Global Hospitality News: eHotelier Newsletter

Entrepreneur Hugh Osmond has launched his long-awaited £5.5 billion bid for pubs and hotels group Six Continents.

The offer, which values Six Continents at 648p per share, was made through Mr Osmond's AIM-listed investment firm Capital Management & Investment (CMI).

Under Mr Osmond's plan, Six Continents would be broken up with the hotels business to be sold to rival hoteliers or run in partnerships.

Six Continents, whose estate includes Inter-Continental and Holiday Inn hotels and All Bar One pubs, has yet to respond to the approach but has already branded Mr Osmond's plan to break up the hotels business as "fundamentally flawed".

Mr Osmond said: "I would hope that this is a winning offer. But hostile bids, as this may be, have a way of developing."

As an alternative to the all-share offer, Six Continents shareholders can choose to take a partial cash deal. In both cases shareholders would also be able to keep the announced interim dividend of 6.6p per share.

The deal would also see £1.4 billion of cash returned to shareholders - double the £700 million Six Continents has pledged to pay out if its own proposed demerger takes place.

Mr Osmond said: "Our central point is that Six Continents is at sixes and sevens. They have destroyed shareholder value for years. Almost £6 billion of net investment has left operating profits lower than 10 years ago."

CMI has pledged to launch asset sales, stage sale and leasebacks of its £7.6 billion property portfolio, and bring in Punch Taverns management to run the pubs estate.

The offer is conditional on shareholders turning down Six Continents' demerger plan at an extraordinary general meeting on March 12.

The enlarged group would seek a stock market listing of its own and would likely be propelled straight into the blue chip FTSE 100 Index.

Mr Osmond, who made his fortune at Pizza Express and Punch Taverns, has dismissed Six Continents' own demerger plans as "wasteful".

The Takeover Panel said CMI proposed to dispose of 2.6 million shares it currently holds in Six Continents and would donate any profits from the sale to charities of its choice.

Forbes.com

Hugh Osmond, who has launched a hostile takeover bid for hotel and pub owner Six Continents valued at $8.7 billion, has been known as the enfant terrible of British business--though, at 41, it has been suggested recently that he is no longer an enfant. He is, however, raising the stakes and taking a page from 1980s-era raiders like the late Sir James Goldsmith in England and Carl Icahn in the U.S.

Osmond's bid is through his investment vehicle Capital Management and Investment. He is offering 36 shares of CMI for each share in the much larger Six Continents (nyse: SXC - news - people ), owner of Inter-Continental hotels and All Bar One cafe/bars. An alternative offer includes some cash in addition to the shares.

"I am sure this will be a long fight but an interesting one,'' Osmond told Reuters. The would-be titan made his name in the 1990s as the force behind PizzaExpress restaurants and with the $4.3 billion deal for Allied Domecq's (nyse: AED - news - people ) pubs. That transaction, which was also quite hostile, put Osmond in what The Observer calls "The Beerage."

By offering mainly his shares in exchange for theirs, Osmond, a one-time medical student, has his work cut out for him in convincing Six Continent's shareholders that he can create value by splitting the company in pieces and selling them off.

Six Continents has presented its own plan to shareholders to "demerge," as the British say, its Inter-Continental and Holiday Inn hotel businesses and its All Bar One and O'Neill's British Pubs chains into two separately traded companies. Under the plan, Six Continents would also issue a $1.1 billion dividend to shareholders, less than the cash component of Osmond's bid. Osmond has said his bid is conditional on the demerger being delayed or the shareholders voting it down.

Osmond will also have to sell off the 2.6 million Six Continents shares he has already accumulated owing to British takeover laws, which prevent a bidder from profiting on a situation of his own making. Osmond's announcement to that effect sent Six Continents' shares down slightly in early trading.

Osmond said his CMI management team has a proven record of creating shareholder value and that the demerger idea was a loser. "Our message is simple. Vote down Six Continents' demerger. Accept CMI's better alternative. Realize value in our business," Osmond said. He also said shareholders would "receive private-equity levels of returns." The cash in the deal is being supplied by Credit Suisse Group's (nyse: CSR - news - people ) Credit Suisse First Boston and Lehman Brothers (nyse: LEH - news - people ).

Osmond accused Six Continents of being a poor operator of hotels and pubs as well as a lousy dealmaker. He said it sold its bingo parlors and betting shops too cheap. "Almost $9.5 billion of net investment has left operating profits lower than ten years ago,'' Osmond said.

Six Continents, which has noted the unsolicited offer but which has made no formal response, said its own spinoff plan would better enable its shareholders to realize value.

Osmond has been mocking that idea. "What I really object to is the idea that they'll change their spots," he told The Observer recently. "They say that the demerger will enhance shareholder value and make the businesses more biddable separately, but I believe they are only doing it to preserve their own roles--and are actually making it less biddable. Who can go hostile on a pub or hotels bid? You need to see the figures. They are no more demerging to make them more biddable than turkeys vote for Christmas."

Mr Osmond tabled an offer through his Aim-listed bid vehicle, Capital Management & Investment (CMI), which valued the leisure group at 648p per share.

Under his plans, Six Continents would be broken up with the hotels business to be sold to rival hoteliers or run in partnerships.

Six Continents has always rebuffed the suggestion of Mr Osmond making an approach for its business as fundamentally flawed.

In a statement, Six Continents said: "CMI's proposal gives shareholders nothing they do not already own except significant risk." Tim Clarke, Six Continents' chief executive, said the approach would enrich CMI's directors at the expense of shareholders' long-term interests.

The leisure group, whose estate includes Inter-Continental Hotels, Holiday Inn hotels and All Bar One pubs, has demerger plans of its own which would see it split itself in two.

It has accused CMI of having no hotel skills and having no partner to help run the business, and has warned against trying to sell hotels and the bottom of a trading cycle.

Six Continents also claimed substantial deal costs would emerge over and above CMI's incentive package, and claimed the lack of independent directors on CMI's board raised serious corporate governance issues.

As an alternative to the all-share offer, Mr Osmond has said shareholders can choose to take a partial cash deal. In both cases, shareholders would be able to keep the announced 6.6p interim dividend.

The deal would also see £1.4 billion of cash returned to shareholders - double the £700 million Six Continents has pledged to pay out if its own proposed demerger takes place.

The Scotsman - SIX Continents yesterday denied it was planning to ditch key executives in a bid to persuade shareholders to turn down a £5.5 billion takeover approach from entrepreneur Hugh Osmond that could be tabled as soon as today.

The under-fire hotels-to-pubs giant said there were no plans for long-standing chairman Ian Prosser or Richard North, the finance director who will lead the demerged hotels arm, to leave the company ahead of time, despite shareholder claims that the group needs shaking up after years of poor performance.

The denial comes as Osmond puts the finishing touches to his hostile bid by recruiting HBOS to join Credit Suisse First Boston and Lehman Brothers in providing a debt facility so shareholders can opt for a portion of cash as an alternative to his expected all-share bid.

The corporate raider, who beat Whitbread when he paid £2.75 billion for the Allied Domecq pub estate in 1999, is preparing to go hostile after talks with 6C’s management fell through last week.

He has already held talks with rival hotel operators to sell off parcels of properties, but is understood yet to have signed binding agreements.

Osmond reckons he can return as much as £5 billion to shareholders in the long term through disposals, sales and leasebacks from the Holiday Inn to Crowne Plaza hotel estate and the securitisation of revenues generated from operating the pubs and restaurants, such as All Bar One and O'Neills. However, his personal gain is expected to run into hundreds of millions of pounds.

Under Six Continents’ plan to split its pubs and hotels divisions into two separately quoted companies, Prosser, the chairman, will join the hotels arm as executive chairman but step back to become non-executive chairman at the end of July before leaving the firm in December.

A spokeswoman for the company said last night: "We see no reason to change that."

North, who has made it clear he would like the opportunity to run the demerged hotels arm without resorting to sell-offs is also unlikely to be sacrificed. The spokeswoman added: "Richard is the right man for job and will see this company through the demerger and beyond."

One adviser for Osmond said: "The argument about putting up new management to do the job is simple: why on earth spend over £100 million of shareholders money promoting a demerger without the management you propose to run the businesses?"

Six Continents' original plan was to demerge into two new companies, InterContinental Hotels and Mitchells & Butlers, which would manage the pubs and restaurants. The split would cost £109 million in advisors' fees and taxes and see £700 million returned to shareholders.

Now it is tipped to adopt some of Osmond’s plans for disposals and refinancing that would return more capital to shareholders. Sources close to the company said last night that it was still planning to go ahead with the extraordinary meeting on 12 March when shareholders would vote on the demerger.

Osmond intends to delay the vote.

For many, the preliminary tourism statistics for 2002 will come as a surprise. For the first time in history, the number of international tourist arrivals has exceeded the 700 million mark, and despite all the grim expectations and debates about the crisis, the year ended with a 3.1 per cent increase. Tourism has once again proven its resilience.

In total, according to the preliminary data sent to the World Tourism Organization from official sources throughout the world, almost 715 million international tourist arrivals were registered last year. That is 22 million more than in 2001 or, compared with the "millennium year" which many experts claim should be taken as the reference, almost 19 million more than in 2000. "The results we have are credible and give a rather clear picture," says Mr. Augusto Hueescar, WTO Chief of Marketing Intelligence and Promotion. He also underlines that International Tourism Arrivals (ITA) count only part of world tourism, in which domestic markets are not included. The latter has profited a great deal during tourism's greatest crisis, especially in the United States.

Data on tourism receipts are not yet available, since they require a more complex methodology. "We can be relatively satisfied with the year 2002 and cautiously optimistic about the development of 2003," says Mr. Frangialli. "The statistics did meet our expectations, in some parts of the world they even exceeded them, however we should not forget that the threats are anything but over." "We have a lot of work to do to reaffirm positive trends, but first of all, to regain consumer confidence where needed. World tourism has never before felt such a need for cooperation as now," the Secretary- General points out. "Taking all the problems into account, we can all be certain that tourism is firmly on the way to recovery, back to the trends predicted in Tourism 2020 Vision," says Mr. Frangialli.

The preliminary results for 2002 show a substantial change in the world tourism map: Europe remains firmly in first place, while Asia and the Pacific claimed the number two spot from the Americas. The international arrivals to African and Middle Eastern destinations are growing slightly above the world's average, but the base remains rather low. All the European subregions ended 2002 with positive results. South Mediterranean Europe, with Spain, Italy and Greece, leads the way with its share of the world market exceeding 20 per cent, eclipsing Western Europe by barely half a percentage point. Germany managed to maintain the status quo with respect to 2001, the Benelux and Austria saw slight growth, and United Kingdom experienced growth of over 3 per cent.

However, growth in Western Europe was below average overall, while international arrivals increased by an average of 3.9 per cent in Central and Eastern Europe. The unlucky exceptions are Poland and the Czech Republic, with a serious decline of more than 5 per cent. More than 130 million international tourist arrivals were registered in Asia and the Pacific, which many regard as the "destination of the future". Northeast Asia led all subregions with almost 12 per cent growth, followed by Southeast Asia (a bit less than 4 per cent growth), Oceania (1 per cent growth) and South Asia (2 per cent increase).

This means that the WTO predictions from some years ago -- namely China, together with Hong Kong and Macau, becoming an increasingly relevant tourism power -- have already started to become reality. India suffered a 6.6 per cent fall, while Iran, the Maldives and Sri Lanka are doing way above average, so it seems that their strategies work.

The Americas was the only region to close 2002 in the red. But it should be noted that the decline from dramatic 2001 averages out to 0.6 per cent, with North America (the United States, Canada and Mexico) increasing, thanks to positive results of Canada, 0.4 per cent on 2001, which -- with a fall of almost 7 per cent -- was painful enough. North America still holds a "decent" global market share of almost 12 per cent, but this is much lower than its 14.6 per cent share in 1995. The Caribbean islands experienced a decline for the second year in the row, with a 3 per cent drop -- much bigger than the 1.9 per cent decline the subregion suffered in 2001 -- probably as a side effect of the problems in the US airline industry.

But the damage was small compared to the 7 per cent fall in international arrivals to South America, 1.9 percentage point worse than last year's 5.1 per cent decline. The only subregion to have enjoyed growth in Americas was Central America, almost 10 per cent, but on a rather low base compared to other subregions. Africa offers a very different picture. While Northern Africa experienced a decrease of 4 per cent, Sub- Saharan Africa performed way above average, with an 8.5 per cent increase. The Middle East suffered an almost 4 per cent decrease in 2001, but performed extremely well, with an 11 per cent increase in 2002. (Jimoh Babatunde )

Many hotels, even some properties with significant business travelers, do not yet have high-speed Internet access available in all guestrooms. Although usage continues to increase, paid access is still below 10% with free access only attracting 20% or so of guests. With business travel in decline, Internet access may seem less important, but there are several reasons why this is not the case. Firstly, there is a core group of executives, some, but not all in technology companies, for who e-mail and the Internet are indispensable. Without access, these travelers will not even consider your property. Next, communications technology is increasingly moving to the Internet.

This includes everything from voice-over-IP (telephone conversations using a computer and Internet connection) to online business meetings to instant messaging. In my family, instant messaging among my children and their friends has far surpassed the telephone as their main means of communication. By comparison, cell phones are far more intrusive, are limited to one conversation at a time and even with caller-id, tell you far less about the caller and your desire to speak with them than the Internet-based channels. Finally, to people who use the Internet as the ultimate information and entertainment reference source, not having it available constantly is a tremendous hardship.

One of the other misconceptions about Internet access that prevents hotels from installing it is the notion that it will only get less expensive by waiting. It’s certainly true that the technology equipment, from cable to hubs, switches and routers will continue to drop in price. But already cat5e cable is below 10 cents a foot, while the per-port (single-wired connection) hardware cost can be as low as $10 and certainly not above $50 for the most expensive. That brings material costs per room from $25 to perhaps $100. I will talk more about alternatives like DSL/LRE and wireless, but for a standard wired room, the majority of the cost for wiring is in labor. Any decrease in materials will likely be offset by an increase in labor costs and both are likely to be far smaller than the lost revenue, either for paid connections or additional business, by delaying installation.

You are now no doubt convinced that it’s time to get this going in your boutique, but as yet inaccessible (to cyberspace), hotel. The next question that often comes up is “wired or wireless?”. Wireless access makes a lot of sense in common areas, including meeting rooms and F&B. In the guestroom, it’s a trickier question. Wired is almost always more expensive, even for a new property. However “piggybacking” the Ethernet connection on existing phone lines may save some money. Wireless connections are susceptible to interference, and they can be more easily “hacked”, although major wireless providers are equipping their networks to make this much more difficult if not impossible.

Wired connections can be built in one of three major ways. The first is with glass (fiber optic) cabling. The second is copper (cat5, cat5e or cat6). The last is using existing phone lines, either shared with a phone line or unused (DSL, LRE). New copper wiring provides the most expansion capability at a reasonable price. Cat5e and cat6 wires can run at 1 Gigabit/second. For perspective, consider that most networks in an office use a speed of 10 Megabits per second and this “Gigabit Ethernet” is 100 times faster. If the hotel has a full T-1 connection to the Internet (at a cost of $500-$1,000 a month), the Gigabit Ethernet connection is over 600 times faster.

Fiber optic cable is more expensive than copper, more expensive to install and requires far more expensive network equipment. The only reason to use fiber would be to connect two locations where there was very high electrical interference between them, as glass is not affected by such interference. Wired Ethernet also allows other devices, such as video servers, thermostats, minibars and lights/appliances to communicate on the network.

DSL and LRE (LRE is Cisco’s version of DSL and stands for Long Range Ethernet) and similar technologies use special equipment that compresses Ethernet signals to allow a single pair of phone wires to carry data, even with a simultaneous voice (phone) conversation over the same wires. Although such data transmission is slower than a dedicated wire, it is more than adequate for an Internet connection or even “video-over-IP” now being used by some in-room entertainment providers. As you would expect, the equipment for these connections is more expensive than standard Ethernet equipment.

Wireless connections come in three main “flavors” at the moment. The vast majority of wireless devices use a standard called “802.11b” or “Wi-fi”, which permits fairly high-speed wireless connections (about the same speed as a basic wired connection of 10 Megabits/second). Recently a new version called 802.11a has begun to gain usage. These connections run about five times faster but the transmitter (called a WAP for wireless access point) and receiver (the computer or PDA) need to be closer together than Wi-fi. The effective distance of wireless connections depend on many factors and can even vary due to weather or outside interference. They automatically drop down to slower speeds when necessary though and even these slower speeds are plenty fast for Internet access. The third variety of wireless access is called 802.11g and is not fully a standard yet.

Some guests may have their own wireless PC cards or built-in laptop capability, but many will still need the hotel to supply the wireless device. Typically those are PC cards that fit into the laptop card slot, however they often require software (called drivers) to be installed on the guest’s computer. Although the providers who provide such access specifically to hotel guests often provide automatically installing cards, there is still software being loaded onto a guest’s computer that may subject the hotel to concerns by the guest. Besides a wireless card for your laptop, another way to connect to a wireless network is using a WEC or Wireless Ethernet Client (also called a wireless Ethernet bridge).

These relatively new devices are actually 802.11b wireless receivers that have a standard Ethernet (wired) connection coming out of the wireless receiver. The advantage of these devices is that they require no special equipment to be installed on the portable PC and no software to be loaded on the guest’s computer Since a WEC has a standard Ethernet connection the computer connects to it just as it would to a wired connection. However some WECs need to be plugged into an AC outlet, unlike standard wireless cards that are powered by the computer.

Some additional considerations for wireless access are that wireless access points need both power and a wired Ethernet connection to function (though some wireless providers can supply power to the access points using the same cat5e data cable). In addition to the distance limitations, a single wireless access point can only handle a few connections simultaneously so putting one WAP in a room with 25 computers connected to the Internet is likely to yield poor service levels. Finally, while it’s easy to tell in which room a guest has plugged in their computer, it’s not even possible to distinguish a guest from a visitor when they connect wirelessly. This requires that wireless users (including WECs) use a password or credit card to gain access (unless the hotel does not charge for the service and doesn’t mind non-guests using the facility).

In choosing between wired and wireless access in the guest rooms and meeting rooms, you should consider cost, convenience, security, likely future uses and lead time.

Current practices for guestroom access range from free Internet for everyone, to “slower speed” free, to loyalty program members free, to $12.95 a night. Meeting room Internet access is almost never free and generally costs $100 - $500 or more per room per day. There are pros and cons to each approach. Since completely free Internet access will have many more guests using the service, it will actually decrease the value of the service because at the end of the line (T1, DSL or Cable modem) everyone is sharing the same “pipe” to the Internet. Most guests who have a true need for Internet access do not mind paying a reasonable amount for that access, but certainly at a business property with a fairly high ADR, a small increase in room rate will more than make up for incremental revenue and is less likely to make guests feel “nickel and dimed”.

A key capability regardless is being able to ensure that Internet access is up and running at fairly high speed at all times. This requires someone monitoring the connection and ideally a way of automatically limiting any one guest from using all the available Internet bandwidth. Finally, since the Internet connection can be used for everything from accessing illegal materials to providing copyrighted content to others, a hotel may want to consider using a third-party service provider who can limit the risk of a guest abusing this amenity. At the very least, the hotel should require the guest to acknowledge certain terms and conditions that specify the risks the guest is taking and acknowledging that the hotel cannot protect the guest from dangerous, illegal or malicious content or guarantee the privacy of their access.

We touched briefly on how the hotel gets connected to the Internet, but we’ll take a bit more in-depth look at that question now. The main method is called a “T-1 line”. This line is a dedicated wire running from the hotel to the Internet. The rated speed is 1.5 Megabits (1.5 million bits per second). Since a data T1 is expressly for Internet access (T1s are also used for 24 voice telephone lines) they are by far the most reliable Internet connection. The offsetting factor is the cost which ranges from $500 to $1,000 a month. These costs are likely to continue to drop along with other telephone costs. Some hotels may want to consider a fractional T1, which can be anything less than 1.5Mb or can be shared with some phone lines (for example, 12 phone lines and 750Kb Internet access – ½ a T1- can run over the same T1 line).

DSL connections, also available from the phone company are essentially fractional T1 lines and come anywhere from 192Kb (1/8 of a T1) and up. Business DSL lines can be either symmetrical DSL (SDSL), meaning they send and receive data at the same speed, or (like a home DSL line) Asymmetrical, (ADSL) in which case they receive data at a much greater rate than they provide it. ADSL is not recommended for guest connections because it is both less reliable and often will not allow a secure connection back to the office (called a VPN or virtual private network).. Cable modems provide a third connection method, and they generally run faster than even a T1 at a fraction of the cost.

However that speed can vary depending on the number of other locations sharing the cable line and they also generally do not support VPNs. DSL and cable lines can range from 64Kb up to 7Mb (5 T1s); however, speed and uptime are usually not guaranteed as they are with at T1 line. In addition, the maximum speed of a DSL line is limited by the distance between the hotel and the other end of the DSL line; which is not something the hotel can control at all. If your hotel has a lot of government, medical, financial services, large corporate or technology business guests, a VPN will be very important. Make sure your Internet provider and firewall supplier both allow for VPNs.

A final consideration for guest Internet access is security. Although “switched” networks (which most newer networking equipment uses) have some inherent security, there is generally little reason to have guests and employees sharing the same network or even Internet connection. For one thing, you may want to monitor and restrict employee access to both the Internet and e-mail, whereas that’s not appropriate for guests. ADSL and cable modems are OK for administrative access, especially with a network server appliance managing a couple of connections.

Both networks should be protected with a device called a “firewall”, which makes it more difficult for malicious Internet users to attack or infiltrate computers within the hotel. Employee firewalls can also be used to ensure that viruses are not introduced into the network where that is left up to the individual guest when using the Internet in a hotel. VPNs provide an additional layer of security.

High-speed Internet access is not going away, nor is it getting less important to travelers. There’s no question that it will be as expected as a telephone in the room is today at some point. For a property with no existing wiring infrastructure, the time from concept to operation can easily exceed six months. Even for a pre-wired property, finding an equipment provider, ISP, installation company, and support source, finalizing configurations, and negotiating prices and contract terms will require at least three months from start to finish. Deciding whether and how to wire, who will provide the service, and what features will be available are not decisions that should be made in haste.

This means that if Internet access becomes a standard feature among your competitive set or you want to distinguish your property in this way, planning needs to begin sooner rather than later. If you have any questions on high-speed Internet access or any other area of hospitality technology, please contact HVS Technology Strategies at info@hvsit.com or 973-335-0871 in NJ, 303-443-3933 in CO.

Ready Or Not - UK Businesses Must Make Disaster Recovery Plans Now - PKF UK Report

More than half of small businesses do not think they need an operational disaster recovery plan, according to a recent survey* by accountants and business advisors PKF. But Gordon Brown's radical contingency plans to take control of the London Stock Exchange and other key institutions to avoid economic meltdown in event of a terrorist attack, announced yesterday, are a timely reminder that businesses must review their own contingency and recovery plans for potential disasters.

Potential terrorist attacks are not the only reason to review crisis management strategies - floods, fires or theft could also cripple a business that is unprepared. But even a small disruption could have a big impact - what if your business was unable to communicate with consumers/suppliers for several days, unable to process work or if it permanently lost important data? PKF urges businesses to be ready for the worst:

· What's the problem? Identify all potential hazards - some areas of the UK are more prone to natural disasters such as floods or hurricanes, but any office could be affected by fires, explosions or flooding from an accident or attack.

· Location, location, location - develop a contingency plan for how the business could continue to run if your office is unusable. Could you use another branch, temporary facilities from a supplier or work from home (in which case would you need extra lap-tops, mobile phones or other equipment)?

· Safety first - make sure employees and customers are safe with updated evacuation plans, access to emergency numbers and first aid equipment and staff training in essential medical treatment.

· Data dilemma - make sure important data is protected, copied, backed up and held safely, preferably at a different location to your headquarters. Make sure all critical data can be accessed despite the loss of the master copy and that all crucial data can be restored from back-ups.

· Ensure you're insured - review your business insurance cover. Would it enable you to get back in operation and cover replacement costs of vital facilities? Do you know how much it would cost to lease temporary equipment or hire temporary workers, if necessary?

· Who does what? Cross-training staff on crucial activities will ensure you can run vital operations. Identify the core skills and find out where else you could get temporary staff from in an emergency.

· Wired up. To aid recovery of computer systems and telephone lines make sure you can identify the technology required to support critical services and find out how you could replace this in the shortest possible time.

· Communications - do you have a PR plan to handle customer and shareholder perceptions of the business in the event of a disaster? Less than a third of SMEs (29%) have a crisis management plan for communications, according to a PKF survey.

· Keep calm - stay calm and make sure everyone knows what they are responsible for as you get the business back on its feet. Consider counselling for staff if they have been involved in traumatic circumstances.

Nick Winters, partner at PKF, said: "It's all too easy to focus on the day to day and short term goals in business - but the uncertain economic climate and current threat of war and possible terrorist attacks are timely reminders that disaster can strike at any time. Every company should have a crisis management plan because once you're hit by a problem you don't have the luxury of time to think through the best options and ensure your systems are backed up, your staff are trained and you have a route to recovery. The more prepared you are to cope with it, the better your chances of getting through a disaster as quickly as possible and with the least disruption and trauma. It could be the difference between saving and losing your business."

*Balancing risks and reward - are you getting it right? is available free from PKF. The survey found that 54% of SMEs do not think they need a disaster recover plan for potential operational problems and less than a third (29%) had a crisis management plan for communications.

Sol Melia Reports 2002 RevPar for All Hotels was Down 4% from 2001; Average Occupancy for 2002 at 66.5%

Sol Meliá today announced results for the hotel company for the year 2002. Revenues grew to 1,010.3 million Euros, almost exactly the same as in 2001, while Earnings before interest, taxes, depreciation, amortization and rentals (EBITDAR) reached 300.6 million Euros, a 0.5% increase over 2001. Earnings before interest, taxes, depreciation and amortization (EBITDA) fell by 3% to 233.2 million Euros, in line with analyst expectations. For the second half of the year 2002, EBITDA and EBITDAR grew by 22% and 20% respectively, compared to decreases of 23% and 15% in the first half of the year, indicating a clear recovery of the business over the year.

Net profits excluding exchange rate differences and extraordinary profits fell by 12% to 53.3 million Euros. Funds from hotel operations reached 175.4 million Euros, an increase of 7% over the previous year.

Average RevPar (revenue per available room) for all Sol Meliá hotels was 45.4 Euros, 4% less than in 2001, and like-for-like RevPar of comparable hotels fell by 1.9%. Average occupancy for the year stood at 66.5%.

By business area, RevPar for resort hotels in Europe fell by 4%, mainly due to a 40% drop in RevPar from hotels in Tunisia. RevPar for resort hotels in Spain increased by 1%, thanks mainly to a good performance by hotels on the Spanish mainland coast (RevPar + 4%) offsetting the weaker results in Spanish islands (RevPar – 2%).

In the European City Division, RevPar fell by 2%, a satisfactory figure for year-end when compared to the 7% fall that was seen over the first three quarters of 2002. The improvement was due in large part to stronger results from the Meliá White House in London and company hotels in Madrid over the fourth quarter, during which their RevPar grew by 26% and 15% respectively.

The Americas Division saw RevPar fall by 15%, strongly influenced by the 32% drop in RevPar from the Gran Meliá Caracas due to the political uncertainty in Venezuela and unable to be offset by the increase of 12% in RevPar from hotels in the Dominican Republic.

After the rationalization of the brand structure in 2001 to focus on 4 major brands, in 2002 attention has been focused on the standardization of product and service quality, the repositioning of brands and their customer segmentation. The period also witnessed the results of the analysis of the hotel portfolio within these parameters, leading to the disaffiliation of hotels that did not come up to brand standards and whose owners declined to invest in product improvements at the end of their affiliation agreement. This process lead to the disaffiliation of 24 hotels, mainly in Spain and the North of Africa and the Middle East such as the Lebanon, Morocco, Tunisia and Turkey. The company also added 22 new hotels. Thanks to these changes, 75% of the hotels in the Sol Meliá portfolio have been thoroughly renovated or newly built over the last 5 years.

2002 was also a year for consolidation as far as distribution channels were concerned, witnessing the reinforcement of traditional channels, especially shown by increases in the world-wide sales force and the tightening of relationships with leading tour operators, along with the promotion of multi-channel direct sales.

Thanks to the standardization of products and processes, as well as the application of other control measures, the company achieved its cost-saving plan, producing savings of 31.7 million Euros. In spite of the cost savings, the company was able not only to maintain, but to actually increase the results obtained through guest satisfaction surveys world-wide, and especially in Europe.

The uncertainty that has gripped the international community as a result of the potential conflict in Iraq makes it difficult to forecast performance over the coming months. Nevertheless, the excellent condition of company products, the efforts made to bolster sales, the disaffiliation of unprofitable hotels or below-standard properties, as well as the financial strength of the company, and assets valued at over 3,000 million Euros, allows Sol Meliá to face 2003 with a certain calm.

Following the recent bombing in Bali on October 12 and the possible threat of further terrorist activity in Southeast Asia many governments have issued travel warnings, labelling many destinations in Southeast Asia as ‘high risk’. Consequently, it is likely that the arrivals of international tourists to many destinations throughout Southeast Asia will be negatively impacted. The estimated decline in international visitors to destinations, such as Bali, is a somewhat subjective forecast at this time, and largely depends on the future events in the region over the next three to twelve months. However, the purpose of this article is to examine the impact of somewhat comparable events over the past few years on tourism arrivals to Bali, and to estimate the likely impact the Bali bombing could have on tourism and hotel performance in Bali.

The table below sets out the monthly international arrivals to Bali by month between the periods 1999 – 2002 YTD (as at September).

Newsletter - March 4, 2003