Horst Schulze Believes He Can Do It Again with a New Luxury Hotel Chain

Inside an office on West Paces Ferry Road, one of the country's best-known hoteliers is quietly planning a new luxury chain. 

Horst Schulze, the longtime president of the Ritz-Carlton until he resigned nearly two years ago, has assembled a group from the old days. They are working out of the offices of W.B. Johnson, who owned the Ritz-Carlton from 1983 to 1998 and grew it into a worldwide chain. 

Johnson possibly will participate in the new venture, said Schulze, who is still in the research phase and will decide by May whether to move forward. 

Schulze, who said he'd like to start in Atlanta, confirmed that he has discussed developing at the Buckhead Plaza site near his office on West Peachtree, though he also has looked at many other sites around the world. 

Schulze has not yet assembled financial partners, he said. Experts say funding for hotels is tough to find in today's economy, though Schulze's track record would help. 

Several luxury hotel chains, including Ritz-Carlton, Four Seasons, Mandarin Oriental and St. Regis, are expanding in the United States, despite the down economy. 

"I think Mr. Schulze would be well-received by any potential partners, because he has a legendary record in the industry," said Bruce Ford, vice president of sales at Lodging Econometrics in Portsmouth, N.H. 

Mark Woodworth at PKF Consulting in Atlanta said "patient capital" typically goes into high-end hotel projects, meaning investors are willing to wait longer to see the return on investment. 

Schulze "is such a proven individual in the industry, and he has demonstrated over a long time that he knows how to create a product," Woodworth said. 

Atlanta developer W.B. Johnson bought the famous Boston Ritz-Carlton and the naming rights in 1983. Johnson, who got rich as a Waffle House and Holiday Inn franchisee, expanded the Ritz name around the world. By the early 1990s, there were 25 Ritz-Carltons. 

Johnson owned some properties and managed the rest. Schulze was president of the management company. 

The company did have troubles, including lawsuits from hotel owners. A suit filed by four owners in 1995 called the company "the most arrogant and financially irresponsible hotel company in the world." 

However, Ritz-Carlton also achieved a reputation for unparalleled service. In 1992, it became the first hotel chain to win the prestigious Malcolm Baldrige National Quality Award for service. 

Johnson sold the company to Marriott. Ritz has continued to expand and is moving its headquarters from Atlanta to the Washington area, where Marriott is based. Critics say that Ritz has lost some of its cachet since Marriott took over. 

Several old colleagues, including Bob Warman, previously vice president of operations at the Ritz, are working with Schulze on the concept. 

For now, the new company is called West Paces Hotel Group, after the headquarters address. Schulze is testing a few names for the hotels, he said. 

In an interview, Schulze was vague about his vision. He said the hotels likely will be smaller than a typical luxury hotel. However, they will not be boutiques. He said he will use better efficiencies to increase profits without cutting service. 

"The fast way is to walk into the hotel and eliminate the flowers," he said. "Any idiot can do that." 

The hotels likely will be built from the ground up, because customers want a new design, he said. 

"There is the potential to write a new book on our industry," he said. "We think we did it right once. We think we can do it dramatically better."   

Marriott to give $6 mln refund to hotel owners-WSJ

(Reuters) - Marriott International Inc.  will distribute an additional $6 million in purchasing rebates to the owners of hotels it manages, the Wall Street Journal reported in its online edition on Monday.

The unexpected payment comes after the hotelier finally closed the books for years 2000 and 2001 on its former purchasing unit, Marketplace by Marriott, the newspaper said.

The rebates are part of a dispute between Marriott and some of its hotel-owner clients, who say the firm has been unfairly profiting from purchasing services at the hotel owners' expense, the Journal said.

Marriott denies those allegations and says it passes along to the owners any rebates that it receives from suppliers.

The Washington, D.C. hotelier disclosed two weeks ago that it returned $8 million in certain purchasing rebates to owners last year, as well as a further $20 million in rebates for telecommunication services and $20 million in joint-marketing allowances for marketing programs with companies such as American Express Co (nyse: AXP - news - people). and Visa International, the Journal said.  

Owner Claims Four Seasons Staff Freeloaded  $180,000 in Services at Caracas Four Seasons;  Fierce Legal Battle Continues, $120 million  Hotel Remains Closed

In July, 18 months after opening, the Four Seasons hotel in Caracas was shut down. 

Before the mudslinging, before the shouting, the Four Seasons hotel in Caracas was the toast of the town. 

It rose 21 stories high out of the upscale Altamira neighborhood, a marriage of luxury and modernity with an unmatched pedigree: Four Seasons' first South American hotel. Travel writers gushed, architecture mavens crowed, the developers rubbed their hands with glee. Then the trouble began. 

Today, the hotel's owner, Consorcio Barr, and manager, Four Seasons Hotels and Resorts, are waging a fierce legal battle that spans Caracas to Miami. 

Consorcio Barr, which is based in Caracas, has accused Four Seasons of financial mismanagement and freeloading, allegations that have been dragged through the media and five Venezuelan courts. In U.S. District Court in Miami, the hotel giant accused Consorcio Barr of hacking into the Four Seasons computer system. In July, 18 months after opening, the hotel was shut down. 

Says Carlos Barrera, CEO of Consorcio Barr: "This is a powerful corporation with a team of lawyers abusing the justice system and using it to intimidate and harass." 

Says Katie Taylor, Four Seasons' president of worldwide business operations: "Quite frankly, in the past four decades we have never had an experience such as the one we are dealing with in Caracas." 

Says Chase Burritt, a hospitality analyst with Ernst & Young: "In a down hotel economy, the whole owner-manager issue is a struggle. A mighty, mighty struggle." 

Carlos Barrera and his brother, Lautaro, had long dreamed of building a luxury hotel in the heart of Caracas, and Four Seasons, the Toronto-based hotel management chain, was eager to open its first South American property. Developer and hotelier clinched the deal in 1997. 

Four years later, in January 2001, the $120 million hotel, designed in part by the Miami firm Arquitectonica, opened its doors. 

Even as travel writers were penning their accolades -- "room highlights are heavenly" Condé Nast Traveler enthused -- tensions were afoot. 

Four Seasons felt rushed into opening; the hotel, they said, was incomplete. 

They agreed to a gradual, 'soft' opening after Consorcio Barr gave assurances that they would cover start-up and operation costs, promises that Four Seasons said were not kept. 

"In retrospect," said Taylor, "It is clear that Consorcio Barr's inability to meet these commitments stemmed from the simple fact that they did not have the financial resources necessary to do so." 

The Barreras' background is in general contracting. Their company, GYCSA, was involved in the construction of the Eurobuilding Hotel in Caracas and the city's subway system. Four Seasons in Caracas is their first hotel. They are not connected with the Four Seasons condo/hotel in Miami, which is scheduled to open next year. 

Barrera, for his part, said the Four Seasons ignored repeated requests, sent out between January and April 2001, to submit financial reports to his company. When the Barreras did receive reports, they were aghast. 

Between January and May 2001, Carlos Barrera said the staff freeloaded $180,000 in services; one staffer racked up $5,000 in expenses in one month, he said, and a pastry chef expensed $16,000 over four months, much of it at the hotel bar. 

"The cost of the food, the beverages and the cleaning chemicals were not acceptable by industry standards," Barrera said. "In some cases, the cost of an item of food was higher than the selling price." Four Seasons said their spending was in line with any luxury hotel's start-up costs, and that their accounting was transparent. But Consorcio Barr, they said, was snooping. 

On Nov. 6, 2001, Four Seasons filed a suit in U.S. District Court in Miami accusing Consorcio Barr of hacking into its servers and accessing proprietary information. 

Four Seasons was granted an injunction forbidding Consorcio Barr from attempting to access Four Seasons network. Consorcio Barr, while decrying the charges as false, said they were entitled to the information anyway. 

Later, their Miami lawyer, Eddie Palmer of Steel, Hector & Davis, unearthed evidence that the Four Season's supposed computer expert witness had fabricated his credentials. 

Back in Venezuela, the crisis grew. 

On Dec. 1, 2001, Four Seasons seized financial management of the hotel. Consorcio Barr had been diverting money away from the hotel to pay other expenses, they said, and food suppliers were not getting their money. 

"Our management agreement stipulates that if the owner of the hotel cannot provide the proper working capital, Four Seasons has the right to assume control of the hotel's revenue," Taylor said. 

The seizure was illegal, the Barreras said, and moreover Four Seasons failed to meet its promise of yielding a net profit of $4 million over the first year. 

They took Four Seasons to five courts in Venezuela, and obtained rulings saying Four Seasons had to relinquish financial control of the hotel. 

Four Seasons appealed, and in June of this year, stopped taking reservations. The litigation had disrupted their cash flow, Taylor said, making it impossible to buy the staples necessary for running the hotel. 

Weeks later, the hotel sat vacant. Some 300 employees, locked out and unpaid, staged protests widely covered in the Venezuelan media. 

According to hospitality industry watchers, money battles between hotel managers and owners are not uncommon, especially in depressed times. Squeezed by their lenders and facing a revenue drought, owners often accuse their managers of cost overruns. One of the majors, Marriott International, is fending of at least four lawsuits from owners charging it with mismanagement and racketeering. 

"Most of the times the operator is not taking advantage, they are only doing what is included in the contract," said Ernst & Young's Burritt. "The operator really doesn't have an agenda. They make money when the revenue is in." 

But Consorcio Barr's position is that Four Seasons is trying to "financially asphyxiate" them. The owners are also indebted $41 million on the $120 million property, which includes shops and condos, and their creditors are demanding payment on the now-empty hotel. 

'Certainly in a better economic environment, perhaps (the Four Seasons') poor administration would have been less visible," the company said in an e-mail to The Herald, '(But) the hotel problems are mainly due to the operators' poor administration." 

Barrera said he is committed to reopening the hotel with a new management team. Four Seasons, however, is digging in its heels. 

"Four Seasons has no desire to leave Caracas . . . we have expended millions of dollars to help ensure the long-term success," Taylor said. "We want to stay." In Venezuela, several decisions are pending, and in Miami both sides are in arbitration. Neither side plans to take the gloves off. 

"Everybody's had this trouble," Burritt said. "The only difference here is that it's a lot more public." 

Many Hotels Are Turning to Fancy Spa Services to Stand Out

New York Times  -  It is called the "morning jump start" and is designed for jet-lagged guests who have to clear their minds for negotiating deals. Here is what you get at the Hotel Inter-Continental in Hong Kong: a dry-skin brushing to stimulate circulation, the application of a spearmint-scented exfoliating body polish to remove the dead skin cells, an aromatherapy body massage, a luxury aromatherapy facial and, finally, a "stimulating" foot massage.

Pretty much every high-end hotel these days has rooms with multiline phones and high-speed Internet access and a business center with fax machines and conference tables. How, then, to lure business travelers in a soft market?

Spas are the thing.

Not so long ago, hotels that catered to corporate travelers offered up fairly basic fare in the way of body and health care: a gym with a treadmill, stationary bicycle and weights, and a beauty parlor (or hair dryer attached to the bathroom mirror in less upscale lodgings).

That is not good enough anymore. These days, a spa — a unisex "wellness" center that offer as many as a dozen varieties of facial treatments, body scrubs and massages — has become a way for hotels to stand out. As often as not, it is connected to a fitness emporium with exercise equipment ranging from Stairmaster machines to lateral pulldowns. "Hotels are looking to ways to differentiate themselves from one another in this competitive market," said Stefanie Michaels, president of Adventuregirl.com, a travel Web site. "Business travelers are weary and looking for ways to be at the top of their game."

Of course, it can be hard to stand out if everybody is doing the same thing.

The growth in the number of "noteworthy hotel spas" has been exponential, from 14 in 1995 to 35 in 2001 to ubiquitous today, according to Tim Zagat, publisher of the Zagat Survey guidebooks. Since last year, "almost every major hotel has built them," he said. "There are a very large number of people who can't go more than two days without going to a health club."

What is striking about the phenomenon is the packaging. Before, hotels generally had barbershops, beauty salons and fitness centers, and they hired outside massage therapists. "But then, they packaged it all together," Mr. Zagat said. "It's about the whole experience."

Acknowledging the trend, Zagat last year added a new category, "spa facilities," to its Zagat Hotel Survey guides.

There has been no letup in the movement, either. "In the last couple of weeks, we've had four proposals out to hotels looking for spa and fitness management, more than we've had for a while," said Liz Neporent, creative director of Plus One Holdings, which creates corporate and hotel fitness centers and spas nationwide. Clients have included the Waldorf-Astoria, the Plaza Hotel and the Trump International Hotel and Towers in New York. Increasingly, she said, business travelers "are making choices based on whether they can get a facial and a massage at the hotel."

Hyatt says it has taken its spa services so seriously that it has introduced the Spa Hyatt division to answer the growing demand for spa facilities by both business and leisure travelers. Next year at the Grand Hyatt Hong Kong, an entire floor of standard rooms will be converted into a spa floor, where guests can actually spend the night in the spa.

The Hotel Inter-Continental in Hong Kong also features jet-lag relief and stress-buster treatments that it says are geared toward international business travelers, about half of whom are based in the United States. One of the most popular is the morning jump start. Then there is the "good night, sleep tight" Chinese herbal wrap in which, after an aromatherapy massage and exfoliation treatment, the body is enfolded in a cloth drenched with herbs that are absorbed into the skin. While all that is going on, the weary traveler gets a scalp massage.

Many luxury hotels are upgrading existing spas. The Four Seasons Chicago, for example, added five treatment rooms and a relaxation lounge to its fitness facilities. The hotel will also now dispatch massage therapists at $120 a therapist an hour to its conference rooms to do hand massages, chair massages and reflexology treatments for executives as they negotiate deals.

Jayne Wagner, an advertising sales representative for Reader's Digest Publications in Chicago, says her department schedules two or three "spa events" annually at the Four Seasons for anywhere from 5 to 15 mostly female clients, as a counterpoint to male-dominated golf outings. As the women wait for manicures, pedicures, massages and facials in a "gathering room," she said, Reader's Digest executives talk business with them.

The Four Seasons New York is also redoing its 10-year-old spa. "A lot of the plans we're doing focus on understanding that you've got guests for a shorter period of time, and they require a speedier rejuvenation and bounce-back," said Leslie Lefkowitz, a hotel spokeswoman.

That's the way it goes at the 35,000-square-foot (that's almost an acre) Peninsula Spa at the Peninsula Hotel in Manhattan, whose guests are mostly business people. Maryanne Nielsen, the spa's general manager, says she books a lot of groups from financial services companies like J. P. Morgan and Credit Suisse First Boston that bring their clients for spa treatments. "It allows their brain to recharge and relax so they become more creative," she said.

Some hotels are extending the spa concept right into the rooms. At the Cape Grace, in Cape Town, South Africa, guests can summon a masseuse for in-room full-body aromatherapy massage, reflexology treatments, sports massage or a manicure-pedicure.

At the new Hilton São Paulo Morumbi in the financial district of São Paulo, Brazil, you can reserve one of eight "relaxation rooms" for $545 in peak season, almost triple the $189 price for most rooms, that are are divided into three zones: work, relaxation and bath.

To make sure they have it just right, many resorts are hiring seasoned directors from destination spas. Marriott's Harbor Beach Resort and Spa in Fort Lauderdale, Fla., for example, added an $8 million, 24,000-square-foot spa last year and hired the former spa director at Canyon Ranch in Arizona to run it.

Marco Beach Ocean Resort, in Marco Island, Fla., a favorite destination of many event planners, often sees groups of executives who are there to mix business with pleasure. The hotel recently created an 8,000-square-foot spa.

"We always choose a resort that has a spa and golf," said Michelle Massey, travel coordinator for AIG Annuity Financial Institutions Group in Houston.

Thailand forms Convention and Exhibition Bureau

TravelWeekyAsia.com  -  After several delays, the Thailand convention bureau is now formally established.

Known as Convention and Exhibition Bureau and launched late last month, it will act as a one-stop service center and coordinate with Thai public and private agencies to market the destination as a world-class venue.

The bureau is now working on selecting a 11-member Board of Directors whose first task would be to appoint an executive director to the bureau.

The person tasked with putting together the body is Tourism Authority of Thailand’s International Convention Division director Udon Metatamrongsiri.

“We need to have the first temporary board board meeting to select the permanent board. Right now there is only one staff and I am the one,” said Udon, who declined to say if he would take up the executive director post.

The CEB has 90 days from September 27 to do this. It’s expected to have about 30 staff and Udon said he has budget of 130 million bath (US$3 million) right now.  

UK: Incoming visitor figures up for first time

Caterer.com  -  The number of overseas visitors to the UK has entered positive territory for the first time this year, according to the latest survey.

Figures from the British Incoming Tour Operators Association (BITOA) show visitor arrivals for September up by 3.71% on the same period last year.

But figures are still some way off September 2000 numbers, the last “normal” year for inbound tourism to Britain. Comparing September 2002 with 2000, visitor arrivals are down by 20%.

September 2001 also showed a massive 23.62% decline on the same period the previous year.

BITOA said the figures were “going in the right direction” and that “2003 could be more healthy than was first feared.”

In the first nine months of the year the number of arrivals was down by 2.94% on the same period in 2001.

US Securities Markets- An Investment Opportunity In Hotels For Institutional Investors?

Written By:  Michael T. Sullivan &  Marshall A. Bendelac HVS Capital Corp

With the uncertainty in US Securities markets, many institutional investors have looked more favorably on real estate as an investment.  Representing hard assets, which theoretically have solid intrinsic values, there has been a recent flight to this investment class due to its long-term tangibility.  Such investments are often more favorable than some alternative speculative investments, such as companies bearing few, if any, hard assets (i.e., “dot-coms”). 

Real estate’s limiting factor, however, is typically the percentage of the total investment amount that most large institutional investors will allocate to this asset class.  Most  investors will try to limit their real estate (and real estate mortgage) portfolios to roughly 10% to 15% of their total assets, with the balance of their investment portfolios typically deployed in the securities markets.  Of this real estate allocation, hotels or hospitality-oriented investments usually do not exceed 20%.  Additionally, as the values of their securities portfolios drop in the present equity markets, the percentage of capital that could otherwise be allocated to real estate is diminished.

Enticing investors to put their capital in the real estate (and subsequently, hospitality real estate) market, however, is the fact that the recent and prolonged downturn in the US securities markets bears only an indirect correlation to real estate asset valuation.  Real estate values, in general, are derived and fluctuate independently of securities prices.  However, an interesting exception to this exists, and can be found within domestic hotel-oriented Real Estate Investment Trusts (REITs).  These are publicly-held companies that are essentially comprised of individual and/or portfolio hotel assets, which trade on the US securities markets.  Examples include Host Marriott, Fel-Cor, and Equity Inns. 

Presently there are 15 hotel REITs which are traded on US stock exchanges.  Furthermore, several of them have been recently trading at significant discounts to their Net Asset Values (NAVs), due to the depressed state of the equity markets.  Recent NAV discounts for several of these companies have ranged from approximately 10%-60%.  Essentially, this demonstrates that the companies’ share prices are lower than the values (on a per share basis) of the hotel investments which they hold.  In other words, hotels owned by REITs are worth more outside of the REIT than they are as a holding of the REIT.  As such, the sub-par performance in the public equity markets presents savvy investors, who can analyze and determine which of the public hotel REITs offers the quickest upside, with an opportunity to capitalize on recovery in share prices that merely reflects the true values of the underlying assets held in REITs. 

Michael T. Sullivan
Marshall A. Bendelac
HVS Capital Corp.
1777 South Harrison St.
Denver, CO  80210
303-758-3100
303-691-3799 FAX

Rooms channel marketing - what are your options?

The current reservation channel options are too complex for hotels to manage by themselves. So many hotel operators have voiced that quote in the past year it has become an industry cliché.

Reservation channels, their options and pricing plans are multiplying and changing so fast that a new species of reservation marketing company has evolved to handle the shifting environment. Often called 'representation companies' or 'reservation service providers,' these new firms offer more than a means of access to the thousands of channels; they are providing marketing services to educate hoteliers about the new selling environment and working hard to help them sell more rooms.

Many hoteliers are uncertain about exactly what a 'net-rate' sales agreement is, or the 'merchant model' of inventory control, or the difference between 'production' and 'consumption' fees. To make the reservation channel industry and its fees, service options and technology more understandable we have interviewed leaders from eight representation companies, both large and small, for a fast class in how to sell rooms in the Digital Age.

Inventory control, the 'merchant model' and fees

Today technology has given us so many ways to sell a room that it is nearly impossible for a hotel operator to understand, let alone intelligently manage, the available channels for room sales. There is the central reservation call center, now called a 'voice center;' the property itself, the 'big four' global distribution companies (GDS), Amadeus, Sabre, Worldspan, and Galileo; additionally there are thousands of private label Web sites like Expedia and Orbitz, as well as hundreds of tour operators, corporate booking portals, and regional convention coordinators. If you are the average hotel, many of these channels have an allotment of your rooms, and it is likely most are showing out of date rates and incorrect availability.

Communicating with all of these channels to keep them current on inventory and rate requires, in some cases, daily manual intervention with multiple faxes and phone calls. More importantly, verifying the accuracy of each channel's current allotment and rate by the property is critical but rarely automated. Most times hotel operators do not know where or how their rooms are being sold or at what rate.

In the United States Internet-booked rooms is the fastest-growing segment of hotel reservations. Voice centers (formerly known as 'central reservation offices') have seen their domestic production shrinking steadily in the past three years, but internationally and especially in Asia, voice centers continue to be strong reservation providers. "Our voice center is not our biggest reservation producer, but our voice services have grown in the past two years because we have picked up Asian chain business," explained Rita Emmer, vice president of VIP International (www.vipintcorp.com). "Regal Hotels, one of our chain clients, has us manage phone reservations for their Japanese hotels during Japanese business hours. Some chains, like Candlewood, have turned over 100 percent of their new business voice reservations to VIP; others use our voice center for early or late reservation calls. We provide a single point of contact for reservation marketing to hundreds of channels for our clients. We work with all the GDSes, and we pass reservations to Travelweb (formerly known as HDS)." VIP International's client hotels manage their inventories and rates from a customized Web screen to control the rooms they have on the shelf in one or all of their channels. This is the 'merchant model' of inventory control. "We know the marketplace is complex so VIP has client representatives who actively work with our hotels to help them understand new offerings and changes in existing channels. " VIP International offers client hotels two payment options; a fixed dollar amount on reservations sold, plus a monthly service charge; or a small percent fee on each reservation and a lower monthly service charge. The monthly charge goes toward paying the GDS and other fees related to reservation handling between companies, and related 3rd party commissions.

Tiger's golf clubs

Mark Ozawa, vice president of Sceptre (www.esceptre.com), a reservation services company, said, "There is a huge amount of reservation technology available to hotels. The problem is, you can have the best technology tools, but if you don't know how to use them you will not benefit. If you had Tiger Woods' golf clubs could you play as well as he does? Service is the key to using the tools right." Sceptre is one of a group of reservation companies that differentiates itself by offering hands-on service in addition to channel connectivity. Sceptre uses 'Hotel Factory' technology for central reservations and travel site connectivity. "More and more reservations companies are using Internet-based ASP (application service provider) utilities to allow client hotels to change availability on open room blocks and keep rates current. Sceptre, like many reservations providers, uses its Web site to let hotels open and close blocks and update rates, and then puts their changes out real-time to all the channels, including the GDSes," continued Ozawa. Fees for services vary by reservation company, and often on a case-by-case basis depending on the number of reservations a property is expected to receive. Sceptre provides marketing and connectivity services for a monthly service charge and a per-transaction fee based on consumption, not production. The difference is that client properties pay Sceptre for reservations booked when the guest checks out. With a production-fee structure properties pay reservation companies when a reservation is booked. One advantage of the consumption method is that cancellations do not require a fee refund or credit, as often happens with the production method.

Net rate deals: how do they work?

At a recent HFTP chapter meeting the guest speaker, a well-known Atlanta travel industry figure told the gathering, "The hospitality industry hates having to do net rate deals." The comment deserves clarification. In recent months 'net rate,' also called 'direct rate,' reservation channels have seen a steep increase in sales due largely to the travel industry's continued downturn. When a hotel sells a block of distressed (or not so distressed) room nights to a channel marketer like Hotels.com or Expedia for resale by them, the price paid by the marketer to the hotel is 'net,' that is, there are no commissions, GDS, or other marketing fees applied; the fees, and further marketing costs, are paid by the channel reseller. The hotel makes a smaller amount of gross revenue on the room, but has no fees to pay, and is usually grateful to sell off the block and get the business in the lobby. Eleven year-old Hotels.com with 7,000 participating hotels is the most successful net-rate channel marketer. It is publicly traded [NASDAQ: ROOM] with a market cap of over $900M. Once Hotels.com has a block of rooms from a client hotel it is motivated to sell those rooms at the highest possible rate because Hotels.com makes its margin on the spread between the rate at which they sell, and the net rate it paid for the rooms. Hotels.com keeps the difference and there are no commissions or other fees charged to client properties.

Bob Diener, Hotels.com's president, said, "Most hotels could not afford the several hundred million dollars we invest annually in direct marketing to sell their hotel rooms. We build entire Web sites for our hotel partners, including photos and complete property descriptions to promote their rooms to over 29,000 of our affiliates. We also send out over three million emails every week to our clients, and operate four call centers in the US and Europe." The result is over eight million room-nights sold in 250 cities this year. Hotels.com sells rooms steadily year round and assists hotels in moving inventory, especially during slow periods "Hotels.com sells primarily to the leisure market, and guests prepay Hotels.com for their room. When Hotels.com sells a room we immediately provide the hotel with notification and the reservation information. For many properties Hotels.com is the difference between making a profit and showing a loss," said Diener. Hotels.com is part of USA Interactive, which also owns Expedia and Ticketron.

Automation explanation

Many reservation companies have taken advantage of new remote processing technology to convert their services to client-controlled ASP functionality. This is still the 'merchant model' of inventory and rate control that allows hotels to access their own available room blocks via the Internet to close or open individual channels, or even to update their hotel's description when amenities are added or removed. Unirez Inc. (www.unirez.com) developed the Hotel Factory central reservation technology that allows its 2,700 hotels to offer rooms to the GDSes and to many other channels through their ASP system. Hotels can use Unirez Web services to develop entirely new packages or room types, and have their modifications immediately uploaded to all the appropriate channels. Clients can even offer different rates to different channels, so Sabre may be showing different rates than Apollo. Unirez also maintains its own large voice center that handles over three million calls a year and powers two other centers with its Hotel Factory technology. "Our goal is to have a paperless operation," said Rodney Wise, Unirez COO. "Our hotels control their own inventory and rates. Property managers make the changes they want to implement their company's sales strategies; we provide the distribution technology for their action." Unirez assesses fees on production so, depending on the property, charges can be a flat fee per room booked, or a percentage of revenue.

Charges for voice center services are on both a per-call basis, and for reservations booked. The per-call voice center fee is customary because many of the calls handled are for reservation changes, cancellations, or are informational without the possibility of converting the call to a reservation. When voice centers publish their 'conversion rate' they are stating the percentage of incoming calls their agents convert to booked reservations.

Synxis is another company with its own technology to allow hoteliers to control their channel placement and inventory. "There are so many points of distribution the average hotelier needs a distribution manager to make most systems work," said Carol Levitt, Synxis' director of marketing and communications. "On their own, hotel managers often fall back on what they know, selling rooms through call centers and only dolling out small blocks to familiar channels. This leaves the tremendous potential of Internet sales underutilized." Synxis gives their new client hotels a 'Welcome Kit' that explains channels and options to shorten the learning curve for first-time Internet channel users. They also train clients on how to use the distribution system and maintain their own accounts on line. Hotels pay Synxis when reservations are booked through the Synxis system. If a reservation is cancelled, hotels receive a credit for the fees. Synxis pays the GDS-related charges. Synxis is in the enviable position of controlling about 80 percent of the rooms inventory of Las Vegas, a market whose guests like to use the Internet.

Nothing happens until someone sells something

While many representation companies stress the service they provide, others underline the fact that rooms sold and revenue generated are the final measures of a successful reservations and representation company. Utell is a subsidiary of Pegasus Solutions, but operates as a customer of Pegasus using Pegasus products. Pegasus is in the business of providing travel Web sites and GDSes with hotel inventory to sell. It is important to note before we go further that only Pegasus and Wizcom can connect hotels to the GDSes (Amadeus, Sabre, Worldspan, and Galileo), all other firms are 'representation companies' that connect through Pegasus or Wizcom.

Utell, the largest international hotel reservations and representation company, has more than 50 sales people that promote its more than 5,000 member hotels to travel agents and corporate travel managers. Utell maintains its own 'Great Rates' room-pricing program to make room rates simpler for its hotel members. Hotels give Utell the rates they want to promote, and Utell works across all rate categories with nine voice reservation centers, GDS connectivity, toll-free numbers, and Utell.com connects to over a thousand sites that sell travel arrangements. Utell also provides clients with an Internet utility called NetRez that allows hotels to update inventories and rates on-line 24 hours a day. Utell is so large that several major chains use its voice centers, which also provide services to 41 countries. Travel agents in South Korea, for example, dial Utell voice agents directly to book hotel reservations throughout the US or in 160 other countries. Service and representation levels determine Utell's fee structure, but a monthly fee and percentage of room transactions are customary, motivating Utell agents motivated to up-sell. Up selling is good for properties, even if the margin goes into the selling company's pockets. The higher the rate charged the better; not only for the selling company, but also for the hotel's stature and future marketing efforts.

InnLink, with over 700 client hotels and its own 100-agent voice center, uses Wizcom's seamless GDS connection for outbound distribution of its rooms inventory. "A seamless GDS connection means that a property's rates and availability are always current and reliable," said Mike Otten, Innlink's sales and marketing director. "Travel agents target hotels and reservation companies that employ seamless connectivity because they are confident in the hotel availability data and in the rate presentation." All travel agents and Internet subscribers who access Pegasus rooms content may see InnLink's hotels. InnLink offers hotels custom reporting and operates its own call center with sales agents trained to process group reservations, an uncommon advantage in the reservation services business. InnLink's sales agents work with properties to process group master information including dates and rates, and processed over eight million dollars in group reservations year to date.

Lexington Services, the largest domestic reservation provider, uses the Spirit central reservation system, and Pegasus GDS connectivity. The company recently added its LexLink Internet management tool for its client hotels allowing them to control their inventory 24/7 for all channels. Lexington specializes in prominent mid-scale independent hotels, resorts and chains. The company prides itself on providing a 'one-stop-shop' for Expedia, Travelweb, and all independent sites at once, and operates a large voice and support center in Dallas where its headquarters are located.

On the horizon

The economic downturn is forcing many hotels to enter into 'net-rate' programs with companies like Hotels.com, Expedia, Travelocity and others, where properties sell large room blocks at low rates to maintain cash flow. This is a good thing for many hotels today, but times will change. A stronger market will motivate hotels to refrain from using discounted channels and opt for sales strategies that yield a higher rate, causing net-rate companies to lose market share.

A second attack on some net-rate and other reservation providers is being made by Travelweb LLC (formerly Hotel Distribution System, LLC) formed by Hilton Hotels Corporation, Hyatt, Marriott International, Six Continents Hotels Corporation, Starwood Hotels and Resorts, and Pegasus Solutions. The six companies created Travelweb to preserve chain rate integrity and brand identity in the face of uncontrolled, discount-driven price erosion. "Travelweb is in business to help hotels maintain their brand identity in the face of on-line distributors that would turn hotel rooms into a lowest-price commodity," explained Joe Humphry, CEO of Travelweb. "We do that through our Pegasus reservation interface which allows Travelweb to access our client hotels' reservation systems in real time so all their inventory is accurate when we sell rooms. Additionally, we enable hotels to yield manage the rooms we sell, and provide guests with hotel-generated confirmation numbers to ensure their booking information is accurate and the brand is represented. Many of the other reservation service providers only offer their own confirmation numbers, which often results in confusion at check-in. Another advantage Travelweb offers is the ability to pay our clients every 30 days on average for rooms sold."

Learn to use the tools

For hotel operators who want to broaden their rooms distribution intelligently there are a number of channel service providers ready to help. Fees, service options, and technology vary by company, and many offer on-line tools that let hotels control their own rates and room blocks. The hands-on merchant model of channel room control goes a long way toward lifting the fear many operators have about losing control of how and where their rooms are being sold. To save clients time, several channel marketing companies offer detailed reporting that eliminates the need for on-property paper trails.

The reservation industry is heavily fragmented and in many cases hotels are forced to monitor rates, inventories and channel relationships manually. The greater problem is that this fragmentation and extra work does nothing to increase travel or improve business. The same number of people travel to San Francisco each week regardless of how many channels there are. The fact that Priceline, Orbitz, Site 59, and Expedia each offer a new rate program every week does not help the industry. What this marketing and rate proliferation does is add more complexity to the already impossible maze of channel options.

The tangle of reservation channels is not likely to be simplified soon. But on one level -- the easy accessibility of hotel reservations on the Internet -- the system is working. Hotel operators only need to learn how to use distribution options profitably.

Michael Squires is president of Softscribe Inc., a consulting corporation that helps clients sell technology products to the hospitality industry.

Source:  Hotelmarketing.com

Singapore: Tourism task force pushes for casinos

Services panel chief rejects idea; proposal put forward to govt 

The Business Times  -  Will Singapore shed its squeaky-clean image and allow casinos to operate in the country? It may, if a proposal by a government-appointed task force wins approval.

Businessmen say the Tourism Working Group (TWG), which is part of the Economic Review Committee, has done the unthinkable - it has asked that casinos be legitimised in Singapore.

Calls for casinos were first made during the recession of 1985/86 and have surfaced each time the economy runs into trouble. But none has gone beyond the talking stage, as it's widely assumed the government would never allow it. This is the first time a formal proposal has been put to the government. Talk in business circles is that the TWG submitted its proposal some months ago and is awaiting a decision.

Contacted by BT, TWG chairman Wee Ee Chao declined comment. Mr Wee is chairman of the Singapore Tourism Board. He is also head of stockbroker UOB Kay Hian and second son of United Overseas Bank chairman Wee Cho Yaw.

The TWG is part of the sub-committee for service industries which reports to the Economic Review Committee appointed by the government to 'remake' Singapore's economy.

In September, the TWG unveiled a comprehensive report to double annual tourist arrivals to 15 million and tourism receipts to $20 billion within 10 years. Its proposals ranged from sprucing up Orchard Road to joint marketing with other countries in Asia. But there was no mention of casinos. Instead, the TWG is said to have prepared a separate proposal on the pros and cons and submitted it directly to the government. 'Every one is playing it low. It's a very emotional issue,' said a hotel and property owner.

Few issues divide Singaporeans as casinos do. The 'no to casinos' camp - said to include a number of cabinet ministers, particularly those old enough to remember the back-alley casinos in Singapore's early days - is worried about the adverse social effects on the population, especially the young.

One vocal critic is Khaw Boon Wan, Senior Minister of State for Transport and Information, Communications & the Arts, and chairman of the ERC subcommittee on services, to which the TWG belonged.

Mr Khaw was said to have refused to sign the TWG report if it included any mention of casinos. This is why the TWG submitted a separate proposal.

In an email yesterday, Mr Khaw told BT: 'Some industry players are keen (on casinos), but I don't think it's a good idea. I won't support it myself. The social impact of casinos cannot be simply brushed aside. We cannot prevent people from gambling, but to glamorise gambling is a different matter altogether.'

He said countries like Canada and Australia are regretting allowing casinos, and 'if allowing casino is the only way to re-energise our tourism industry, then it's a truly sad day for our tourism industry! I like to believe that tourists come to Singapore for better reasons than that.' The TWG, however, is said to have considered casinos 'purely on business grounds', and the realisation that it's the only way to double tourism receipts in 10 years.

'All other (TWG) proposals are not new. You can throw a lot of money in infrastructure and you can talk about regional cooperation, but you can't make people come here unless they want to come here. And gambling is the only way to do it,' said an industry player.

According to this 'yes to casinos' camp, gambling is already legitimised in many ways in Singapore - 4-digit lottery, the Big Sweep, horse racing and betting on the 2002 World Cup, which raked in $500 million revenues for the government-owned Singapore Pools.

To them, casinos are just another way for Singaporeans to gamble legitimately. Moreoever, Singaporeans are going in droves to gamble on Star Cruise ships, and hundreds of millions of dollars flow out of the country every year this way.

'The government might as well set up casinos and keep the revenue at home,' said a developer.

In recent years, many Asian countries have opened the doors to casinos to bring in tourist dollars. From Malaysia, the pioneer, the list now extends to Vietnam and Myanmar.

On Monday, Thai premier Thaksin Shinawatra met J Terrance Lanni, chairman of MGM Mirage, the company that controls half of Las Vegas' high-end gambling business. Mr Lanni said he is keen to invest in Thailand casino complexes that include restaurants, hotels and entertainment facilities for the family.

If casinos are allowed here, they will almost certainly follow the MGM model and be situated on Sentosa. Many companies will benefit - from hotels to tour operators, and, of course, the party or parties appointed to run the casinos.

In the property market, the listed government-linked CapitaLand is generally tipped to be one, if not the only, operator if casinos are allowed. And the biggest loser would be Star Cruise and its parent, the Genting group, which would lose a lot of Singapore customers.

Hong Kong's September 2002 arrivals show 30% growth

Visitor arrivals in September 2002 totalled 1,370,279, a 30.1% increase over the same month in 2001, the Hong Kong Tourism Board (HKTB) announced today. This is the highest monthly growth rate recorded so far this year.

The encouraging figure needs to be seen, however, in the context of last year's 11 September terrorist attacks in the United States, which sent arrivals plummeting in the second half of that month. The comparison base is therefore relatively low.

Nevertheless, the cumulative January to September figures confirm that the growth trend remains very strong. Total visitor arrivals for the first nine months of 2002 now stand at 11,743,153, a 16.0% increase on the same period in 2001.
HKTB Executive Director Clara Chong said that although the September 2002 figures were very positive and in line with the healthy growth seen throughout this year, the circumstances made it difficult to read too much into them.

"Once again, the terrible events in Bali have reminded us how fragile the recovery can be," she said. "The tourism industry can no longer afford to take anything for granted. While feedback from our worldwide offices and trade partners suggests that so far, this latest incident is not having too much of an impact on bookings for Hong Kong, it seems inevitable that it will further dampen public sentiment to travel, especially in our long-haul markets."

On a more positive note, Ms Chong said that visitors' average length of stay in Hong Kong had increased to 3.52 nights over the first nine months of 2002, compared with 3.05 nights for the same period in 2001. "This is largely due to the increased number of Mainland tour groups this year," she explained. "Up to the end of September, the average length of stay of Mainland visitors was 4.29 nights, a significant increase on the 3.40 nights recorded for the first three quarters of last year. This is welcome news for tourism-related businesses."

Analysis by Markets

Mainland China was once again the fastest growing market in September, accounting for 593,509 visitors, a 70.5% year-on-year-increase. More than 119,000 Mainland arrivals were recorded in the last five days of September alone, as visitors made an early start to the "Golden Week" National Day holiday at the beginning of October.

All other markets also showed positive growth in September. Arrivals from South & Southeast Asia increased by 13.0% to 148,554, with India (18,193, +26.8%) and the Philippines (25,815, +22.9%) performing especially well. North Asia recorded 9.2% growth to 162,476 arivals, led by Japan (130,013, +10.6%). Arrivals from Taiwan increased 10.5% to 196,415.

In the long-haul markets, arrivals from The Americas showed sharp growth of 20.3% to 95,814, although figures for this market, more than any other, will have been affected by the low comparison base in the wake of last September's terrorist attacks. Arrivals from Europe, Africa & the Middle East rose by 9.7% to 99,150, while those from Australia, New Zealand & South Pacific grew 6.2% to 35,786.

Cumulative figures for the first nine months of 2002 show Mainland China leading the way with a 47.6% increase to 4,703,556 arrivals, which already surpasses the 4.48 million recorded in the whole of 2001. Arrivals from South & Southeast Asia are showing a 5.4% increase, followed by Europe, Africa & the Middle East (+3.7%), Australia, New Zealand & South Pacific (+2.0%) and The Americas (+1.6%). Only Taiwan (-1.3%) currently remains in negative overall growth, while arrivals from North Asia are almost identical to those of 2001.

Same-Day Visitors

During September 2002, 63.1% of all visitors stayed for one night or longer, compared with 63.4% in the same month last year. The remaining 36.9% continued to other destinations on the same day. Visitors from The Americas (79.6%) and Australia, New Zealand & South Pacific (79.5%) were the most likely to stay overnight, while at the other end of the scale, only 21.9% of all visitors from Taiwan did so.

For the first nine months of 2002 to date, 64.5% of all visitors have stayed for one night or longer, a similar figure to the 64.6% recorded in the same period in 2001.

Hotel Occupancy

Average hotel room occupancy across all categories was 82% in September, a significant increase on the 74% achieved in September 2001 when bookings were severely affected by the terrorist attacks in the United States. All different categories of hotels and tourist guest houses recorded increased occupancy, especially the top tariff (High Tariff A) hotels, which averaged 80% occupancy compared with only 67% the previous September.

For the first nine months of the year to date, average occupancy stands at 82%, compared with 78% in the same period of 2001.

Online travel site Expedia to enter Asia-Pacific

(Reuters) - US online travel agent Expedia will expand into Asia by the end of this year, with plans to operate in three Asia-Pacific markets by March 2003, its regional chief said.

The travel giant, whose stock has risen 19 per cent over the last two days on strong third-quarter earnings, plans to have operations in Hong Kong, Australia and Singapore by the end of next year's first quarter, James Vaile, vice president of Expedia Asia-Pacific, told Reuters by phone from Sydney.

He said Expedia would launch service in its first Asia-Pacific market by the end of this year, but would not specify which of the three areas will lead the push adding Japan would likely be Expedia's fourth market in the region.

He declined to give planned investment figures for Asia.

"Twenty-nine per cent of the global internet population is located here in Asia," Vaile said. "The online travel market for the Asia-Pacific region is estimated at approximately US$8.3 billion by 2004."

With an estimated US$500 million in non-US bookings for the current year, overseas business still accounts for a relatively small portion of Expedia's overall bookings, which totaled US$1.47 billion in the third quarter alone.

Internationally, Expedia, a spinoff from Microsoft MSFT.O and now majority owned by USA Interactive USAI.O , has expanded its overseas markets to include Britain, Germany, France, Italy and the Netherlands over the last four years.

Vaile said that like Europe, he expected the Asia-Pacific region to require an initial period of about four years before it moved beyond what he called an "investment" phase.

Much of that phase in Asia will be used to determine what appeals to local consumers, together with a push to sign hotels and airlines into supply contracts, Vaile said. Expedia now sells rooms at about 60,000 hotels around the world.

Vaile said that one of Expedia's main rivals in the region would be Zuji, a service operated by a group of major regional airlines including Cathay Pacific 0293.HK and Qantas QAN.AX .

Priceline.com PCLN.O , the U.S.-based name-your-own price online travel firm, launched its service in Hong Kong this year and plans to bring it to other Asian markets.

As part of its go-slow approach to the region, Expedia will sell its services in Asia initially through third-party sites and not directly through its own site, Vaile said.

"That's what we're doing now in this market: investing to get it right and rolling out our relevant and fitting proposition in each market," he said.

One of the biggest challenges facing Expedia in a broader regional Asia-Pacific expansion is language, since all its products to date have been designed for languages that use alphabets. Accordingly, the initial services in Hong Kong, Australia and Singapore will all be in English, Vaile said.

"The challenge that we're faced with in rolling out in a non-Latin based language is it requires serious re-coding or redevelopment of our entire source code," he said.