of that, everyone spent that on travel. Revenge travel has been absolutely the driving force. There's a huge story there in terms of U.S., I think we're all seeing U.S. travel has come back in a big way. But it's actually less of a story when we look at other markets. When we look at the numbers in terms of what households have been doing with that income, they're saving. There's still a lot of saving that's still out there that could be unwound, that could support that spending. And while unemployment remains low, confidence remains high in many countries, we do still see some continued spending. And then when we look at what people are spending on? They are spending on travel. Across all the advanced economies, the ones that we're now concerned about for having the downturn, we've looked over history of how much people spend, how much of their spending it goes on travel, both domestic and international. And it tends to fluctuate between 7% and 8% across these advanced economies, more in Europe, slightly less in U.S. due to sort of vacation time taken. Pre-pandemic, it was at a high point around 8%. 2022, this share of spending on travel bounced back to a normal range. This year, it's bounced back up to around that 8%. People wanting to get back out and travel to experience new activities, experience something beyond their 4 walls. That drive is absolutely there, and we think that is going to continue to support travel. That's why we have optimism. So bringing this together, where do we see travel today, so we see for 2023, looking at total travel domestic, international for Europe as a whole, we do see that travel has recovered. It's got back to pre-pandemic levels. And yes, next year, we're going to sort of retire these charts, I think, everything looking back to 2019, I think we need to get beyond that. We need to start looking at growth because we have recovered. International is still lagging. Domestic is still leading the way. There's some rebalancing that needs to take place within this picture still, obviously, but there is -- recovery has taken place from most major source markets. Of course, there's risks specific to the travel sector. So just sharing some results here from one of our business survey that we carry out amongst travel businesses, asking all the businesses to site what they see as major risks to the travel outlook. The top ones all relate to costs. Staffing issues is in there, but that is effectively a staff cost issue of having to attract good staff back after the pandemic, having to pay competitive rates. This is going to be a challenge, obviously, going forward, but it's a challenge that is sort of partly being met by businesses passing on some of these costs to consumers, who are willing to pay right now. There's been a lot of story about travel businesses profit hearing from the rebound, from the recovery. We don't think that's a true situation at all. It's yes, there are higher costs being faced, but businesses are aware of it and they're passing it on wherever that is practical and travelers are willing to pay. It's going to come into sharp focus. Everyone's aware of it now, and we think there's going to be a bit of sort of continuation of some of the domestic travel, some of the lower cost options, a bit of trading down. At the same time, we still see luxury absolutely booming. There's a lot of wealthy households, high earners still doing very well. So costs being 1 issue. But of course, when we see risks, there are definitely opportunities. So going back to the same survey, we asked you where do people see the biggest opportunities for growth. And infrastructure, development, new improvements, that has come out absolutely top of where there are opportunities, opportunities to provide new products, new experiences to meet demand. And if you dig into that, there's a lot of comments about sustainable development, getting the right development that what people want to help destinations to help businesses gain share of that growing market. Other things that stand out as being the opportunity for growth is the events side of things. So we've seen leisure events have been a great driver of recovery. That's sports events, but also events, such as concerts. I mentioned already this morning, Taylor Swift has been a fantastic event, the Air Bristol been bringing millions of people to different cities around the world. And yes, my 15-year-old daughter is very excited about it all and the extra dates that are happening at Wembley. First, just an example of some of these events and the ability of these events to bring people to different cities. But it's also business events. It's that personal contact is really crucial for people. We decided, I think, having come out of the pandemic. Yes, webinars were quite nice, but getting together, there's just nothing like it. It's what we need to do. And so this time last year, I invented the Goodger Index, where I looked at how much travel I did pre-pandemic, how much travel I did at the same period last year. And I declare the business travel had returned. The Goodger index is above 100. This year, I haven't even bothered calculating it, we're far, far above that. The need for business travel is absolutely coming back. And with that, we're getting blended travel, people extending their trips to fully experience destinations. Having said that, that is where the real opportunity lies. When we look into different travel segments, yes, we can see domestic has come back for business leisure, short haul business and leisure, also very rapid to come back, but it's the long haul is the 1 missing element that long-haul business as well, in particular, is yet to come back. But if people really do see that value in face-to-face meetings and some of these longer haul markets come back, I think that is the missing piece of the puzzle. And just very quickly, I wanted to talk through all of this travel, this is an extract some work we did for European Travel Commission. Just looking at long-haul travel to Europe and source markets, and the dark blue bars look at historic growth contributions, the light blue are the forecast contributions. We've always seen U.S. and China have been the real driving forces for that long-haul travel to Europe. They're still going to be the markets to watch, and particularly China when it comes to the value of travel, the higher spending. And that is something we are confident that will return, and we're really looking forward to seeing come back in to provide that great opportunity for continued growth. So I'll leave it at that point. I won't talk through all of my final point. You can look at them. But thank you for your time.

Thank you very much, David. Great to have highlighted some bright spots in an otherwise challenging economic environment. We'll see you again later. Okay, on to our next speaker. If you've been involved in the industry for any time at all, you will know him. And he has promised yet again to make the stats fun. So please welcome the good hotel numbers guy.

Please welcome Managing Director of International Business at STR, Robin Rossmann.

If you knew how many cool slides they have to get through, you would also run -- probably run away. Yes, thank you very much for the introduction. I am here to talk about data, which means I'm going to be bringing the fun. Right. So if you don't know STR, we collect data from hotels all around the world. And I'm going to ask you all 9 questions today to share some information, but also challenge some of the things you may think that may be incorrect. I would do that in the form of a kind of game show where I'm going to ask the question. I'm going to ask you to think, is it fact? Is it something that -- we at STR collect, so we can tell you without a shadow a doubt that it is true. Is it fiction, something that may be widely held to believe true, but is not actually correct or is it future? Is it something that is in fact yet, but we think it will be in the future. So in that context, my first question is, has European hotel demand fully recovered from post COVID. Now Liia showed you that RevPAR was up 25%, but occupancy was back 5% for Europe year-to-date. So is this fact, future or friction? And the answer is, it is fact. Because even though we're 3% behind occupancy year-to-date, when you look at demand, it is fully recovered for the last 4, 5 months versus 2019. And that is pretty awesome. Next question, is Europe has lagged the U.S. and growth post COVID. Now if you're an economist, you would say that's true, because European GDP growth is about 2%, the U.S. is about 8% or 4x of that. So the U.S. is ahead. However, I care about the wider economy, where hotels. So from a hotel perspective, that's fiction, because the U.S. has got RevPAR up about 12%, 13% and Europe is up some 25%. Now you may ask yourself the question we'll hold on that's a problem, right? Hotel performance is correlated to broad economic activity. So surely, there's some kind of dislocation that's going to correct you on the future. And you may be right because this does have a lot to do with a huge amount of American tourists coming over. But I also think it's got a lot to do with the shift of the European economy towards luxury and leisure. So next question, changing tax slightly. So 15 years ago, Airbnb short-term rentals came. And over the last 15 years, it's been one of the hot topics in terms of from a political perspective, how do you regulate this? Does it need to be regulated. And so my question to you is, are changes in short-term rentals going to impact hotel performance. And to give you some context, if you look at the number of rooms by major hotel group across Europe, Accor, leading the way some 360,000 rooms, which is still only about 4% of room supply. And when you add just Airbnb on top of that, it's about 2 million rooms or about 20% of all the rooms in Europe. Now as I said, Airbnb didn't exist 15 years ago. It's growing to 2 million rooms. And in that time, it's done almost nothing to hotel demand. Hotel demand is still broadly tracked real GDP. In fact, it's recovered faster than real GDP growth over that period. So you could say that it's fiction because surely, if Airbnb has done nothing to hotel performance in the last 15 years, then they aren't going to do anything in the years coming forward. But actually, when you see what's happening in New York where they've pretty much outright banned Airbnb and short-term rentals and the impact, which is accelerating in recent weeks. We're seeing that hotels performance is improving significantly. And so we do think that in the future in those cities, in those markets where regulation does come in and restrict that short-term rental supply, you will see a boost of hotel performance. So we are talking geopolitics, which means we have to cover Taylor Swift. And the real question is, is Taylor Swift even more popular than one of the most visited cities in Europe, Edinburgh, with all its festivals across the summer months, who is more popular? Well, Taylor Swift has already sold just about 5 million tickets for her events in the U.S., which is hell of a lot. And it may surprise you, Edinburgh does attract a lot of people. It attracts about 4 million people that come every year to the book festival, the classical music festival, the French festival. So a lot of visitors. So you may think that Taylor Swift has won this, but you would be wrong. Because I don't like Taylor Swift. And I'm going to make sure that Edinburgh wins. So if you look over the last 75 years, you'll find that 75 times by 4 million is a lot more than 5 million, and so it is a fact that Edinburgh is more popular than Taylor Swift. But what really matters is, are events back or people booking and attending events like Edinburgh Festival at the same or more than they did in the pandemic. And the answer is, yes, they are comparing '23 to 2019, and this shows you the business on the books all the way from the 6th of March. So looking into the future, how many people were proactive, booked, and actually, what occupancy materialized. You can see at the end, it was about 90%, both in 2019 and 2023. And actual fact, in '23 people were booking earlier further in advance, longer and stronger and that is very helpful to the way that we manage our industry. So next question, are hotel profits fully recovered post COVID. This is a cheap shot. It's an easy one. Yes, it's weighted towards luxury and leisure, but absolutely at 25% GOPPAR level ahead of 2019 levels. Now one of the things that has driven this has been the return of U.S. travel in particular. And as we look into the future, and Dave did give a bit of analysis on this earlier, and this is coming from your data 2 days. So thank you for letting us borrow it. The question is, what is more important, U.S. or Chinese travel? Because the Chinese travel hasn't come back yet. And this was really quite interesting because, yes, China will grow in importance, but we shouldn't forget just how important the U.S. is to travel to Europe. Before the pandemic, it was about 2x the amount of Chinese traveler nights. So about 100 million versus 50 million versus China. And obviously, it has come back way ahead and way before Chinese travel and with significant growth this year. So China is forecast to catch up, but still it will be the U.S. that will be our most important inbound tourists. And also those that are spending higher amounts. Now that being said, there are many, many markets across Europe that are longing for that Chinese travel to come back, especially business destinations in Germany and people that look after that tour group business. So it is the fact that the U.S. is more important. I'll ask my favorite one. So you can't use the past to predict the future, can you? Now all the future is out there. I want to believe that this is true. You past can't predict the future. You need to think about what's going to happen. You need to have the sense. And it's true, it's true. I'm playing here. But I'm just going to show you a chart. This is 2017 occupancy week-over-week, through Europe, yes. And this is 2023. It is almost exactly the same. Why is it almost exactly the same? Because the calendars are exactly the same. The holidays fall in the same period, the Mondays -- it falls across the same period. And so yes, a lot has changed, but fundamentally, we're creatures of habit, and we're allowed to. We have returned to those habits. And you can see here, you do this for Europe, you do this for U.S. everywhere. It is uncanny when you match up the calendars just how consistent the week-over-week demand changes are. So its fiction. You can use the past to predict the future. But just a bit on the future, our forecasts are positive for the future. A little bit of a slowdown from '23, which was exceptional, but we do see positive occupancy and rate growth next year. More on that in a different presentation. So what about sustainability? Do sustainable hotels perform better than others. Now there's no doubt that, especially on the corporate side, with events, people I haven't to fill out questionnaires that have questions around sustainability. But we've done some analysis on sustainable rated hotels versus their comp sets. And the reality is that at the moment, there isn't a meaningful difference in the top line performance of those hotels. Clearly, if you do the right CapEx projects, it will impact the bottom line in your cost. But so far, top line performance isn't massively impacted. But I don't think that will be the case 10 years from now, hopefully sooner, but 10 years from now, certainly at the latest. Because there is a real difference at the carbon footprint when you stay in a hotel that is good at managing emissions versus one that isn't. And this is data from Greenview, and it is fantastic, because it really just helps you visualize what it means in terms of carbon emissions. If you stay in the best, lowest quartile in terms of carbon emissions hotel, you're going to walk away with about a cabin bag of CO2, it's about 8 kg of CO2 with you. If you go to the average hotel, you're going to have to check that baby in, right? That's more than the 10 kg, the 15 kg of -- 14 kg of CO2 you're taking with you. If you're in the upper quartile, it's about 17 kg. And if you're staying at a hotel that is really not holding back in terms of the way it operates and gives you every luxury -- and this is just, by the way, this is the U.K., so this is not some resort destination or somewhere in the Middle East. But even in the U.K., you're walking away with the grizzly bear behind you, right? 200 kg of carbon. And I do believe that consumers and more and more consumers will make decisions along those lines, not yet because none of us really in this room truly know the carbon impact of our decisions. But just like food labeling over time, labeling of carbon emissions will become mandatory. And when it does, these will be impacting decisions. All right. So I've got 2 minutes left. I'm actually going to be on time. It's amazing. I do have my last question for you, which is COVID and the impact of work from home and business travel has made hotels less attractive real estate class than other types of real estate. Certainly, at the beginning of COVID a lot of people would have said, this is true. But I can show you data from CoStar, so we're part of CoStar, and we collect all commercial real estate. And I've just done a comparison here of hotels versus office, looking at the metrics that we look at, which is occupancy for office that would be vacancy rates, average room rent or market rent and then RevPAR and a new metric I made up [indiscernible], which I don't think will carry very long, but you get the idea. And so hotels fully recovered. Yes, office, 96% recovered. Is that right? Well, it's right because it's long-term leases and even if people aren't in the office, they still let. So that's right. I'll come back to that in a bit. Now this is one of the first big things. Obviously, that market rent, that long-term rent doesn't change often. And when people have been letting new space, they haven't been paying more. That market rent, the long-term rent doesn't change often. And when people have been letting new space, they haven't been paying more. So only about 4% up where as hotels 18 actually across Europe, 25% up. And so hotels 20% up on the RevPAR in the U.K. and office 4% down at an operational revenue performance metric. However, if you actually look at the physical occupancy of those -- that real estate and how many people are actually in the office, it's closer to 54% of 46% down. And over time, unless more people start coming in and using that space or could use differently, that's where it's going to tend towards. So quite simply, it's better to become a hotel owner if you're looking at broader commercial real estate. And that is more than a joke that is what we're seeing and hearing in terms of capital allocation from funds going out there to look at real estate. And so on that note, and with 28 seconds to spare, it is fiction, hotels are more attractive now than they've ever been before. And with that, if I had a pair of sunglasses, I put them on. And thank you very much.

Thank you, Robin. Great stuff. Sorry, Edinburgh, Taylor gets my vote. She'll shake it off. Okay. Audience, one for you now to add to Robin's stats. QR code will be coming back up on screen, get ready and let us know what you think will be happening to RevPAR next year. Log your thoughts when the code appears, and we will discuss your answers later. Try and have some differences this time. Okay. Let's shift from travel demand and trends and look at what's happening in the capital markets. To help us do that. Our next speaker, advisers global clients on their hotel investments in Europe, including strategic acquisitions and disposals in the region. Join me in welcoming him. Please welcome Head of EMEA, Hotels and Hospitality Capital Markets at JLL, William Duffey.

Thank you, Robin. There were pretty fascinating slides and set the theme pretty well and so I've got to end on a high as well. But I'm afraid there is a few more charts that I will touch on in this section. And so look, for me, really delighted to be able to present this today, which is a topic I find really fascinating. That is capital movement around the world and kind of why does it behave in certain ways in our sector. And so I wanted to start here. There's a little bit here to take on board. But effectively, this is volumes, okay, over the last 23 years, but at the same time, dovetailing pretty nicely with some of the major macro events that we've obviously been witnessing. Sadly, there's a lot more at the far end than this end, as we all know. But at the same time, I think the key statement to make from here is that cross-border hotel investments contributed about, on average, 19% of annual global hotel liquidity. So it is really a key point that it has a huge importance to the sector. As you can see from the lighter blue at an EMEA level, effectively this is a big benefit of cross-border capital on nearly all years. It's so big actually, when you look at the data, it's up to about 27%, up to 2019. And kind of why when you look at that bulk of it is clearly within Europe. And I think there's a number of factors there. Clearly, Europe is stable. It's transparent. It's got a well-developed legal system. But it's also a familiar ground. If you think about some of the offshore capital, you'll have a number of those individuals who potentially come to Europe to stay for holidays or they have been educated here. It's clearly well connected, but at the same time, from a offshore perspective and investing in Europe, in particular, you have seen some tax incentive basis that's made it much more attractive for putting capital here. And despite all of that and the continued economic challenges that clearly Euro has faced, it feels as though it's fairly resilient, right? It does continue to bounce back. If we look at the U.S., on the other hand, it's a completely different picture, right? And what it shows us is the U.S. is just not as dependent on global capital. You kind of ask yourself why, for me, it's predominantly down to the U.S. as being such a big beast and that ability for it to trade very much within region and between its counterparts. Clearly, it's worth to highlight, right, you're going to find some of the bigger funds in the U.S. You clearly, will have LPs that are offshore that are investing through their funds. But as I said, majority seems to be done through within region. Asia, on the other hand, is, as you probably would guess, it's very much a domestic, domestic market. But at the same time, we have seen some activity there of recent with North American private equity in particular, Kasel, Blackstone, Bearings to name a few who have all made acquisitions there in the last couple of years. But even going back to 2007, this was Morgan Stanley who came into Japan buying ANA. But again, as I said, it's very much more of a domestic to domestic market. So taking this slide, and doing this to it, the squiggle effectively is what interest rates have been doing. And I think there is a general sentiment that we certainly have the potentially low interest rates over the last 10 years, right, have fueled the volumes into the sector. To a degree, I think it is clearly right. It's definitely helped, but if I show you this, I mean, there's not a huge amount of correlation with it. I think it's much more down to the capital dictating what it wants to do and when. 2015 was clearly the vintage. Hopefully, we see that in the not-too-distant future, close to $30 billion. And as you can see, it wasn't obviously when we had the low interest rates, but it was when we were seeing those rates starting to fall. I think you had at that point in time that the global economy was clearly experiencing some periods of stability. You've got some growth back from 2008. Travel and tourism was picking up. And obviously, you had some hotel companies and funds that were restructuring. You had strategic hotels as an example that's sold out to Blackstone at that point in time. And at the same time, you had ISG as another example, who were going through that asset-light basis. And so at that point in time, you saw that North American private equity really dominating and going on a little buying spree. If we take 2016 and '17 on the flip side, again, super interesting at a U.K. level, we're seeing a lot of Far East capital starting to turn up. Why they were taking advantage very much of the devaluation of the sterling after the Brexit vote. And so they were effectively getting quite a discount to pricing just on that FX time. So right now, I've just finished up doing a tour through the Far East about 4 weeks ago. And again, really interesting feedback that was coming through that. And that was very much the -- a number of investors, whether there was a family offices or even to the REITs that we were talking to, many of them were saying to us, we will not look at the U.S. at the moment because we are scared on this U.S., China tension and that fear of potentially getting worse and worse. Maybe that does get better with a little bit of the breaking of breads between the two leaders last week, but the sentiment was very much it's off bounce. But I think it's fair to say when you look at this and what we've seen, tensions across the world definitely have quite a big part to play in capital movements. But also the basis of capital. And what do I mean by that? I use 2 expressions here that are tested to see whether people know, which is one OPM and the other MOM. OPM, investing other people's money. MOM, investing my own money. And the importance of that is as follows. If you think about it, a lot of the offshore capital is MOM, investing my own money. And these guys don't have any urgency to do a deal, they don't have the pressures to deploy, they take the time, they'll make a decision when it's right for them. Rather than investing other people's money, you could perhaps categorize that more in the private equity side and these guys do need to invest. And that comes on to my next slide when we look at who's been active. And so -- what we try to do is see if there's been any correlation between the buyer audience, leaving up to GFC, but also after COVID as well. The light gold or brown here is North American private equity, predominantly capital, which has been, as you can see, a pretty big and dominant player in the sector and is the largest buyer audience in most years. But at the same time, you can see with Asia and the Middle East, they are an extremely important buyer universe to have and the light blue in the middle bar being China, which I'll touch on shortly. What we find really interesting is how this capital is looking to invest. And if you take an example with ADR of recents, these guys have changed their strategy where it's much more investing now indirectly through a partner rather than what they were doing previously, which was direct deals. At the same time, when you get a little bit more granular, what's driving some of this motivation to invest as well. We see that predominantly, a lot of the Thai capital, in particular, is looking to chase yield. Robin, if you take PIF out of Saudi, they have a really different strategy. They're much more focused on luxury brands and luxury platforms as their basis of acquisition. The one that I would call out that potentially does change in terms of source of capital and may sound left field, although we've heard it a couple of times today, and that's India. And I think in due course, you predominantly will see a little bit more of capital coming out of India. Why? I think we saw slightly earlier that GDP is nearly close to double digits. There's a good sense that an awful lot of wealth is being created there. And you will see, I think, some capital start to move out of there. We've seen a little bit of activity to date, whether that was InterGlobe that bought within Europe, a couple of years back, Reliance have also bought in the U.S. and in the U.K. So again, I think you'll find that capital is looking at ways that it can diversify its wealth and risk, and that's something I would keep a certain eye on. So if we look at a little deeper in terms of the Americas and source of capital, as I mentioned, the America is just not as dependent on offshore capital. But Clearly, the call out has to be in 2016 and 2017, as I touched earlier, this is just amazing to see how much activity was happening with Chinese investments into the U.S. where these guys, it's fair to say they were on a buying spree where they're obviously seeing a huge amount of economic growth coming out of that region. You saw, for example, China Life bought $2 billion of assets from Starwood Capital. Angband at the time when it bought strategic. They bought the Waldorf in New York. I mean that was $7.5 billion of transactions just in those 2 alone. And then the Chinese gapped off and turned off the tap, the restricted Chinese companies investing outside of China, some tension started to obviously grow between the U.S. and China. And as basically, as you can see here, really no capital out of China is starting to invest in U.S. hotels at the moment. So I think, again, a very clear example of how that sort of geopolitical does influence capital movement. If we take the same, but looking at EMEA, as I touched on earlier, I mean, EMEA just has a much more diverse pool of capital investing into this geography. I mean it is the largest beneficiary of inbound investments, about $120-odd billion since 2000. We touched on China on the previous slide. We clearly saw a bit of activity here. But again, very small, that was mainly for example, Fosun buying Club Med. But the one to call out, I think, is the Middle East. It accounts for circa 20% of inbound investment into Europe. So I guess right now, we start to ask ourselves the question, are we going to see with the current conflict in Israel starting to impact some of that capital movement? What we do know is that some of that Middle Eastern capital where there is a larger demand than ever for inward investment. So again, where we have seen and all heard of these giga projects, Red Sea, as an example, there is a demand of some of the larger groups to allow some of the allocation of capital to go into that inward investment. And therefore, we pose the question, will that have some form of impact to what these guys will do outbound. So -- to kind of summarize and hopefully that can be seen, but I think the key message is cross-border investment into the hotel sector is hugely important. I mentioned at the beginning, it's contributing about 19% of annual global hotel liquidity. Clearly, the world that we're living in today, there's an awful lot of geopolitical unrest, there's rising macroeconomic volatility happening. I think it's fair to say this is and will continue to have a part to play in driving transactional volumes in the sector. However, what does excite me though is just seeing that new capital, new regions coming into the sector. As I mentioned earlier, I think there's a good chance you'll see a little bit more outbound capital coming out of India. But at the same time, we are seeing some of that South American capital routing through to Spain. So we have seen these regions pop up before. Take, for example, the South Koreans, they were fairly active in our sector about $2 billion they put in since 2000. But for me, the capital will try to do its best at being measured with where it wants to invest and how it wants to invest, but it goes to show it is clearly without many challenges that it's faced. Thank you.

Thank you, Will. Some really interesting thoughts there. Will you stay and join me for a bit longer and to join our conversation, let's welcome back Dave and Robin. You guys all touched on China in some way, shape or form in your comments. So guys, it's time to use the agree and disagree cards now. First up, I mean, please feel free. Do you agree -- it's got to be done. Do you agree or disagree that China will become the largest source market for arrivals into Europe, agree or disagree. Do you always have to ask difficult questions promptly. Okay. Well, that was pretty clear. Good. Fine. We'll move on. What about, though, Will a bit more in your domain, do you agree or disagree that China's role as a major cross-border investor is over? Is it over their role as a major investor? Oh, you're sitting on the fence here. Okay. Will, a bit more equivocal on that. Any thoughts?

I mean I think until the Chinese government changes its position, then it will have an impact to how much outbound capital they are allowed to do, unless you've got existing assets that sit in Europe or you've got legacy structures out of Hong Kong or Singapore. But other than that, it's going to be very limited.

Interesting. Now given that you're all with us and awake, Anders, do we have any other questions from our audience for the chaps.

Starting with Bill again and you touched upon it, but with the Gulf states and Saudi building out their own tourism infrastructure at a rapid pace, will it mean less investments into the European hotel sector?

I think as I mentioned, I think it potentially has an impact to some of the larger funds there. They have an allocation of spend, but they also have that demand of X of that needs to be inward investment, potentially that's going to have an impact to their allocations that will make outside of region, yes.

You can do one more.

Yes, And that's one for Dave. You talked about blended travel, so that when you move in and out of different roles, you start sort of as a business traveler, and then you move into leisure travel. How much of travel is blended today? And how would you say that compares to pre-pandemic.

That's a impossible question. I'd like to pass over to the good data guy to my side. But I think what we're seeing is that it's a higher proportion than it was pre-pandemic. It's something that we've heard a lot about, and we just sort of said buzzword, horrible buzzword, blended word don't like it. But then what we are seeing is it is actually happening. People are sort of booking their trips and you look at the travel behaviors and people are staying for the weekends in addition to visiting. And the fact that you can work remotely does actually build into that, that you can get the family that goes with you or certainly or at least, I don't Robin view.

Yes, I mean we don't have any hard data. But what I would say is whatever it was before it's probably 30% more now, sounds good stat. Agree -- best data we have got.

Okay. Thanks, Anders. Thanks all. Maybe if we boil everything down to RevPAR, we asked you all a little bit earlier what you thought would happen to RevPAR next year. And I think we might be able to see the results coming up on the screen, just behind you guys. Thank you for making a bit of a difference between the answers this time, okay, it's going to be higher. Are you all in that position, Dave?

Yes. Yes. We do think -- yes, certainly, our focus is much more on the demand side of things. We're certainly seeing that the demand was mentioned cautious optimism being the word. That's coming, who's coming back. We are confident that, yes. Chinese might not be the biggest source market, but they're going to be the biggest growth source market, and in fact, they're coming. And they do tend to spend.

Any comment from you, Robin, on that.

It is what we're forecasting. But what I would say is any number of unforecastable events could disrupt that. And I think what's more important is what will it look like in 10 years' time. And I think that's when it's very, very easy to be very bullish for the prospects of the -- of our industry and the demand for travel and tourism.

And you mentioned that it was -- some of these stats are driving more people to look at hotels rather than office. Do you think this is a good news story for us on the transactional so far.

I'm going to be biased to that. But no, I think it's a fair point. Certainly, when we kind of talk to a lot of our client base and certainly where they invest across multiple asset classes, A number of them are saying to us that going into '24 and '25, they're probably going to reduce the allocation that they may have to say, offices. And that effectively shortfall, in essence, is going to go into either logistics or into living, which hopefully to that hospitality is a beneficiary of it.

Yes, yes. And we're seeing lots more conversion start happening in London and the same. Guys, you've done very well, keeping yourselves to time. Thank you very much indeed. We should probably draw it there. So everyone, please thank, Will, Dave and Robin. Thank you.

You may now all be wondering why I am holding this as I've learned today handball. But in a Pandox context, it's really not that strange. Pandox has been invested in the sport of Handball for many years and actually has its own foundation, M9, which supports the sport here in Sweden. Both the men's and women's World Cup competitions are coming up here in Sweden soon, and you are very lucky because we have 5 pairs of tickets to give away, to you lucky people. But you do have to work for it. For those who are able, I would like to invite you to stand up. It's a good time in the afternoon. Stretching is good for us. Please do. Great, right. I'm going to throw this handball into the audience and the first person who catches it will be our lucky winner. Are you ready? Are you ready, Yes. Thank you. Okay. This is a really bad idea. The last time I went Ten-pin bowling. I dropped the ball behind me. So I suggest we find another way you can take your seats again. Thank you, Anders, perhaps you can help me with this.

Sure.

So in here, we have all of your names, mine is only in here 3 times. And we're going to pick our 5 lucky winners. So Anders is going to help me with the name. Let's see. Okay. First up.

The first name is Daniel Stanback.

It's okay. We will give you your tickets, you're fine. Okay, winner number 2, here we go.

The next one is [indiscernible].

Number three.

Number three, [ Keith Neilson ].

Number 4.

Number 4 Is Elizabeth Thomson. They're all in the same spot, aren't they.

I know. And last, but by no means least #5.

Number 5 is [ Erasmus Bloomfiske ].

Okay. Congratulations. Those of you who won, have all won 2 tickets each. Pandox will be in touch with all the details, and we really hope you enjoy the game. Thank you for your help. Okay. Now after that sporting excitement, I think it will be a good idea for us all to relax and catch up with Kelly again because it's time for her to reflect on another difficult time in the hotel market. [Presentation]

Thank you, Kelly. They were tough times. Okay. Helping us up next on our next segment as we start to look to the future is a woman with over 20 years' experience in our markets, having held leadership roles in JLL throughout the Americas, EMEA and Asia Pacific. She has a unique world view. It was no surprise then that earlier this year, Accor snapped her up as their Chief Strategy Officer. Please welcome her to the stage. [Presentation]

Thank you, Gilda, for being here today. Great to have you. So you've just made a big change. Can you tell us a bit about the reasons behind the move and what it's like after 20 years in one organization to start something new.

Big question, and we do need the drinks that were featured on the screen. No, listen, [ Vicky ]. Well, number one, thank you so much for having me here. It's a real honor. And then in terms of sharing the why, the answer really is why not. So I had an amazing career at JLL for 19 years. I got to do my legacy, but in terms of putting the glasses on, there's so much to do in our sector. And I do think that we have this confluence of events going on right now, whether it be secular or just things that we have to deal with from a short to medium term, and I want it to be a part of it. And so I figured what better way than to go into a hotel operating company. And in this one, it's one that I admire very much. I love its leadership, I love its team, and so it was time to go.

Amazing. And it has a lot of rooms as Robin showed us. I wonder if you could do a little compare and contrast for us. What are the biggest points of difference, I guess, between a U.S.-based adviser, your JLL life and now a European headquartered hotel company.

Very different upbringing. So I've been in the States for almost 30 years, I'm 42, about to be 43, so most of my life. And as we were talking about, the U.S. is commercial machine. You go there, you learn how to make money. You go there, you learn how to make business. And I really wanted to do something else. I wanted a different perspective in life, and it's all about that. It's all about perspective. It's all about seeing the different side of the coin. And that's why I love their travel, and I did many a trip with Will around the world, and it was good to sit down with other culture, so other people, other teams and understand why they're doing things in a different way. I wanted different context. And so one of the reasons to come to Accor was to be back in Europe. And see it in their way. And I tell you something, it's very interesting when you're used to operating only in a commercial sense, whether it's right or wrong, it doesn't matter. The answer that you always get is [ Vicky ] is just business. It's not personal. It's just business. And you become quite intentional, but it's just business. And I wanted to go to a place where it was more personal. And I told you, "Oh my god, it's very personal. It's 100% personal. But when it's personal, not only are you intentional, you're more consequential. And I started doing this different type of approach when I became a mom almost 3 years ago, a little bit over 3 years ago. And so yes, it is thinking about not just in the year for the year, which, by the way, is also very broker mentality. That's how it's been raised, if you will, from a professional and academic perspective. But I wanted to go beyond. So the fact that I can roll up my sleeves, get my hands dirty, bring my know-how, learn as well and do things in a more personal way. This is what I wanted to do. And I feel like the European way is a more personal way.

It's fantastic, for fun. Can we have just a little chat about markets. How are you feeling about the investment market? I know you and Will worked together for ages. So, do you agree with them?

Yes, 100%. Listen, the market is very challenging right now, extremely challenging right now. Geopolitics as it relates to cross-border investments is, I would say, one of the main drivers. And to Will's point, the foreign sovereign wealth funds invest directly and indirectly and they're really the drivers of this movement of capital. With so much geopolitical, very serious noise going on, interest rates being the way they are. And by the way, I think we also have to look at what is happening in the source country economies. So if you just look at the Middle East when we were meeting with Middle Eastern investors and know was just there 2 weeks ago, they will tell you what we are developing in [indiscernible] is very exciting. I probably will get a better rate of return, by just investing in, I don't know, in the UAE or in Saudi Arabia, so on and so forth. So there's competing priorities for that capital. And so a lot of these investors maybe find better opportunities in home country. They still want to hedge, they still want to go abroad, but they're going to be very mindful of what is happening geopolitically. And so to Will's point of my own money, that capital right now is just frozen taking a step back and just trying to figure out what they need to do. From a PE perspective, which is really what drives capital investment in the United States, there's a lot of challenges. Most of these fonts are generalists, about 70% of funds that invest in the U.S. are generalists. They have competing priorities as well. They have a lot of exposure to asset classes that are not doing very well like office, and they're going to have to come out of pocket to make go on those loans, et cetera. So there's a lot of factors going on that will impact investment in the short term. But I think on the long-term perspective, we are, by far, the most exciting commercial real estate sector. We're seeing the Hotelization of real estate across the commercial real estate as well. And so there's so many applications that one can take from our sector. So that excitement is not going away.

No, I agree. But then we probably would, I guess. Let's talk strategy. You're now strategy head, and Accor is, as we've seen a huge organization with multiple different facets. How do you go about in an organization like that trying to hone in on the strategic priorities and in such a large organization.

Well, listen, I've been there for almost 60 days. So there's been a lot of observation, a lot of, yes, just observing, learning, understanding, going back to what we talked about at the onset of our conversation to make the context, the reason why decisions have been made, the reasons why decisions haven't been made. So there's a lot of, if you will, reconnaissance that I've been doing over the past several weeks. I tell you, I have a very big admiration for our CEO. That's the reason why I joined. He's the reason why I joined. And he's probably -- and by the way, I love all the brands. Everybody has their own competitive advantage. But I would say that Sebastian has done the most in the last 10 years in terms of testing, breaking, putting together, exploring and that is very exciting. And so in terms of where we're going, there's two distinct strategies right now, the way I would -- from my perspective, the power brands, which is our -- it's our engine and it's growing and it's becoming quite relevant. We'll be celebrating very big anniversaries of some of our brands next year, like 50 years for Ibis, et cetera. And so they have their own strategy, but then we have the fuel engine, the higher growth and not more important, just growing at a higher pace on the lifestyle side, which can go from economy to luxury, and then the luxury sector. So that requires a different type of emphasis different type of approach, but it's very exciting, honestly, I feel very lucky to be seeing both sides.

And amazing to have that core and then disruptors, great stuff. Are there any strategic -- just a quick one. Are there any strategic challenges that you have on your big radar that we haven't yet hit today?

I wouldn't call it challenges, maybe it's more things to consider. So I love all the secular trends that we've been talking about, all the confluence of events that are happening. I think one of them that we haven't talked about, [ Vicky ], is this generational transition? We work with 5 different generations right now. All of them have different priorities. All of them have different reasons to travel. They travel in very different ways as well. The way that they've adopted the different generations have adapted to the impact of COVID, how they work with play, how they use technology, how they communicate, how they interact. These are very profound -- it's a very profound issue and we do need to think about it because at the end of the day, they're going to be our colleagues. They're going to be our employees, and they're going to be our guests. So I would say maybe we need to also think about that aspect of the equation, which is incredibly important.

Maybe we'll see something about it later. Fantastic. There is another poll question for you now on the QR code. See if you agree with Gilda, what's your biggest challenge for 2024? Do you have a look on the QR code, Gilda, you will join us later. We will look to see what you've come up with on your thoughts. But for now, Gilda, thank you very much.

Thank you.

Okay. We come now to our last speakers of the day. This bit will be going out over the webcast. By here in the room, prepared to have your horizons broadened and your minds blown because our next two speakers are expert trend forecasters. One studied to be a theater director, the other is an author, and both have worked with some of our most preeminent brands to help position them for success. I actually saw a comment on LinkedIn a couple of days ago about today's event, talking about these guys and saying something like super excited to have any excuse to spend time in these mines. If they are using, I am listening. We hope you enjoy as much. Please welcome them. Thank you, chaps. Thank you. Great talk. Please join Gilda and I will have a chat. Well, that expanded my mind somewhat. Whilst you recover, let's ask our audience some questions.

We touched a lot there on climate. And can we ask with your panels? Do climate features, climate factors feature in your travel decisions today. Agree or disagree. You're all very worthy individuals. Some honesty coming through, very good.

Okay, mostly green.

But in the future, we're with the future laboratory, in the future, do you expect them to feature more?

Yes, because you're not going to have a choice.

Okay. All right. That is very, very interesting. There was a point that you picked up on, and actually, Gilda, you and I touched on it earlier as well, which is sort of strategic business priorities and the role that business is playing in bringing some of these new trends to life. Can I ask you first from the people you're talking, I'll come to you on this in a second. The people you're talking to at the moment, are you hearing from business that making a positive difference in their community having that sort of impact is currently C-suite priority?

Yes, absolutely. It still is. And I think this is, for me, the really contentious issue. But there are signs of how it becomes very interesting. So there's a British brand that we've been looking at called Faith in Nature, which is a beauty brand that makes clean product. They have recently appointed to Martin's point, Mother Nature to their board. It's a legal appointment. They have a human individual who is legally required to represent mother nature on that business' board. So every Board decision has to go through Mother Nature, that's where regulation starts to become really important. It's a bit like the work we were doing recently for Intrepid Travel, who took a pretty big risk in creating a communications report, a PR report that was looking at the fact that we are facing a future model of restricted travel. So what do you do as a travel agency when it's no longer about progressive growth. It's about the fact that some of the key destinations that their tourists want to visit. Their clients want to visit will be out of access within 10 years or they may simply not even exist anymore.

I just wanted to come to you on that, Gilda, because you've made the very interesting point earlier on about how in the U.S. business, and you go there to make money. And I wonder if there is a different perspective from a U.S., European angle on this point.

Listen, I think in the board room, there is a different perspective. Okay? And we're in different phases. I mean, you gentlemen can chime in, of course. From a regulatory perspective, the EU is miles ahead, okay? But I do think that the next gen that is coming up in the organization. They're very worried about this. And so slowly, it will catch up, and we will see a more, I don't know, more equal level of support, if you will.

I think it is going to be slightly quicker than we anticipated. We've been doing a lot of work recently looking at -- we've released a global affluence report which really chimed with something Forbes had looked at, which is that the age of the average global luxury consumer is about to down age by about 10 years over the next decade because we're seeing this transfer of wealth from a whole generation that made it who are, of course, coming to the end of their lives. And the attitude of this new generation of entrepreneurs of wealth owners of wealth funds and offices is markedly different and I think it means that the attitude we see from, say, a Patagonia owner is no longer going to be the odd one out when it comes to a board discussion.

And I think that's something that we can do better as a business is we need to educate our audience, right? The last couple of weeks have visited places that are, honestly, they're treasures. Buildings that are hundreds of years old. Brands that have all this history, places that are just magnificent. And so if the stats that we saw of the U.S. is the biggest market of outbound travel. Well, it doesn't matter just to use them as an example, you need to educate people when they're coming into your property. Why are we doing this? What are you seeing? Why do we need to protect it. I mean the fact that people are writing on the calls, who does this, right? So we need to educate them. We need to hold them accountable, and it's all part of the reputational economy at the end of the day.

Anecdotally, that's very interesting because I was talking to one of my go-to sort of travel experts who runs an Italy only business and was telling me about the uptick of sales, obviously, along the Amalfi Coast, especially amongst the Americans this summer. And she said, what really riled over here in their conversations was the fact that they would say, "Oh, have you been to stay at the Belmond this or the Belmond that -- and what rate was the fact they were no longer using the name of the property, which has been there for decades, if not longer. It was now the fact that Belmond had done this amazing job at actually putting their name at the front of all these properties and creating this need and this desire that was related to brand. It's a fantastically successful job and they're not the only ones that have done that.

Yes, it can be a good thing to put brand name because imagine that within that portfolio, there are some s***** Belmond property. There are some good ones. So by pulling the prefix Belmond, you kind of clear away all the kind of worst properties. So I always think when we're creating a brand, is it the brand that we're creating that gives value? Or is it the properties and the experiences that add that value to the brand. And I think the kind of wise CEO understand both positioning on it because there is a point where, if you remember, designed hotels, the other group were essentially used to refuse hotels after a while because it just became diligent and it became progressive to do so. But when the hotel group was bought by Marriott -- are they turning those hotels away, now. I'm not sure they do. But I think what it does mean that the brand then becomes challengeable and questionable. We must always remember the power of brand, the power of property, but also the customer, what is their judgment? Is it the brand the company because you do good points and rewards. Are they becoming -- we know that you curate great experiences and to your point, like the great property, and therefore, one is indivisible with the other. So there's a lot of work we have to do to decide where we sit because the customer is already making that decision. I mean how many people have you met to choose their positioning from the point of view of TikTok like how many customers?

Well, I think there's definitely something in there about authenticity, which we will need to take forward.

A new travel agent of tomorrow is TikTok..

Well, there you go. Chris, Martin, Gilda, that was fast. The LinkedIn guy was right, absolutely fascinating, spending time in your world. Bear with me just a second here. But for a moment, everyone, please thank them. Okay. It's time for a final check in with Kelly. Let's see if her glass is filled and what's on her mind. [Presentation]

Thanks very much to Kelly for all her reflections this afternoon. We've been provided with some great insights today, and that would be a great time to summarize what we've learned. So to help me do that, please welcome back Liia and Gilda.

Yes, indeed, I think Kelly has it right, it's time for drink. Thank you very much. It looks very tasty indeed. We are actually going to do this. So that you're all aware. One of the questions we asked you earlier on was what you thought your challenges were for the year ahead? So whilst we have a cheer. Let's bring up on screen, what you thought the challenges for 2024 would be. Okay. Okay. So mostly inflation and cost pressures, more evenly spread. You're all very much a homogenous group, I think. Liia, what's your take on that?

I think it's actually quite encouraging that it's not one single thing we're actually worried about. But it's -- we learned to live with a lot of this turmoil. And I think if anything, we learned to sharpen ourselves. So yes, we will find ways around it.

Find ways around it. What does it mean for you, Gilda.

Listen, I think we've proven that we're very resilient as the people as an industry. And so this is now the new reality. And to your point, Liia, at the beginning, we have to figure out how do we create more value so that we can continue to command the prices that we need to be profitable. And when you also need to, I think, be a little bit more discerning on the cost structure. As well, so there's just it's a new reality. We cannot avoid it. So let's just be smarter in terms of how we run our businesses.

Amazing. And we've heard some, some incredible stuff today, I think, going way back to Per and Kjell and Tobias at the beginning of the afternoon. From everything that you've heard today, what are you going to take away and channel into your respective businesses? I'll start with you this time.

Oh my god, so much. It's honestly so much. We need a little bit of quite time to reflect. I have a 10-hour flight. So I will be doing a lot of that. But so many things. I think listen, the future is now. And I know we were talking, I love the fact that you talked about the past nostalgia and maybe that's a safety place to go, but also the future is now. And so when we -- I see it whenever I went to this conference, okay, and the people in the conference were attending were mostly students. And I love what they said. It was University hotels called The Hague. They taught me something. They said that the person of the future has to be well versed in 3 things. IQ, okay, EQ and AQ, I said, I don't know what AQ is, what is it, and its resilience, adaptability. And I think that's so important. There are so many things to do right now.

And we saw the frequency of shots.

For a newcomer coming into the industry, how do we stay relevant? We get to attractive as brands the best talent. We got to be an exciting industry. But we have a lot that we're facing, a lot that is challenging. So we need to be resilient. We need to be inventing. We need to be thinking, but again, not putting all the pressure on the next generation because it's a future. The future is now. So we need to start doing today. I think that's my biggest takeaway.

Fantastic. Liia, what struck you most.

Two things, actually, and I love the word optimism. And I promise, we haven't coordinated our presentations. But you may call it balanced or cautious or whatever. But I think it's the -- it gives me a lot of strength and courage that the hotel market is as resilient and strong because we've gone through a lot of hard time. And it gives us courage and strength to actually, while we will be investing a lot and to continue to do that and continue to repay about it. . The other thing is that I think it's important that we continue to think how we can, as hotel property owner cater for the end consumers complete life, so to say, that we are not -- we are further away from the minibar mentality or somebody decides what's our choices, but we sort of can have our own sustainable choices and cater for that in our own hotel properties.

Exactly. Is there any sort of different operational perspective on that? Is that an owner perspective? Is there any other different operational perspective to take?

Listen, there's -- again, there's a lot to unwind and a lot to [indiscernible]. But in the book, okay, we talked about 4 spaces that impact the way we operate. And I like the concept of the third space and that's where hotels we are. And so when we're creating content, which is -- that's all we're doing right now, right? That's AI, that's we're creating an experience right now is how do we transform the hotel so that it could be a breathing living machine. It's content creation. How do we make it conducive to relaxation, to doing a business, to networking, to feeling very good. So again, there's a lot for us to do. There's a lot of creativity that we could inject into our operation. And just because it works in the past, it doesn't mean it's going to work in the future. So, I think there's a lot for us to be inspired on in terms of what we heard today. It's a fantastic group of people, and you put it all together so thank you.

No, I think there's definitely a point in that resilience, adaptability, flexibility, being able to respond quickly and sort of living as a concept coming together and being able to facilitate everyone's whims, whatever that would may be that day depending on what's hit them. So it's been a truly fascinating day. Thank you, hugely for your company today. Thank you for putting this all together. And I think we should just say cheers. Please feel free to stay and enjoy your wine. Oh, that was nice. Anders, thanks you also for being there, helping engage with our audience this afternoon and for putting all of your hard work into this, I know it's been a lot of hard work. But as we do to close, there is one more announcement to make. We benefited from some fantastic insights today from all our speakers. And it might be traditional to thank them with gifts or with flowers. But all our speakers and Pandox would like their involvement today to make a tangible impact beyond that it's had on all of us here. So Pandox will be donating SEK 100,000 to save the children as a way to say thank you for our speakers' time and effort today. It's a truly phenomenal charity and sadly never has there been greater need for its services. I think it's an excellent example of business taking their role in the global community seriously and deserves a round of applause. So in closing, I'd like to add my own thanks to our contributors today. We've heard some fascinating history. We lived some recent difficult times, seen how our markets are currently performing, and just most recently, taken a glimpse forward to learn about the agency we can all use and indeed must use in creating our future. I hope you feel energized by our discussions. I'm just a little bit more prepared to take on the future in your corners of our industry. We've heard about -- the importance of strong leadership today. And team Pandox, you are true leaders, thank you. For those who can stay to join us for just a little while longer, there is some of what Pandox also does very well, some true hospitality. And we look forward to seeing you all again at Hotel Market Day 2024. Until then, [Foreign Language].