LONDON — It has long been a truism in the hotel industry that what can be measured should be measured, and if one can measure it, then there are savings to be clawed back from the initial capital expenditure in development and from day-to-day operational costs.
In the United Kingdom, one thorny topic in this regard is building safety.
At a session during February’s Hotel Industry Development Event, panelists said that hotels sit to one side of many of the regulations and provisions outlined in The Building Safety Act 2022, but it is too much of a risk for hotels to not take note and believe the law does not apply to them.
That law came into effect following a June 2017 fire at London’s residential Grenfell Tower. The blaze killed 72 people.
The wording of this legislation states that The Building Safety Act 2022 applies to “mixed-use buildings primarily through its higher-risk building regime and leaseholder protection provisions. While the act is often associated with residential safety, its legal requirements extend to the commercial elements of mixed-use structures that meet specific criteria.”
Gemma Whittaker, partner of construction and engineering building safety at Gowling WLG, said hoteliers need to understand their hotels’ exposure to “reputational, operational and valuation risk” from the new regulations.
Hotels need to conduct due diligence every five years consistent with guidelines outlined from the Royal Institute of Chartered Surveyors, a set of standards that went into effect for commercial properties in April 2020.
The act has brought in more resolutions since it first became law, and more changes might be brought into force in the future, said Charles Seifert, director at Inside the Box Advisory and ItBox. He added hotels that are part of mixed-use developments have more exposure, as are those that contain aparthotels, serviced apartments and long-stay accommodation options.
“Hotels that sit within large mixed-use developments are already within scope,” Seifert said.
Panelists agreed hoteliers need to understand a law that is extremely involved and complicated, and regard the issue as a vital component of a hotel’s underwriting.
The goal is for hoteliers, investors and owners to fully understand if their hotels and other assets fall within the remit of the law and how they can offset risk.
Hoteliers are not exempt from risk just because most of the legislation points more definitively to the residential sector, said David Kelly, director at CHPK Group.
“Competence of contractors has been a really positive move in the residential market, and that has started to trickle across to other sectors, hotels included,” he said.
He added hoteliers must perform due diligence into contractors “on-site and ensure they have the necessary competence.”
Getting past that point will see hotels of higher investable quality.
Financial implications
Hotel transactions and valuations are vulnerable to financial change.
“For investors, the issue is not simply whether a building is safe, but whether it can prove that it is,” Kelly said.
He said investors will view building safety increasingly through the prism of “value resilience rather than regulatory technicality.”
Hoteliers have their work cut out for them, panelists said. In September 2025, the Building Safety Regulator — a new legislative body founded in the act — calculated that “74% of (U.K.) high-rise residential buildings assessed so far have failed to meet the standards required for a Building Assessment Certificate,” according to Tetra Consulting.
The regulator said this high failure rate indicates most “principal accountable persons” are “not sufficiently managing risks related to fire spread and building structural integrity.”
Paul Slattery, director at Otus & Co. Advisory, said exposure is very real.
“Never once did I ever have access to insights about the physical state of hotels, and I was valuing hotel companies. And that’s just silly,” he said, referring to advisory roles in the industry throughout his career.
Seifert said the 74% fail rate “wasn’t a risk fail, it was a technical fail,” with the Building Safety Regulator not being satisfied with a building’s audit trail.
The lessons learned and legislation resulting from the Grenfell disaster have resulted in huge expenses, for some buildings higher than the valuation of the building itself.
Hoteliers need the best advice and that it is extremely difficult to understand how insurers view a hotel’s particular exposure to risk when calculating premiums, Slattery said.
“The insurance premiums on hotels and hotel real estate… have been going up through the roof," Slattery said. "[Insurers] can’t measure the risk. The information is not available. It’s held privately. And so, [insurers] just charge more.
“It’s entirely possible that a hotel can be owned, it can be leased, there can be a manager in there, there can be a franchise in there. The physical state of the hotel is not a private matter for the owner,” he added.
Slattery added hoteliers should have a measure of between 2% and 5% of hotel turnover to ensure their hotels’ physical integrity vis-a-vis the BSA law is sustained.