Global Hospitality News: eHotelier Newsletter

(AP) -- As America goes to war, Europe's tourism industry is bracing for a blow.

Hotels from Paris to Rome to Berlin have already seen a drop in reservations and anticipate a greater slowdown, just as the peak tourism season gets under way.

"For tourism, you need peace -- otherwise you have no tourists," said Alain Feutre, head of the Paris-based International Hotel and Restaurant Association. "If the war is a long one, it will be a catastrophe for us."

War against Iraq comes at a crucial time for the tourism industry, which is still feeling the effects of the Sept. 11 attacks, fears of global terrorism and economic gloom in many parts of the world.

The drop in visitors is all the more damaging because the world's big spenders, the Americans and Japanese, top the list of those staying home.

At Paris' luxury hotels, where the majority of guests are American and Japanese, occupancy rates sank to 25 percent in recent weeks as the world waited for war. Occupancy is normally 60 percent this time of year, Feutre said.

Reservations in the Italian cities of Rome, Florence and Venice, which thrive on art lovers and business travelers, are down 50 percent from this period a year ago, according to Italy's largest hotel association, Federalberghi.

When war broke out this week, a surge of American cancellations followed, said Bernabo Bocca, the association's president.

"Americans have a very high need for security," said Natascha Kompatzki, spokeswoman for Berlin's tourist office. "In the past few days, we've seen the first cancellations, and trips are being delayed." So far, she said there was no evidence of Europeans canceling their travel plans.

During wartime, travelers are likely to stay closer to home and opt for destinations that can be reached by car or train instead of planes. This means that European travelers could help offset the absence of Americans and other overseas visitors.

British Airways, Air France and Alitalia, among other European airlines, said they'd registered a recent decline in passengers but did not immediately have figures. Air France said it planned to release an "adjusted" flight schedule next week.

Tourism experts say it is too soon to tell if the industry will suffer as it did from the Gulf War in 1991 -- when worldwide tourism had its slowest growth since World War II.

"If the conflict is short, and if it is limited geographically, the impact may not be so huge," Francesco Frangialli, secretary-general of the World Tourism Organization, said at a recent industry fair in Berlin. The shorter the war, the faster the industry rebounds, he said.

Americans who do travel say they are trying to keep a low profile, particularly in France, which led the anti-war bloc on the U.N. Security Council.

"Friends told us we might get beat up here," said Marsha Strickland of Meritt Island, Fla. "We're trying not to be too gregarious or draw attention to ourselves."

She and her two travel companions, who visited the Eiffel Tower the day war was declared, said they registered at the American Embassy "just in case."

Others, like Miles Kapner, an American executive riding the Paris subway, found the absence of tourists appealing.

NY Times - Although the war in Iraq is a major disruption for the travel industry, online travel services may have much less to fear than their conventional counterparts.

Analysts said Internet travel agencies like Expedia, Travelocity and Orbitz were likely to survive any slump caused by the Iraqi war better than traditional travel businesses, just as they weathered the Sept. 11 attacks more easily.

That is mainly because the e-travel merchants are still relatively small, compared with their traditional counterparts, said Scott C. Barry, an analyst with Credit Suisse First Boston. They have smaller overhead expenses and are nimble enough to adjust quickly to slumping demand and changing market conditions.

Expedia, the biggest travel merchant online, sold $590 million worth of bookings last year and has roughly 750 employees. ( USA Interactive, Expedia's majority owner, agreed last week to buy the remaining stake in the company for $3.3 billion.) By comparison, the corporate travel division of Carlson Wagonlit, one of the largest conventional travel agencies, had sales last year of $10.7 billion and a work force of 16,000.

As the war began last week, the leading online travel agencies were shifting their strategies in a number of ways. Take Travelocity, which is owned by Sabre Holdings. Sam Gilliland, the chief executive, said the company began "moving into information mode."

Last Wednesday, for example, Travelocity replaced a promotional display that had taken up 20 percent of the home page with a box offering travel news. From there, users could find details of the flight cancellation policies of all the major airlines — policies that have been changed in recent weeks to reflect a more generous approach to refunds in the event of war.

Mr. Gilliland said on Thursday that Travelocity had already experienced some decline in domestic bookings and sharper declines in trips booked to the United States from foreign countries. So its customer service representatives were making sure they were current on cancellation and refund policies, rather than focusing on finding the cheapest fares.

Because Travelocity has been "cautious this year in hiring for the call centers," Mr. Gilliland said, he does not expect to lay off any of his 1,000 customer service agents. After the travel slump caused by the Sept. 11 attacks, Travelocity had to eliminate hundreds of customer service jobs.

To help gird revenues in a time of slow demand, Mr. Gilliland said, Travelocity began offering air travel insurance last week. The company will not make a big profit on the business, he said, but travel insurance "can be a good addition" to per-ticket revenues.

More important, Mr. Gilliland said, is that just as in the months after the terrorist attacks, travelers will probably opt for more last-minute travel plans — a development Travelocity will be able to capitalize on, thanks to its acquisition last year of Site59, which books last-minute travel.

Priceline.com, which is also frequented by last-minute travelers, is also watching for a possible surge in customers who are wary of making long-term vacation plans, according to a company spokesman, Brian Ek.

But any gains from last-minute travel will not offset the sagging demand among conventional travelers, analysts say. "Clearly, the near-term disruption to revenues for these companies will be material, since we've already seen bookings dry up in the last couple of days," Mr. Barry of Credit Suisse First Boston said.

If the war continues to damp online travel revenue, the heavy spending on marketing campaigns that the online travel companies have undertaken in recent years will be among the first expenses cut, Mr. Barry said.

"Long term, that spending is important because the key for these guys is to develop brand trust on a level with the airlines and other suppliers," he said. "But there's a lot of room in there to cut if they want to sustain profitability in the near future."

Although travel sites are likely to pull TV, radio and print ads, executives said they would pump more dollars into online advertising. Particularly attractive to them may be the pay-per-click ads offered by search engines like Google and Overture, which provide some search listings for Yahoo, MSN and others. Those sites charge advertisers who appear in the sponsored listings results only if customers click on their links.

Online travel companies may be forced into bidding wars on those sites for terms like "airline tickets" — Expedia and Orbitz bid as much as 86 cents a click for that term on Overture last week — because that marketing device is particularly useful for attracting prospective customers.

Of course, there could be a rebound in air travel even during the war, if terror alerts subside. During the last war with Iraq, demand for tickets within the United States — 90 percent to 95 percent of the nation's ticket sales — "remained relatively robust," said Terrell B. Jones, the former chief executive of Travelocity, who is now an industry consultant and venture capitalist.

Mr. Jones said that domestic airlines would suffer even in the early stages of a recovery, as they are pressed to keep prices low. But online travel sites typically make money on ticket sales no matter what the price, so they will be quicker to rebound. As long as demand rebounds, Mr. Jones said, "most online travel guys will make their $10, $15 on every ticket they sell, no matter what the price."

Internet travel sites have in recent years been diversifying their revenues by taking blocks of airline seats at a wholesale price, marking them up and booking the difference as profit, rather than simply collecting the agency commission. This increasing reliance on the so-called merchant model will not complicate matters for Web sites during a period of low sales, Mr. Jones said, because the online travel agencies do not actually own the inventory. "You can be sure the middleman isn't going to be stuck on the hook for that," he said.

When the travel industry recovers — however long that may take — Mr. Barry says he expects Web-based travel merchants to emerge in better shape than they were before the war, just as they benefited in part from the dismal market conditions after the Sept. 11 attacks.

First, Mr. Barry said, the post-Sept. 11 period destroyed the businesses of many traditional travel agencies, expanding the opportunities for online companies. Second, many travelers who had never booked travel online began using travel sites as information portals after Sept. 11, making them more likely to use the sites to buy tickets when they were ready to travel. Third, he said, whenever there is a downturn in demand, more travel suppliers discover the wisdom of selling unused inventory online. Hotel operators, for instance, were among the biggest Internet converts after the terrorist attacks.

The same conditions could be brewing now, Mr. Barry said. E-travel sites are "taking a hit like everybody else right now," he said, "but from Wall Street's perspective there will be a lot of guys looking through that."

(BUSINESS WIRE) -- Starwood Hotels & Resorts Worldwide, Inc. (NYSE: HOT) announced today that it has withdrawn its first quarter and full year 2003 guidance.

Starwood offered first quarter and annual guidance in January and could not have anticipated the significant deterioration in business due to the elongated Iraq negotiations and the related geopolitical conditions that worsened over the quarter and culminated recently in armed conflict.

The Company said that, given current uncertainties, it will suspend giving guidance until such time that it can more accurately predict the business impact of the war and the impact and timing of an economic recovery.

The first quarter has historically been, by a large measure, the least important quarter for Starwood with the lowest revenues and net income of any quarter on an annual basis. Further, slight changes in costs in the first quarter have an exacerbated impact on EBITDA margins. For example, higher energy costs recently experienced due to the unusually cold winter, particularly in the northeastern United States, where the company has a large concentration of owned hotels, negatively impacted operating margins in the short term.

Starwood is well positioned for an economic recovery with a strong balance sheet and a significant presence in major global markets.

Starwood Hotels & Resorts Worldwide, Inc. is one of the leading hotel and leisure companies in the world with more than 750 properties in more than 80 countries and 105,000 employees at its owned and managed properties. With internationally renowned brands, Starwood is a fully integrated owner, operator and franchisor of hotels and resorts including: St. Regis, The Luxury Collection, Sheraton, Westin, Four Points by Sheraton, W brands, as well as Starwood Vacation Ownership, Inc., one of the premier developers and operators of high quality vacation interval ownership resorts. For more information, please visit www.starwood.com

Several of today`s most pivotal speakers will discuss electronic distribution channels during the American Hotel & Lodging Association (AH&LA) Multiunit Lodging Operators & Owners Forum, April 27-29, at the Denver Marriott City Center in Denver, Colorado. Conducted in three phases, the conference`s various educational sessions delivers effective Internet distribution strategies.

During the first session, executives from Hotels.com, Priceline.com, Travelweb.com, and Expedia.com discuss the advantages of applying their business models to sell hotel products. The second stage focuses on brand strategies and reveals steps that hoteliers can take to optimize and increase traffic to their Web sites. The final seminar targets hotel management strategies and evaluates the importance of providing promotional activities on the property level.

"The changing dynamics associated with the expansion of new Internet distribution channels has really impacted the bottom line profitability of traditional hotel brands as well as individual owners and operators. In Denver, we will bring everyone together, enabling us to learn and discuss future opportunities - an important issue in the lodging industry," said Conference Chairman Kevin Hanley, executive vice president and COO of Sunburst Hospitality.

This two-day event is geared exclusively to address the unique needs and concerns of multiunit owners, operators, and management companies as well as senior executives in the development, sales, technology, and finance.

Additional sessions includes reviewing real estate taxes, updating systems, supervising multiple properties, saving money through group buying, organizing a hotel opening, and much more.

Goldman Sachs has sold all its 31.47% stake in Dusit Thani PCL , Thailand's leading hotel and resort chain operator, to a group of investors led by the company's chairwoman and founder, Dusit Thani said Friday.

Chairwoman Chanut Piya-oui and the other investors have bought Goldman Sachs' 26.75 million shares at 38 baht ($1=THB42.973) apiece, the statement said.

Of the 26.75 million shares purchased, 16.75 million were sold at the same price to other parties including Chatri Sophonpanich, chairman of Bangkok Bank PCL , real estate firm MBK Development PCL , National Securities Ltd., and some local funds.

MBK also said Friday that it has bought 5.45 million Dusit Thani shares at THB38 each from the group led by Chanut.

Goldman Sachs bought the Dusit Thani stake in 1997 in the wake of the Asian financial crisis, and became the company's major shareholder.

Rezidor SAS Hospitality announces the introduction of its international, mid-market Park Inn brand in Scandinavia, with the addition of 14 hotels in Sweden, through the signing of a franchise agreement with Software Hotels.

"This deal represents a significant step in the new multi-brand expansion strategy for Rezidor SAS. Our goal is to reach 700 hotels within 10 years under the four brands," says Kurt Ritter, president & CEO for Rezidor SAS Hospitality.

Park Inn hotels are highly efficient, fresh and innovative, international mid- market hotels. They focus on mastering the essentials of a great hotel experience within their class, having warm and casual service, and being spotlessly clean, easy to use and safe. Most importantly, Park Inn's aim is to provide the best bed in town.

Fredrik Korallus, senior vice president & COO for Park Inn Hotels, comments, "These 14 hotels represent a strong launch for the Park Inn brand in Sweden, our country of origin. They typify the product and service levels which Park Inn strives to achieve."

Software Hotels includes 14 properties in Sweden, of which 10 are Winn hotels and four are leading conference hotels. The company has grown significantly during its 10-year history, mainly through acquisitions. The group is also known for its culinary excellence and has a number of restaurants listed among the best in Sweden.

"For us it is very valuable to join Park Inn and Rezidor SAS, since we will now be able to provide an interesting alternative for their customers. Being part of their powerful reservation and marketing systems will broaden our customer base and strengthen our market position," says Börje Nordberg, CEO of Software Hotels.

The 14 hotels are located in Kvänum/Vara, Karlskrona, Sandviken, Vargön/Vänersborg, Täby/Stockholm, Falun, Gislaved, Gävle, Haninge/Stockholm, Nyköping, Solna/Stockholm, Uppsala, Värnamo and Västerås.

Rezidor SAS Hospitality is the master franchise holder for the Radisson SAS, Regent, Country Inn and Park Inn brands in Europe, the Middle East and Africa. The company currently operates 126 Radisson SAS Hotels & Resorts with over 37 properties under development. The Radisson SAS portfolio now extends to 40 countries.

Rezidor SAS has held the Radisson master franchise since 1994. Regent, Country Inn and Park Inn joined the portfolio in 2002.

Crains NY - Worried by the war-related falloff in reservations, New York hotels are waiving cancellation policies in hopes that visitors will rebook their trips when the conflict ends, and they're stepping up marketing efforts for stays in late spring and early summer.

President George W. Bush's decision to launch the war last week ironically didn't precipitate a wave of cancellations, but only because bookings had already been declining for weeks in the expectation of hostilities. The war, however, has been felt sharply at reservation desks.

"It's been fairly quiet on the phones," says Frank van der Post, regional vice president of operations for Hotel InterContinental The Barclay New York.

The effectiveness of the measures hotels are taking remains to be seen. The one thing that is clear is that the magnitude of the threat posed to the city's already hurting $5.5 billion hotel industry hinges on the war's duration.

While hoteliers say they were actually surprised by the low level of cancellations, they are worried about the dwindling flow of new bookings for March and early April. They blame the drought on nervous travelers taking a wait-and-see attitude about visiting New York.

Rather than sitting on their hands, though, hotel managers are taking steps to respond to what they anticipate will be several slow weeks. Some have tried to woo skittish travelers by doing away with standard cancellation penalties. Others are stepping up sales efforts for stays during the late spring and summer.

Unfortunately, the timing for this latest blow is awful. The average room rate for New York City hotels has fallen to $178 per day, down 6% from last year, and down 36% from its 2000 peak. Similarly, today's occupancy rate of 69% is well below the 83% rate in 2000, according to PKF Consulting, a hotel advisory firm.

"My main concern is that, out of desperation, one or two hotels might drop their rates 30%," remarks Mr. van der Post. "It would be ugly, if that's how the industry responded."

So far, though, the damage seems minimal. Hotels reported some cancellations last week, but not the torrent that many people had expected. The reason, say industry experts, is that most travelers already made adjustments to their plans as war worries mounted steeply beginning in February. Still, some travelers did seem to be taken off-guard and called at the last minute to cancel their visits to the city.

A group of teenagers from around the country that was expected to stay in one of the Marriott hotels in Manhattan on Friday, for example, canceled its stay on Thursday. "We can understand if parents have concerns about their children traveling right now," says a spokeswoman for New York City Marriott Hotels.

In fact, for the past six months or so, many hotels have reported a rise in the number of last-minute reservations. They attribute it to travelers closely monitoring the news, and not deciding to visit New York until they were convinced it was safe. Over the past several weeks, that pattern has only intensified. Now, with the war on, those last-minute reservations are going by the boards.

"The bookings come in spurts," says Mark Lauer, director of sales and marketing for the Waldorf-Astoria Hotel. "Normally, we see a consistent booking pattern, but this reflects the tentative nature of travelers right now."

Some experts are hopeful that the damage from this war will be no worse than that caused by the first Gulf War in 1991. Back then, occupancy rates dropped 14% in the four months following the war, versus the same period the previous year, according to NYC & Co., the city's tourism organization. But room rates held up well, dropping by only around $4, reports John Fox, senior vice president of PKF Consulting.

Comparing the likely impact of this war with that of the earlier one is tricky, however. On the one hand, back in 1991 occupancy rates were much lower going into the war, as the result of the huge overbuilding of the late 1980s, says Mr. Fox. This time around, while occupancy is higher, room rates are more depressed, which has severely squeezed many operators. That means that any erosion in either bookings or room rates could be devastating.

To help prevent that damage from happening, the day after the war began last week, the Hotel InterContinental eliminated its cancellation penalty for individual travelers who have reservations for the next two weeks. The policy also applies to guests who make a reservation now for the next couple of weeks.

"Our feeling is that they may decide to cancel, but at least we will have the opportunity to rebook the business," says Mr. van der Post.

At the Waldorf-Astoria, managers have beefed up the famed hotel's advance sales efforts to book groups and individuals for the coming months. "We want to make sure that we are in a good position, so that when there is hesitation, we are building our business on a longer-term basis," says Mr. Lauer.

The Regent Wall Street Hotel is taking a similar tack. It, too, is counting on the war being just a short-term problem. The Regent just completed building a 3,500-square-foot high-end spa, including five treatment rooms. The hotel is also considering building a pastry cafe in its elegant lobby.

"It's a good time to introduce new services and amenities, because there is much less competition in the marketplace," says Christopher Knable, managing director. "In a down economy you invest your capital because things are less expensive; then when the economy improves you have fresh offerings."

Public Relations for Your Hotel or Destination: Despite war, we all still need a travel reprieve!

As we all know, since September, 2001, American leisure and business travel patterns have seen dramatic reductions, and have become very localized and short-termed. As a result, sales, marketing, and public relations activities for hotels, resorts, and destinations have been modified in order to talk to travelers and appeal to their specific travel instincts. The challenge for hotels and area attractions has been, “Do we spend the money to market, even if guests aren’t traveling?”

The fact is, Americans still crave the need to travel and have continued to do so. It may be via car or train rather than airplane, and the destination may be significantly closer to home than travel of previous years. Vacations now involve a wider range of family members and the leisure traveler is becoming more conscientious in trying to find the best travel deal. As for business travel, it may now entail a slightly longer stay in a particular destination in order to avoid an additional visit.

Regardless of whether your travel product appeals to the leisure or business traveler, your message needs to be heard now more than ever. The industry must continue to promote its hotels, resorts, and attractions, not only to encourage travel during these uncertain times, but to remain visibly healthy when this unpredictable cycle regains its former strength.

Public relations is the most cost-effective method for promoting your travel product, establishing third-party credibility and putting and keeping your name in front of the public. It’s a great way to “tell your story,” market your uniqueness, and create a buzz. And best of all, whether via print or electronically, the cost is minimal in comparison to the results.

Do start to consider putting public relations back into your marketing mix. While you should be assessing your specific sales and marketing techniques, the valuable supplement of P.R. will help boost your visibility at a time when it is most needed.

Leora Halpern Lanz
Barbara Wiener
HVS International
372 Willis Avenue
Mineola, NY 11501
516-248-8828, ext. 278
516-742-3059 Fax

HVS in Canada is well recognized for our comprehensive feasibility studies, easy-to-understand hotel appraisals, strata-title hotel appraisals, assistance with management and franchise negotiations, and selective asset management. As our professionals hold both the AACI and the MAI (member of the Appraisal Institute in the United States) designations, we can work for clients (and our reports are accepted) on both sides of the border.

Our latest publication is the Canadian Lodging Outlook, published in conjunction with STR (Smith Travel Research) and endorsed by the Hotel Association of Canada. This publication summarizes monthly occupancy and average room rates from all of the major cities in Canada, as well as for each province and the country as a whole. We have over 700 hotels with an excess of 145,000 rooms participating in the survey. We will be sharing this information with you monthly, and hope you enjoy it.

Newsletter - March 25, 2003