Alex Kyriakidis: "We are on the verge of a dramatic restructuring of the whole Travel & Tourism sector"

TravelDailyNews.com   -  In a statement about the breakout session he will moderate at the 3rd Global Travel & Tourism Summit in Vilamoura on May 15 - 17, Alex Kyriakidis , Managing Partner, Travel, Tourism & Leisure, Deloitte & Touche, said: "I can`t remember when the Travel & Tourism sector had faced so many challenges - with war, terrorism, economic slowdown and now SARS. As a consequence, many highly leveraged players are in difficulty and share prices of publicly quoted companies are trading at substantial discounts to asset values. In this situation, opportunities are bound to arise and I would expect a wave of re-structuring and consolidation activity. 

The private equity market is awash with capital and over US$25billion is looking for a home. I would not be surprised to see several real estate oriented deals with companies who are simultaneously asset rich and debt heavy. Internet consolidators, tour operators, airlines and hospitality companies are all likely to come under considerable pressure. However, consolidation will not be the only theme; I believe there will be openings for entrepreneurs in gaming and betting, with particular growth in the UK and South East Asia. In short, we could be on the verge of a dramatic restructuring of the whole Travel & Tourism sector."

 In the Summit breakout entitled `Investment Outlook`, Alex Kyriakidis will lead a discussion that will identify where the best investment opportunities will lie and what the profit drivers will be. To assist the analysis, he will divide Travel & Tourism into four broad segments, Airlines, Tour Operators, Hospitality & Leisure and Gaming & Betting. Within each segment, he will also seek consensus on the likely winners and the losers. The audience will be invited to contribute their views, as will a panel of top executives, including:

• David Mongeau, Vice Chairman, CIBC World Markets
• Laurence Geller, Chairman & CEO Strategic Hotel Capital
• Ramsey Mankarios, Vice President, Kingdom Holding Group
• Paul Slattery, Director, Otus & Co

The 3rd Global Travel & Tourism Summit

The 3rd Global Travel & Tourism Summit is being organised by the World Travel & Tourism Council and will take place on May 15th - 17th in Vilamoura, Portugal. The event will be attended by top level company executives and government officials from around the world, and other people involved in the Travel & Tourism industry at the most senior level. 

The Summit`s main objectives are to help the Travel & Tourism industry to come together to rebuild confidence in the face of war, terrorism, disease and economic slowdown, to turn challenges in to opportunities, to build a vision of `New Tourism` and initiate a strategy to achieve it. Other confirmed speakers include James Rubin, Former US Assistant Secretary of State, Neil Armstrong, the astronaut, the President and Prime Minister of Portugal (Jorge Sampaio and Jose Manuel Durao Barroso), the Chairmen of American Express (Ken Chenault), Iberia (Xabier de Irala), Marriott International (Bill Marriott), Qatar Airways (Akbar Al Baker), Six Continents (Sir Ian Prosser), Starwood Hotels and Resorts (Barry Sternlicht), TUI (Michael Frenzel) and over 30 more top executives of companies of similar stature. 

Travel & Tourism is the world`s biggest industry, accounting for nearly 200million jobs, and over 10 per cent of world GDP, more than US$3,500 billion.

InterContinental Hotels Group to shed 800 jobs

It warned that profits during the January to March quarter would be "substantially lower than last year".

The group - which includes the Holiday Inn, Intercontinental and Crowne Plaza chains - said it was cutting 800 jobs worldwide from its 2,600-strong back office workforce.

In a trading update, chief executive Richard North said the company had faced "some of the worst conditions the industry has ever encountered".

The conflict in Iraq and continued weakness in the global economy have hit both tourist and business travel.

Takeover targets

IHG had said earlier this month that it would shed jobs as part of a plan to reduce costs by $100m (£64m) a year, but at the time it did not say how many jobs would go.

In its trading update, IHG said the total cost of its separation from Six Continents and the defence of the Hugh Osmond takeover bid would be about £129m.

Six Continents split into two earlier this month, with IHG taking the hotel chains while the pubs and restaurants business was renamed Mitchells & Butlers.

Before the split took place it blocked a takeover bid from entrepreneur Hugh Osmond.

However, speculation has continued that IHG could be a takeover target for one of the other major hotel groups.

AFX -  InterContinental Hotels Group PLC, the recently demerged hotels arm of Six Continents, today warned that the current SARS outbreak was "adversely affecting" its Far East and Asia Pacific hotel operations, although little impact had so far been felt in Europe or North America.

"It [SARS) is clearly having an impact, especially in Hong Kong where occupancies have been severely affected," group chief executive Richard North told AFX News in a telephone interview this morning,

The group did not break out individual RevPar -- Revenue per Available Room -- or occupancy details for each specific geographical region, but today's trading update for the three months to March 2003 showed a worsening trend for the EMEA -- Europe, Middle East and Asia region.

RevPar here at the flagship InterContinental Hotel chain fell steadily over January to February and quickened in March as the SARS virus began to impact  travel. RevPar in January and February fell 2.5 pct and 5.7 pct respectively, falling to 9.6 pct in March. Occupancies at the end of March were down 2.8 pct in the EMEA region, which has also been affected by the war with Iraq.

 "While the EMEA region is finding the environment tough, our business in the Americas is relatively resilient. The Far East only accounts for 8 pct of of total revenue," North continued.

 The gloomy trading update pushed the shares down 8 pence to 334 pence at 8.50 am. Last week, the group started trading at 386 pence a share when it was formally demerged from Six Continents along with the Mitchells & Butlers pubs arm.

Both sides of the business have been subject to intense bid speculation, both prior to and after the demerger. Entrepreneur Hugh Osmond launched an unsuccessful 5.6 bln stg bid for the whole of Six Continents in March and post the demerger, other bidders are thought to be looking at both businesses.

US hotel groups Starwood, Marriott International and venture capital firms Texas Pacific, Blackstone and CVC have all been mentioned as potential bidders for the hotel pub assets.

However, North today declined to comment on any negotiations. "If we had anything of any substance to report we would tell the market," he said.

He acknowledged that the current difficult market conditions were affecting valuations for the company and admitted that against the gloomy economic backdrop, the timing for flotation could not have been worse.

"I accept it was not the best time to float, but the process had been in place for a year. A year ago, people were predicting an upturn for the hotels industry in 2003 ... now it is extremely difficult to predict when the recovery will begin," he added.

North said in an effort to try and mitigate the downturn, the group would push ahead with its 100 mln usd cost saving plan, of which 75 mln usd will be achieved by the end of 2003.

Over half of the savings will be achieved through headcount reductions with around 800 redundancies from a global corporate staff of 2,600. The group will also close its London headquarters and move to Windsor, saving 9 mln usd a year.

London hotels are `A Casualty of War`

The full effect of the build up to, and early stages of, the war in Iraq on the UK`s hotel market was quantified in figures from  PKF that reveal particularly dramatic losses for London hoteliers.

Occupancy dropped 10.3% to 67.1% in London during March, while average room rate fell 4.1% to £88.22. The combined effect of these decreases - largely due to reduced international trade - was to push the capital`s rooms yield down to £59.22, a drop of 14% compared to March 2002. The fall is particularly significant when taking into account that last year`s comparative figure was already down more than 16% on the previous year, due to the traditionally quiet Easter bank holiday falling in March 2002 and the continued fall-out from 11th September 2001.

Regional hotels saw less dramatic changes due to their reliance on domestic trade, but even so the overall picture was gloomy. Occupancy fell 0.4% to 67.8% and average room rate rose a marginal 0.5% to £60.39, leaving rooms yield virtually unchanged at £40.93, compared to £40.92 last year. Again, following a disappointing performance in 2002 (rooms yield down 7.0%), the otherwise `stabilising` figures for this year are cast in less positive light.

Melvin Gold, managing director of hotel consultancy services at PKF, said: "The UK`s hotel performance during March has been very disappointing but hardly unexpected in light of world events and the domestic economy. The figures for March show quite clearly that international travel was tremendously affected and London hoteliers have been hard hit, whilst regional hotels, which we might have expected to bounce back a bit more since Easter is falling in April this year, have failed to rally.

"I wish I could predict that April`s performance will be better but it will certainly be worse due to the conflict in Iraq, the Easter weekend in the middle of the month and the run up to the May bank holiday weekend at the end of April. We may even see international issues such as the outbreak of the SARS virus in Asia having further impact on the already battered London market."

Preliminary data for March 2003



Final data for February 2003

Promotions fuel guessing on next Marriott chief

IHT  -  Two important promotions this year have fanned conjecture over who will eventually run Marriott International Inc., one of the world's largest hotel companies.

The succession speculation began in January, when the hotel chain promoted John W. Marriott 3d, son of the chairman and chief executive, J.W. Marriott Jr.

John Marriott, as the son is known, is now in charge of global sales and marketing and of managing Marriott's nine hotel brands and its North American lodging operations. The day his new duties were announced, the company, based in Bethesda, Maryland, also expanded the job of the chief financial officer, Arne Sorenson, to include hotel operations in continental Europe.

Marriott operates eight hotel chains on behalf of other owners, including Marriott, Ritz-Carlton and Renaissance hotels, offering different levels of service and prices. The company reported $19 billion in overall sales last year from managing 2,500 hotels in 65 countries.

With his gold-plated name and a quarter-century in the family business, John Marriott, 41, would seem a perfect fit for his father's shoes but not so fast, says his father, who is known as Bill. At 70, Bill Marriott keeps a vigorous pace, visiting 200 hotels a year.

"I will be able to say who I think is best," he said. "But the board will have to approve it. This is a big, complex company, and we've got to have the best talent."

Like other hotel companies, Marriott is struggling with tumbling occupancy rates, a result of the fragile economy and travel anxieties from terrorism and the war in Iraq. In the fourth quarter last year, Marriott had a loss of $37 million, narrowed from a loss of $116 million a year earlier. For all of 2002, the company had net income of $277 million, up 17 percent from 2001. Revenue rose to $8.44 billion from $7.79 billion

In February, Marriott lowered its 2003 earnings outlook because the war and the soft economy had slowed travel; first-quarter results are to be released this week. Executives at Marriott say it is well positioned to recover its core clients corporate travelers when the economy improves. But other troubles loom.

Several hotel owners have sued Marriott, contending that the company and its hotel supply purchasing firm, Avendra LLC, improperly pocketed vendor rebates. Both companies deny the accusations. Two suits were dropped and one was settled, but uncertainty about the remaining lawsuits, including one filed this month, has hurt Marriott's stock ratings.

After the suits were filed, a new openness emerged in what many had considered a closed, even secretive culture at Marriott, which was founded in 1927 as a family business. In the early 1980s, Marriott began switching to managing and franchising its hotel brands, and it sold many hotel properties to private investors through limited partnerships.

Although John Marriott, who joined the Marriott board last year, may appear to have an inside track to lead the company, analysts do not discount Sorenson, 44, a lawyer whom Bill Marriott hired from the Washington office of the law firm Latham & Watkins.

Mark Falcone, who follows Marriott for Deutsche Bank AG, said the latest appointment "positions Arne well to move up in the company by giving him operating experience." But, he added: "I don't see it as a rivalry. There is definitely room for both of them in the next leadership tier."

John Marriott discounted the succession issue. "I've been asked that since I was in high school," he said. "I've always said that I don't know. Our family owns a lot of stock, and our wealth is tied up in the company, so I want it to do well. If I'm running the company, great. If somebody else is, that's great, too."

John Marriott said he was convinced that there could be only one person at the top. "You need a leader," he said. "Otherwise, who do you answer to?"

It would be hard for any outsider to compete with his experience. Marriott got his start in the business at 15, washing dishes at the Crystal City Marriott in Arlington, Virginia.

Over the years, he has done "nearly every job in the hotel business," he said, including leading JWM Family Enterprises Inc., a limited partnership that owns nine Marriott-managed hotels.

"Seeing the hotel business from the owner side has been a fantastic learning experience," he said. It was also a leap from earlier jobs as an ice cream scooper and a short-order cook, which, he said, is "a challenge when you are juggling 15 orders."

Canada lashes out at WHO advisory

TravelWeeklyEast.com  -  Canadian health and tourism officials have lashed out at the World Health Organisation travel advisory placed against Toronto due to the SARS outbreak.

HK's Regal Hotels 2002 net loss 765 mln hkd vs loss 514.2 mln

AFX  -  Regal Hotels International Holdings Ltd (78.HK) said its net loss widened to 765 mln hkd in 2002, from a loss of 514.2 mln a year earlier.  Sales dropped to 988.6 mln from 1.057 bln

It reported a loss of 437 mln related to impairment arising from the sale of the Regal Constellation Hotel in Toronto. It also booked an asset impairment provision of 181.9 mln for other hotel properties, it said in a statement.

Operating loss widened to 569.6 mln hkd from a loss of 173.3 mln. Loss per share also broadened to 0.17 hkd from a loss of 0.13. The company did not pay a final dividend, the same as a year earlier.

International Confex 2003 delivers quality visitors

International Confex, Europe`s leading annual forum for the meetings, events and corporate hospitality industry has  once again delivered a quality visitor audience for the 2003 show - 76 percent of visitors were of managerial level or above which is a 14 percent increase when compared to 61 percent at the 2002 show.

Visitor profile improved because 25 percent of those attending hold an annual events budget of over half a million pounds - an increase on the 22 percent that held budgets of that size last year, and 80 percent of visitors approve or influence that budget - compared to 71 percent last year.

There have also been some subsequent changes to the Confex team and organization which will benefit the 2004 show. Jessica Blue has been appointed as Event Manager and she will be taking over the helm from Paula Lorimer who has left to have her baby. Jessica is an experienced event manager who started her career at CMP by joining the Confex team in 1997. Since then she has been responsible for the GeoSolutions event and for the successful launch of GeoNorth in the IT and Games Division.

International Confex event manager Jessica Blue said "Feedback from our exhibitors revealed that visitor quality at this year`s event was higher than ever: our on-site research now confirms their views. This vindicates our marketing strategy for the event because the focus of our Privilege Club and marketing campaign is to attract and delivery high quality visitors for our exhibitors. Having said that, we were very pleased with the level of visitor numbers in the current climate.

"Pre-registration conversion was at its all time highest at 49 percent - indicating to us that our re-branding was well received and our pre-show marketing really worked! 2003 also saw the successful launch of our Confex Privilege Club. Five percent of our visitors came from overseas and we will be building on this success again to bring quality buyers to the 2004 show."

BACD executive director Tony Rogers said "International Confex 2003 demonstrated its importance and resilience by delivering a quality show with high quality buyers at a time of almost unprecedented global political and economic turbulence. The Privilege Club also made a very encouraging start and has laid the foundations for further development in 2004."

Wembley (London) Limited, director of sales and marketing Peter Tudor said "Once again Confex has proved to be a cost effective investment and has allowed us to exceed our target for generating leads. Many visitors from blue chip companies have made specific enquiries for events they are planning, and we are confident that a significant number of leads will be converted into business.

VIP visitor - Dr Sen of the Brunei Development Corporation said "A world beating show run by top, clever, brilliant people. A wow of a performance - completely terrific"

On-site figures also state:

• International Confex 2003 attracted a total audience of 12,856 of which 8,000 were trade visitors and 4,856 exhibiting personnel.
• There were 488 exhibitors (main stand holders) with around 1,200 exhibiting companies.
• 5% of visitors were from overseas.
• 42% of visitors said their core job function was in event organisation.

In a separate move, International Confex has also been brought under CMPi`s Ben Greenish, who now has responsibility for both Travel Trade Gazette and International Confex - thus allowing CMP to enhance the synergy between these two relates brands. All of CMP`s UK events have also been united in one division under Paul Thandi. Paul, Executive Director at CMPi has many years experience on Confex as a past event director and has been actively involved in building Confex into the successful event it is today. Confex will now benefit from greater dedicated resources and is positioned for further long-term success.

International Confex is ABC audited. The ABC figures for the 2003 show will be available later this month.

International Confex 2004 will be held on 24th - 26th February 2004 at Earls Court 1 London.

Hong Kong:  HKTB and HKHA welcome billion-dollar government relief package

The Hong Kong government has unveiled an HK$11.8 (US$1.5 billion) package in an effort to rescue the economy from the SARS crisis. Of this, the travel trade will receive HK$1 billion (US$12.8 million) in funding for travel promotion, exhibitions and commerce.

Both the Hong Kong Tourism Board and Hong Kong Hotel Association have voiced their support for the move.

“The Hong Kong Tourism Board warmly welcomes and supports the measures announced by the government in a bid to relieve pressure caused by atypical pneumonia on travel-related industries,” the board said in a release.

Hong Kong Hotels Association Chairman, Mark Lettenbichler echoed the support for the relief measures.

“This will certainly shorten our time to restart the tourist industry engine. For the hotel industry, we are also pleased with the government’s initiatives of waiving government rates, water charges, sewage charges and trade effluent surcharges for one quarter, as well as our license fees for one year.

“We believe these are immediate measures that can provide temporary relief to our industry.” Lettenbichler asked that the government move a step further to encourage passenger traffic into Hong Kong by waiving a three percent levy on hotel rooms as well as the airport tax.

Hong Kong’s hotel sector has seen average occupancies slump to below 20 percent, down from 84 percent, over the same period last year.

“Overall, we think that these are timely measures which will allow us to focus our energies to the more pressing tasks such as further upgrading our service quality and preparing for aggressive marketing campaigns this year,” he added.

Bali sees ‘substantial’ pickup from Australia 

TTG Asia  -  Australian travellers are beginning to look at Bali as their holiday destination again, and Legian and Seminyak areas are the “flavours of the month”, while the traditionally preferred areas such as Tuban and Kuta are trailing, according to Garuda Orient Holidays (GOH).

Its product manager, Mr Nick Deacock, said: “We have seen a substantial and encouraging turnaround in enquiry and booking levels to Bali which, though still well below historical levels, augers well for the future.” Following the release of a new promotional air fare initiative by Garuda Indonesia, GOH released a new Super Specials flyer last week.

While new areas were on the rise, Mr Deacock said demand for accommodation in Nusa Dua, Jimbaran and Sanur was still depressed due to the lack of demand for high-end and family style accommodation. However, Mr Deacock was cautious regarding the positive signs.

He said: “Now that the war is all but over in Iraq, the question still exists – what happens next? Will radical elements retaliate and if so, when, where and how? The world has entered a new phase and will never be the same again. Severe acute respiratory syndrome is the latest threat, though as yet does not seem to be a major contributing factor affecting business to Bali in particular.”

Mr Deacock also said the new visa policy was another possible dampening factor. There is already active campaigning by the tourism industry for the government to review and reduce some elements of these total tax amounts, according to Mr Deacock.

The Indonesian government has not announced a firm date to implement the new visa policy.

Sydney continues to win big events

Sydney has defied weak global conditions to confirm 12 new conventions won in the first quarter of this year, amounting to over A$120 million (US$75 million) in meetings business.

The Sydney Convention & Visitors Bureau (SCVB) said it’s seen a huge 200 percent jump from the same period last year. The new international meetings are estimated to attract 33,000 delegates.

Managing director for the Bureau Jon Hutchison said, "The SCVB’s 12 major conference wins would provide a significant boost to the A$764 million worth of business currently confirmed for Sydney through to 2012."

Statistics show that international convention delegates spend A$749 a day in Sydney - nine times that of the average tourist.

The three largest events won since January are:

·         2010 Lions Club International Convention (25,000 delegates generating A$91.7 million).

·         2007 World Congress of Sexology (2,500 delegates, A$10 million).