Global Hospitality News: eHotelier Newsletter

In troubled times we apparently become more sentimental and are inclined to look back on happier days. Thus, in penning this article in uncertain times for the hotel industry, I somehow ended up in the early 1970s!

'Where do I begin?' So wondered Andy Williams' 1971 hit film theme Love Story. I suppose it was that thought that took me back to that era. But Johnny Nash's 1972 chart topper 'There are more questions than answers' became my theme tune and the inspiration for my thoughts on the future outlook for the UK hotel industry over the next year and beyond.

For it is a truism as we hesitantly step over the threshold from 2002 to 2003 that there most certainly are more questions than answers and forming any consensus view is difficult. A spate of trading results in early December from publicly quoted companies gave few grounds for outright optimism but plenty of reason not to allow spirits to sink lower. Perhaps Richard North, group finance director and CEO of hotels for Six Continents Hotels best summed up the mood with his statement: 'We remain cautious as to the extent and timing of recovery in the hotel industry.' However, the group's trading figures revealed that rooms yield performance in the UK was only slightly below 2000 trading figures, which was among the best years the industry had ever experienced. But in London that wasn't the picture painted and, like gateway cities around the globe which are reliant on international corporate business, trading is well below those levels.

The big question is what happens next in the hotel market? Before I answer that it is probably worth dwelling on the factors that may influence it and there are two big imponderables - the political environment, which is dominated by safety and security issues, and the economic environment, which needs to be viewed in a global context as well as a UK context.

The global political environment is the subject of conjecture every day. Weapons inspectors in Iraq, US foreign policy and international terrorism sometimes focused directly on tourists, to name but a few, do not create a stable and certain business environment. That uncertainty is a negative for both business and tourism - a double whammy for the two main travel motivations.

The economic picture, in general, is influenced by this political scenario and by a host of other factors as well. The globalisation trend of the 1990s has linked the world ever more closely together. The USA is the foundation of this modern pyramid and as its economy stutters forward much of the rest of the world picks up a similar heartbeat pattern. Arguably, within the European Union, Germany is a bigger driving force but its economy is widely considered to be in poor shape at present. Recovery and growth in both cases will influence the UK economy and of course have a positive effect on key overseas source markets for the UK.

And then there's the UK economy itself. Generally considered to be in better health than most, there is a degree of uncertainty hanging over the country. The Chancellor of the Exchequer's recent pre-Budget statement was more negative than many had expected and certainly more negative than his own prior predictions. This, coupled with labour-market unrest, an expectation that interest rates' next movement will be upwards and an increase in the nation's debt, has led to lower confidence. This is not helped by existing factors, such as increased employee and employer national insurance contributions from April and the introduction of congestion charging in London, the impact of which is uncertain at this time.

These three factors, the global political and economic situation and the UK's domestic outlook, together cast a large shadow over the hotel sector. If any one of them takes a turn for the worse, then the industry will feel the effect; if all three face a negative outcome then the impact will be immense. On the other hand they may all remain positive or at least static. Under this scenario the uncertainty may remain but the reality may never arrive. We can but hope.

In 2003 there are no major events to inject energy into the sector as there have been in recent years. The millennium, the Commonwealth Games, the Queen's Golden Jubilee and the Ryder Cup have all been a boost for business in recent years but there are no such events this year. We can hope that the increased government funding made available for tourism promotion (in general matched by funds from the industry) will stimulate overseas markets, assisted by the very positive images of the UK's renowned pomp and pageantry that went around the world in 2002 at the time of the jubilee celebrations. But there's no certainty of that and global events could have a neutralising effect.

On the other hand room occupancy has picked up relatively well during the year, and this is even apparent in London. History suggests that hoteliers will virtually always seek to fill their rooms first. A strong average rate led strategy will not follow unless those rooms are full, or filling up.

By the end of October 2002 London's occupancy was ahead of the level it had achieved in 2001. Then it was on a downward slope, while in 2002 the trend was upward. At the time of writing it was almost certain that 2002's occupancy would exceed 2001 but probably not breach the 75% mark. For a market that flew past 80% occupancy for much of the last decade of the 20th century this is still a disappointing level. However, despite the growth trend, 2003 will not see a further breach of the 80% mark, although a return to the upper 70s looks likely barring calamity along the lines discussed earlier. Given that, room-rate growth is likely also to be constrained this year. I would expect to see occupancy break 80% again in 2004 and that year should also see a resumption of a stronger rate-growth pattern. The next cyclical peak? Well that's another question.

Outside London the market has been less affected by global events, but is always impacted by events closer to home. Thus, as I pen this, occupancy looks set to end 2002 at a similar level to the previous year which, at around 70%, was remarkably similar to 2000 as well. There was a time not so long ago when that would have been seen as a high performance level, but we saw the 74% mark breached in the late 1990s and that raised expectations. Chances are that as long as the UK economy stays steady there won't be that much occupancy change in 2003 either. Any positive growth effect is likely to be washed away by the lack of exceptional events which have benefited some hoteliers in 2002. If there is an upside then it will probably be marginal and in the area of average room rate, supported by the fact that there has effectively been static pricing since 2000. All things being equal some growth might be expected again in 2004 but these are uncertain times so don't hold me to it.

I appreciate these sentiments are perhaps not what you would most like to read as you get back to your desk full of the optimism that a new year brings. I may be right, I may be wrong and you will have your own views. I am seeking to raise the questions that you wish to consider for your business in 2003 and I suspect you also might have more questions than answers. Whistle a happy tune. Happy new year!!

Melvin Gold is managing director of PKF's hotel consultancy services department and a PKF partner. He rejoined PKF as a director in September 1996 having previously been a senior consultant with the firm from 1989 to 1992.

An abridged version of this article will also be appearing in Caterer and Hotelkeeper magazine, 2 January 2002 edition.

For further information about PKF, including hotel consultancy services and our other opinions articles, please visit our website at: www.pkf.co.uk

Asian Cash Fuels Australian Hotel Investment Surge in 2002

Asian investors clearly demonstrated their return to the Australian hotel market, purchasing 69.7% of the total value of hotel sales in 2002, according to Jones Lang LaSalle Hotels.
Jones Lang LaSalle Hotels, who tracks major hotel sales (over A$5 million), recorded a total of 19 hotel sales comprising 3,661 rooms for over A$821.8 million. This corresponds to a 42.4% increase in the total value of hotels transacted in 2001. The average initial yield was 6.8%.

“Domestic owners were the most active sellers in 2002, relinquishing A$301.1 million worth of hotel assets, comprising 36.6% of total sales value” said Mr Geordie Clark, Managing Director, Jones Lang LaSalle Hotels. Singaporean and Japanese owners were also active vendors in 2002, representing 28.8% and 27.6 % of total sales value respectively.

Big-ticket purchases by Singaporean investors (namely the Government Investment Corporation of Singapore who purchased both the ANA Harbour Grand and Westin Sydney hotels) accounted for 45.9% of the total value of hotel sales.

Also of note was the first major hotel acquisition by a Thai investor, who purchased Le Meridien Sydney for A$128 million.

As predicted, there was little interest from US investors, as they turned their focus to their domestic market.
“The sharp increase in value of total sales in 2002 was due to the number of 5 star assets exchanged. This trend is also reflected in the average price per room of $224,464, representing a 44.2% increase over the previous year” explained Mr Clark.

All hotel transactions were confined to the eastern seaboard and were concentrated in New South Wales.
“Sydney continues to be a hotspot for hotel investment as investors seek to capitalise on the anticipated recovery in the Sydney hotel market. Poorer market conditions in Melbourne led to a quiet 2002 (one transaction only) as hotel owners looked to ride through the downturn. This trend is likely to continue throughout 2003 with the Melbourne market expected to decline further before recovery” said Mr Clark.
According to Mr Clark, performance improvements in the New South Wales and Queensland markets are expected to spur another active transaction year in 2003. Further buying interest is expected from Asian investors, particularly from Indonesia, Singapore, Thailand and Hong Kong.

The overview of hotel investment activity in Australia for 2002 forms part of the Jones Lang LaSalle Hotels Digest Australia 2002/03 Edition. The Digest provides the latest analysis and forecasts for the country’s five major hotel markets. It also features an economic report card, tourism market examination, future supply tables and an analysis of investment and management trends.

Jones Lang LaSalle Hotels, the world’s leading hotel investment services group, provides clients with value added investment opportunities and advice.

The China National Tourism Administration (CNTA) has released tourism figures for the year, breaking new records in tourism revenue and arrivals. Last year, China tourism generated US$66.62 billion (RMB 553 billion), up 10.7 percent over 2001.

CNTA Chairman, He Guangwei said inbound arrivals broke the 2001 record of 89 million to reach 98 million last year. In another record, China received US$20 billion in tourism receipts from abroad, an increase of 15 percent over 2001.

Domestic travel contributed heavily to tourism revenue, as 870 million tourists pumped US$46.32 billion into the tourist economy. And thanks to the three ‘golden weeks’ in February, May and October last year, 220 million Chinese travelled throughout the country, generating US$10.62 billion in tourism revenue.

The CNTA chairman says 2003 looks even brighter. He says next year’s aim is to increase China’s tourism revenue by 8.5 percent to reach US$72 billion. He also hopes inbound arrivals will reach 100 million next year and that domestic travel will increase to as many as 900 million tourists spending US$51.2 billion in China.

CyberAtlas - Cost-conscious travelers are not only surfing for low airfares, but reduced-rate hotel rooms as well, research has indicated. According to the Travel Industry Association of America (TIA), 57 percent of online travel bookers purchased accommodations on the Internet in 2002 — that's exactly halfway between airline tickets (77 percent) and rental cars (37 percent). Furthermore, Jupiter Research (a unit of this site's corporate parent), predicts online hotel bookings to surge from $5 billion in 2001 to $14.8 billion in 2007.

While this online revenue may seem like bad news to travel agents, Jupiter analysts believe that consumers are often overwhelmed and confused by the rate differentials and choices that are available online, often preferring to call the hotels directly or rely on the expertise of a travel agent.

In fact, Jupiter found that in 2001 for each $1 that the travel industry realized directly online, travel companies selling hotel products online garnered an additional $5 of booking revenue in traditional channels as a direct result of research that consumers did on the Web. A 2002 Jupiter study of 1,845 online travel buyers and browsers indicated that nearly half (48 percent) of those surveyed conducted research and purchased from an agency site, while 34 percent conducted research and purchased from a supplier site.

Jared Blank, senior analyst, Jupiter Research, theorizes that an experienced Internet population will increasingly take advantage of the hotel industry's reduced rates that were created to spur sagging occupancies. Additionally, online consolidators have been proactive in garnering reservations. Blank adds, "These low rates, and the ease of booking at most online agencies and consolidators, have brought new consumers online who otherwise would have reserved their lodging directly with the hotel."

PhoCusWright supports the predictions of increased Web bookings, expecting traditional travel agencies to represent just 18 percent of hotel sales in 2005 — down from 21 percent in 2001 — as hotel sales move online. The firm forecasts a 49 percent increase in online hotel sales in 2002, reaching $6.3 billion.

Vendors that can successfully capture the online hotel bookings market would serve the 64 million travelers who used the Internet to make travel plans in 2002, according to the TIA. Of those that use the Internet for travel planning, 41 percent actually made travel reservations online in 2002, translating to 39 million people — up 25 percent over 2001

eyefortravel.com - 20 Dubai-based organisations will exhibit on the DTCM stand (Y230) at International Confex 2003 which is being held from 25 to 27 February 2003 at London’s Earls Court. Among the Dubai-based delegates will be a range of MICE industry specialists, including supplier organisations such as hotels and destination management companies.

During the exhibition, the DTCM will be informing visitors about the latest developments including Dubai 2003; and the forthcoming opening of Dubai International Convention Centre and several private sector developments.

A major showcase for Dubai as a meetings venue will occur at the end of September 2003 when over 10,000 delegates are expected to visit the emirate for Dubai 2003 to attend the annual meetings of the World Bank and the International Monetary Fund. This will be the first time these important meetings have been held in the Middle East.

The major structural development for Dubai’s MICE market in 2003 will be the opening of the Dubai International Convention Centre (DICC) in March. The emirate’s existing 120,000 square metres of varied conference and exhibition space in purpose-built as well as hotel-based venues will expand considerably with the opening of the DICC. It will be the region's largest convention centre, with seating capacity of 6,000 in the main auditorium and 44 breakout rooms. In addition, part of the DICC development will be the 412-room Novotel and 210-room Ibis Hotel which will significantly increase Dubai’s hotel capacity.

The completion of numerous other private sector developments will also further expand and enhance Dubai’s product proposition to meet an anticipated steep increase for future demand. Important plans for the conference and incentive market include the Grand Hyatt which is due to open in early 2003. The new property will feature 674 rooms, 186 apartments, 4,340 square metres of conference space and state-of-the-art meetings facilities.

A new, purpose-built 9,000 square metre conference centre as part of the future Madinat Jumeirah resort development is also underway. The first phase of which will be the 300-room Mina Al Salam due to open in September 2003.

Incorporating the region's culture and traditions, a unique resort will be the Hatta Heritage Village located in the spectacular Hajar mountains an hour's drive from the city. With the opening scheduled for 2003, the resort will cater for small incentive groups and meetings.

For incentive organisers, summer 2003 will see the completion of a highly anticipated development in Dubai; the first Formula One standard race track in the United Arab Emirates. The Dubai Autodrome will consist of a five kilometre circuit designed to F1 specifications complete with grandstand, hospitality suites, retail shops and a F1-themed refreshment outlet.

Year-round business and leisure travel to Dubai is growing constantly from the UK and Ireland. In 2001 the destination had 15 per cent more British and Irish hotel guests than the year before, totalling 355,542 and similar growth rates are expected for 2002, once the figures for the whole year become available. Long-term worldwide visitor targets are equally ambitious - 15 million visitors by 2010, compared to 3.6 million visitors last year.

For further press information, photography or an interview please contact: Lucy Blogg at Dubai Tourism and Commerce Marketing

Tel. 020 7747 2150 (dedicated media line)

Great Eagle International to expand portfolio under Langham Hotels International

Great Eagle Holdings Hong Kong Ltd. has announced today that its hotel operating and asset management arm, Great Eagle Hotels International (GEHI) will operate under the name of Langham Hotels International Limited (LHI) with immediate effect.

Great Eagle purchased the Langham Hilton, London in 1996, subsequently carrying out a further upgrading of the property that included acquiring the adjacent buildings which today house the elegant Concierge Club, Health Club and Spa. The Langham Hilton, along with the group's refurbished Great Eagle Hotel in Hong Kong, has set the benchmark for the group's future international hotel expansion.

Langham Hotels International also owns hotels in Boston, Toronto, Melbourne, and Auckland and has started construction on a new 700-room, five-star hotel in Mongkok, Hong Kong that opens early next year.

The decision to rename the hotel business after the London property underscores LHI's belief that the strength of the Langham name is correctly aligned with the ownership of renowned and prominent hotels. The name also accurately reflects the company's commitment to being at the forefront of the hospitality industry, just like the Langham 150 years ago, consistently improving its quality of product, service and environments for discriminating travelers throughout all the hotels that it owns.

The Langham Hotel is legendary, its name synonymous with gracious hospitality and fine living for over a hundred years. Opened back in 1865 by the Prince of Wales, The Langham was not only London's first "grand" hotel, but also the city's largest building at the time.

It quickly established itself as the Capital's most fashionable meeting place and has played host to Emperors, Kings and Queens, sporting heroes, film stars, eminent politicians and heads of state from around the world, as have other more modern acquisitions of the group in recent years.

An extensive US$150 million refurbishment between 1986 and 1991 saw the building restored to its original glory, with no expense spared in recreating every tiny detail of its original grandeur and elegance, whilst at the same time offering all the facilities and comforts of a modern luxury hotel.

Commenting on this change of company name, Kevin Murphy, Vice President - Marketing & Development said: "The adoption of the Langham name for our hotel company is a natural progression for us as we bring a new focus on growing this division of the Group's interests in the years ahead. It will also further strengthen our commitment to own or operate only successful, high quality hotels that offer excellent hospitality and service, combining the best of both our international and Asian traditions. We will now concentrate efforts also on future growth here in Asia Pacific, particularly in Mainland China.

"Those existing agreements we have with our operating partners in our various other international locations remain comfortably in place providing an additional benchmark for our own present and future operations."

Langham Hotels International, the newly renamed hotel subsidiary of Great Eagle Holdings, is a dynamic, modern, high quality hospitality ownership and management company which operates a number of luxury hotelsand serviced apartment properties in prime locations within Hong Kong, and asset manages the extensive overseas hotel interests of its parent company, the publicly listed Great Eagle Holdings Limited, Hong Kong.

Properties managed and operated by Langham Hotels International in Hong Kong include the luxury Great Eagle Hotel, a new five star property in Mongkok (due to open in first half of 2004), the superior Eaton Hotel, three Eaton House serviced apartment buildings and the Yat Tung Heen Chinese Restaurants

Overseas properties owned by the Group, and asset managed by Langham Hotels International, include the deluxe Langham Hilton in London, UK; the Sheraton Towers Southgate in Melbourne, Australia; Le Meridien Boston in the USA; the Sheraton Auckland Hotel and Towers in New Zealand; and the Four Diamond rated Delta Chelsea Hotel in Toronto, Canada.

Mercury - Disney today broke ground on Hong Kong Disneyland, its first theme park in China, hoping strong tourism growth will help the multi-billion dollar venture swiftly operate in the black.

A ceremony at the 126 hectare site at Penny's Bay on outlying Lantau island marked the official start of construction on the park in the land-scarce territory after an 18-month government-funded reclamation project.

"We have never been more confident in Hong Kong or the potential success of Hong Kong Disneyland," said Disney president Robert Iger.

"Hong Kong is an even stronger tourism market than it was back in 1999, when we first announced this project and its potential for growth is outstanding."

The total number of tourists visiting Hong Kong jumped some 20 per cent last year to more than 16.5 million.

Asked when he believed the park would become profitable, Disney chairman and chief executive officer Michael Eisner said it was "impossible" to predict.

"I think this is going to be a blockbuster of a project and will become profitable sooner than any of our projections," the confident Eisner predicted.

The start of construction eased worries from the territory's government, which invested $US2.8 billion ($4.87 billion) in its 57 per cent share in only the third Disney park outside the United States. Japan and France are the two other nations to host the house the mouse built.

The future of the deal signed in late 1999 looked bleak when Shanghai officials said last July they had been discussing a similar project with Disney.

A Disney park in Shanghai would be a serious threat to the Hong Kong Disneyland as mainland Chinese are forecast to make up a whopping 60 per cent of the estimated five million annual visitors to the territory's amusement venue.

Eisner noted that if a park were to open in Shanghai, "it won't be before 2010".

Disney's delay was seen as a boon to competitor Universal Parks Resorts, a subsidiary of Vivendi Universal SA of France, which signed a deal last December for a movie theme park in Shanghai. That themed venue is expected to open in 2006 - the same time as Hong Kong Disneyland.

The Hong Kong Disneyland will include a Disney-style theme park, two hotels, retail, dining and entertainment facilities.

The joint venture has become an important link in a plan to haul Hong Kong out of the economic doldrums that followed the 1997-98 Asian financial crisis

expatica.com - France's varied climate and landscape, along with its potent mix of history, culture and cuisine, have combined to make it the world's top holiday destination. But this success may ultimately be its very downfall, as Michel Blanchard explains.

The world's most visited country is struggling to manage its influx of tourists who, by flocking massively to Paris and the Cote d'Azur — and avoiding rural areas — paradoxically threaten to strangle any further development of tourism in France.

"We have 80 percent of tourists on 20 percent of our land," said Fabien Roussel, spokesman for the French ministry of tourism. "It has to be shared out better."

"If tourism continues to be concentrated, it won't develop," Roussel said. "We have to think of it in terms of durable development."

France hosts 73 million visitors a year. During the summer of 2001 alone, 10 million of them flocked to Paris and the riviera — better known in France as the Cote d'Azur.

The Parisian district of Montmartre, one of the capital's top tourist hot spots, overflows in the summer months. Ecologists are worried about climbing local pollution levels caused by the influx of coaches that ferry the tourists along the area's narrow streets.

The cobble-stoned streets of the tiny central Paris island, Ile de la Cité, are also teeming with hundreds of thousands of tourists heading every month to and from its resident Notre Dame cathedral

The most popular destinations in France for international holidaymakers, and the French themselves, include Paris, the ski resorts in the French Alps such as Courchevel and Tignes, and the ritzy Mediterranean beach resorts like Nice and Cannes that line the Cote d'Azur.

Meanwhile, many rural departments such as the Creuse in central France are all but empty.

The economy of this central region is based on agriculture, made up of growing cereals, potatoes and chestnuts. Indeed, the reluctance of tourists to explore the Creuse comes as little surprise to its residents — many of them have themselves left the region for other parts of France in recent years to seek jobs in a more dynamic environment elsewhere.

Meanwhile, tourism is steadily growing in France. This year foreign visitors are expected to generate FF 215 billion (EUR 32 billion) and make up seven per cent of the country's gross domestic product (GDP).

As the industry grows, concerns over its unequal geographical spread are mounting.

"We should rebalance tourism in favour of rural regions and the hills," said Assistant Secretary of State for Tourism Michelle Demessine.

The Inter-ministerial Committee for the Development of Territories met to discuss the issue on 9 July in the southern city of Limoges, and announced a FF 440 million boost to developing tourism across France.

The financial stakes are clear: already, this booming business, from home and abroad, ensures the survival of about 200,000 small businesses across France, including hotels, restaurants and travel agencies.

expatica.com - Berlin's tourism bubble has burst. But as Katja Bauer reports from the capital, there's still optimism for the future.

"The boom in Berlin's tourism industry is over for now, but things will start to recover by the middle of 2002," predicts Peter Nerger, director of Berlin Tourismus Marketing.

Tourism to the German capital broke all records in 2000 after reunification and the German government's move to Berlin. But the city attracted fewer visitors in 2001, and the local tourism industry is not expecting any vast increases in 2002.

Berlin still has better chances than many other European tourist destinations, said Nerger. But it also has more potentially empty hotel beds.

The economic slump had already dampened expectations, then came the 11 September terror attacks in the US which abruptly turned the steady stream of visitors to a trickle.

Overseas visitors stayed at home, some trade fairs scheduled to host up to 2,500 participants were cancelled. Hotels saw business drop by a heavy 20 percent.

This was a shock for the German capital, which had enjoyed a record year of 10 million overnight stays in 2000 and was hoping for two-figure growth rates in 2001.

The Reichstag, Brandenburg Gate, Potsdamer Platz and the Jewish Museum had been visitor magnets. Hoteliers and investors were seeing dollars signs.

The city is building more hotels with congress facilities than anywhere else. The largest hotel in Europe with 2,500 beds is due to be completed in 2005.

International chains such as Raffles, Marriott, Ritz-Carlton and Radisson are all investing in new hotels in the city.

Berlin currently offers 63,000 hotel beds, 25,000 of them in high-class categories. It has 12 five-star hotels, more than any other German city.

By the year 2004 there will be a total of 80,000 hotel beds to be filled. Yet holiday and congress accommodation is more expensive here than many other European hotels at an average EUR 103 (USD 95) per night.

In spite of the slump, tourism leader Nerger denies there is a crisis. He is optimistic that business will pick up again by the second half of 2002, and predicts a modest single figure percent increase in visitors.

Berlin is still the top trade fair location in Germany and can still expect a steady flow of visitors because it is the seat of government.

Nerger considers it an opportunity rather than a disadvantage for the city that travel is becoming generally more expensive.

"Good value room prices in Berlin mean that operators will not have to pass on higher prices to the customer," he said. This might make a visit to Berlin a bargain compared to other European cities.

But the number of foreign guests is not likely to rise in 2002 because of the economic situation and the after-effects of the US terror attacks, Nerger believes. He said this will make domestic tourism all the more important to Berlin.

Newsletter - January 14, 2003

Asian Cash Fuels Australian Hotel Investment Surge in 2002