Europe's Hotel Industry Report : eHotelier Newsletter

Financial Times considers how the 11 September terrorist attacks, Bali nightclub bombing and current threat of war in the Middle East have ‘reshaped the international tourism landscape’.

The paper reports the terrorist attacks had an immediate effect on visitors to the US, with figures from the Travel Industry Association of America (TIAA) showing the number of inbound tourists fell 11% in 2001 to 45.3m. The Association predicts a further year-on-year decline for 2002 and is wary of forecasting a full recovery.

Last month’s bomb in a Bali nightclub, meanwhile, resulted in a 75% plunge in visitors to the island. The Indonesian government expects the decline to spread across the country, leaving around 2.7m people jobless.

Advice from western governments to their citizens to avoid travel to southeast Asia in the wake of the Bali attack has hit tourist numbers further.

Governments have reacted differently to the problems faced by their tourism industries. In the UK, which last year was hit by the foot and mouth crisis and the after-effects of 11 September, the government has contributed £20m to a £40m marketing campaign. However, US tourism businesses have received no state aid to promote the country abroad since 1995.

‘We’re asking the federal government for $100m and we’ll match it,’ William Norman, president of the TIAA, told the FT. ‘We are the only industrialised country in the world which doesn’t have a federally funded public private partnership for tourism. It’s long overdue.’

Other destinations have, conversely, benefited from the current political climate, reports the FT. While the number of tourists from the Middle East to the US has dropped since 11 September, with ‘anecdotal evidence’ suggesting they are wary of public hostility, Asian countries such as Malaysia are increasing their marketing spend in the region.
‘Immediately after September 11 we stepped up our promotional drive in the region and we soon saw the benefits,’ said Tourism Malaysia’s Cindy Lam. In 2000, Malaysia received just 54,000 visitors from the Middle East. By 2001 this had doubled to 115,00 and it is expected to increase again this year.

But the FT comments it is ‘doubtful’ the trend will continue given the threat of war in Iraq. The paper concludes that ‘while the circumstances of last year have shown tourism is adept at handling challenging circumstances, a war is the last thing it needs’

Hilton Announces Strategic Financial Transactions to Reduce Debt, Extend Maturities

(BUSINESS WIRE) - Hilton Hotels Corporation announced three separate transactions consistent with the company's financial strategies of reducing debt and extending maturities:

Hilton sold $375 million of 10-year Senior Unsecured Notes with settlement and closing scheduled for November 22, 2002. The notes carry a coupon of 7.625 percent and have a maturity date of December 1, 2012. Proceeds from the sale will be used to repay indebtedness under the company's revolving credit facility. Book runners on the transaction were Morgan Stanley and UBS Warburg, with Credit Suisse First Boston serving as co-lead.

The company sold $67 million in timeshare notes receivable to a wholly owned subsidiary of GE Capital. Proceeds from the sale will be used to reduce corporate debt. This represents the second tranche to be sold to GE; the first tranche of approximately $52 million was sold June 27, 2002. Approximately $90 million of timeshare receivables currently remain in Hilton's portfolio.

Hilton also announced that it has received commitments necessary to renew its $150 million 364-day revolving credit facility. The facility is scheduled to close November 26, 2002, with no change in fees or borrowing rates. Bank of America Securities acted as Lead Agent and Arranger on the renewal.

Mariel A. Joliet, Hilton's senior vice president and treasurer, said: "The bond sale represented a successful and timely capital market execution, and we were very pleased with the reception in the marketplace. We are happy to have completed another sale of timeshare receivables to GE Capital on excellent terms. The renewal of our 364-day facility demonstrates the support that Hilton enjoys in the banking community. Taken together, these three transactions are important steps in advancing our financial goals of reducing debt and extending maturities."

Tulip plans UK expansion

Hotel chain Golden Tulip UK is looking for a site near Manchester Airport as part of a £33m expansion drive which includes a major development at its Old Trafford property.

The group plans to build 100-150 Tulip Inns, its budget brand.

Golden Tulip UK is on the acquisition trail after it secured funding from Graphite Capital, Barclays Bank and the company's own management team.

Tim Wheeldon, the chain's property director, said it is seeking sites of between one and three acres, with planning permission.

He added: "Our aim is to build up to 17 hotels nationwide during the next three years. We have identified Manchester Airport as a key area.

Accessibility

"We are keen to acquire freehold or leasehold sites, close to main arterial routes and business centres. Good accessibility to local and regional leisure attractions is also an important factor."

Each Tulip Inn will generate about 45 jobs, in addition to those created during the construction and fitting-out phases.

Golden Tulip UK already has hotels in Manchester and Birmingham. The Golden Tulip group is one of the world's 10 biggest chains, with 450 hotels across 50 countries.

The 108-bedroom Old Trafford Golden Tulip is undergoing a £4m extension following a 15 per cent rise in business travellers over the past year.

Conference bookings have doubled. The eight-storey extension, which is due to open next month, will boast 56 more bedrooms, five conference suites, a business centre and a boardroom.

General manger Roger Goldsworthy said: "We'll continue to offer business guests those additional touches that make spending a night away from home more comfortable - duvets, throws and cushions on beds, bathrobes and CD players - and be able to offer them the very latest in business and conference facilities."

Human Resources is the headache that keeps hotel managers from their 40 winks, according to a 2001 survey by Cornell University. Attracting talented staff in the first instance was seen as the ultimate waking nightmare. Chris Mumford looks at the options available to companies without a decent cloning programme.

Do-it-yourself recruitment is certainly one option; after all is that not what in-house HR departments are for? The main benefit of D.I.Y. recruitment is that the company maintains control of the hiring process from start to finish. A common misconception is that it is also cheaper than outsourcing. Add up the cost of advertising and the number of manpower hours however and there is very little saving over outsourcing to a recruitment firm. In addition this method means that a company is generally reliant on candidates who are looking to make a change, for whatever reason, and have applied for the position. In other words, active job seekers. Can a company be sure that it is making the most effective hire when it is dependent on candidates approaching it rather than vice-versa?

For companies that decide they need external assistance there is a choice to be made in terms of the most appropriate type of help.

Contingency search firms are typically paid on a results-only basis. They tend to specialise in niche sectors of the market and concentrate on developing a database of candidates qualified in this area. When briefed by a company to find candidates they therefore have a ready pool of talent in which to dip. This saves time and often has the benefit that the recruiter has known the candidates for a period of time and is highly informative about them.

There is generally no exclusivity given to a contingency search firm so most recruiters will be competing with other recruiters. Competition also comes from client companies who are trying to find candidates through their own means. This means that contingency firms typically place a quarter of assignments and are therefore obliged to work on several assignments at once, compromising quality. Companies also need to be aware that the supply of candidates will be dependent on the scope and quality of the recruiter’s database.

Typically, contingency search is considered for lower and mid-management property level positions where a company is interested in seeing a large range of qualified candidates and is willing to take on some of the screening and selection process itself.

Retained executive search firms are better suited to senior level positions where it is paramount that the employer hires not any qualified candidate but the most qualified candidate.

The recruiting process of a retained executive search firm is highly intensive and an employer can expect:

· An accurate assessment of the firm’s capabilities to perform the search as well as how the search will be carried out.

· Screening and full assessment of potential qualified candidates to create a shortlist for the employer.

In addition, the employer can be assured that the search firm abides by the Code of Ethics, Professional Guidelines and Client’s Bill of Rights as set out by the Association of Executive Search Consultants (www.aesc.org), and that the search firm will implement an ‘off-limits’ policy in which it pledges not to recruit from the hiring organisation.

Different scenarios demand different solutions. In today’s climate, when recruitment and the attraction of talent are such major concerns, successful and effective hiring is more important than ever. By possessing a knowledge of the options available and an understanding of their appropriate usage companies can help ease one more headache and get a good night’s sleep.

hoteliers, travel/tourism specialists and allied members
as the voice of hospitality for Georgia

Rick G. Layton, a 30-year hospitality industry veteran, was named President & CEO of the Georgia Hospitality & Travel Association this month. The non-profit umbrella organization, comprised of the Georgia Restaurant Association, Georgia Travel Association and the Georgia Hotel & Lodging Association, represents more than 2,300 businesses in the lodging, foodservice, licensed beverage and travel industries. Layton previously served as GHTA Chairman of the Board and President of the Georgia Hotel & Lodging Association.

GHTA provides a strong voice in governmental affairs including: promoting increased spending for statewide

tourism through the Georgia Department of Industry, Trade and Tourism (GDITT), insuring the Hotel/Motel tax is spent as it was intended, and having a full legislative agenda that protects and promotes the Hospitality industry. The Educational Foundation of Georgia, an affiliate of GHTA, also offers educational programs.

“In today’s economic climate, it’s important that we move the hospitality industry from a No. 2 position in economic impact in Georgia to the coveted No. 1 position, not only in the minds of the legislature but in the hearts of Georgians,” Layton said. “I am proud to return to the GHTA to help our Georgia communities generate the much needed tourism spending and support.

“GHTA is the place where all sections of hospitality come together as one voice,” Layton said. “This unified voice will ring out loud and clear in 2003, saying ‘Southern hospitality is alive and well in Georgia.’”

GHTA is a membership-based business organization, which unites all segments of the travel and tourism industry for the protection and promotion of its members’ interests. The hospitality industry in Georgia is the state’s second largest industry, employing nearly 500,000 Georgians. GHTA is the umbrella organization for Georgia Restaurant Association, Georgia Travel Association, the Georgia Hotel & Lodging Association, and related allied members.

This is the first of a series of articles in which we will discuss current problems that some borrowers (and obviously their lenders) are having with hotel mortgage loans, along with ideas and strategies for possible resolution.

To start, frequently asked questions include: how bad are things in the hospitality industry, especially regarding the conditions of hotel mortgage debt? Also, is this a “U” or “V” shaped downturn? As things have evolved over the last year or two, the downturn can probably be best described as an “L” shaped downturn. In most markets, Revenue per Available Room ("RevPAR") has deteriorated and, for the most part, remained fairly flat. On a positive note, however, improvements in the operating margins of the hotel industry have been well chronicled. Additionally, the current interest rate environment has been an added blessing for the industry, especially for borrowers of variable rate hotel mortgage debt. So the volume of hotel mortgage defaults and foreclosures has not been at the levels that had been expected.

This does not mean that there have been no defaults or foreclosures. From the lenders’ perspectives, particularly as it relates to their real estate debt portfolios, hospitality mortgages have been by far, the most troubling component. However, in most cases in which a lender has a reasonably balanced mortgage portfolio spread out over a variety of real estate asset classes, hospitality mortgages are usually relegated to a minority of the total. As such, even if default rates of hotel mortgages have climbed, such defaults only constitute a small percentage of lenders’ portfolios. Due to this, few lenders seem to be worried about “going under” because of defaulted hotel mortgage debt. Therefore, improved operating margins, low prevailing interest rates, and a lack of general real estate malaise (affording lenders the opportunity to be somewhat understanding in handling defaults within their hotel mortgage debt portfolios) have combined to limit the number of defaults and subsequent foreclosures. Still, defaulted hotel mortgage debt (despite its percentage of an overall portfolio) represents a problem with which needs to be dealt.

As stated above, since real estate mortgages portfolios are, in general, doing well, and the problems to date primarily involve hospitality, not many lenders are sufficiently staffed to manage these problem loans. In the early 1990s, when real estate defaults were rampant, workouts, foreclosures, and troubled asset management essentially became a “cottage industry,” with numerous real estate professionals becoming active in the resolution of these problems. In response to this current lack of workout personnel, HVS has created a new and specialized division to handle this cycle’s downturn: the HVS Special Hospitality Assets Group. Along with two major national law firms, we are currently providing a host of services to lenders and borrowers, working through and resolving their issues (please click here to view more information on the HVS Special Hospitality Assets Group).

Essentially, a default in a hotel mortgage loan is a liquidity problem, or more precisely, is the result of a lack of liquidity. What exactly do we mean by the term liquidity? A lack of cash, cash flow, cash investment, and/or cash equity. In other words, a hotel that is the subject of a monetary default will often enter a downward spiral, and the various parties associated with the hotel (and/or its underlying debt) cannot or will not resolve the problem with cash. Of course, this problematic trend usually begins with a lack of liquidity at the property itself. The hotel is not generating enough bottom-line cash flow to fully service its monthly debt service requirements. This failure to meet debt service then extends this liquidity problem to the lender. However, the lender often takes the position that it has already invested as much money as it is going to into the project, and will not invest any additional capital. At such point, the lender is likely becoming concerned about the loan’s repayment risk (specifically, as it relates to principal amounts), so the notion of any additional investment is probably a non-starter.

Financial conditions of the borrower often mirror those existing at the property; when the property (or the hotel industry in general) is doing well, the borrower should be financially stable, at a minimum. Alternatively, when property operating conditions deteriorate, borrowers often suffer. This is particularly true for those borrowers that are heavily invested in the hotel industry. As such, more often than not, a borrower will not be in a position to provide much (if any) meaningful financial assistance to a troubled hotel property.

By this point, the borrowers may have missed some scheduled payments (principal and/or interest). Sometimes, they will have asked for, and obtained, some level of temporary forbearance or other concession(s) from their lenders. Due to the apparent “L” shape of the industry’s current downturn, however, sooner or later some action must take place. Examples include the borrower seeking more formalized and longer-term concession(s) from the lender, the lender beginning foreclosure proceedings, the borrower contemplating bankruptcy, or some other decisive plan of action. Such topics will be discussed in more depth in our upcoming segments.

Tourism between "Moderate Optimism" and "Structural Changes", WTO Tourism Recovery Committee says

The World Tourism Organization (WTO) Tourism Recovery Committee assesses that recent events in the world have temporarily set back the pace and scale of recovery but consumers will still seek to travel, even if it includes changing their destination or postponing their trip. Many markets continue to be strong, thus allowing the tourism industry to remain reasonably optimistic, while recognizing the structural changes currently in motion.

The WTO Tourism Recovery Committee met for the third time during the recent World Travel Market in London on 12 November. Among attendees were high officials of several Member States, including representatives from Australia, the United States of America and the private sector, as well as the World Travel and Tourism Council. The speakers included WTO Secretary-General, Mr. Francesco Frangialli; President and CEO of the Travel Industry Association of America, Mr. William S. Norman; Director of International Relations of TUI, Mr. Günther Ihlau; CEO of Australian Task Force, Mr. Christopher Brown; Indonesian Minister of Culture and Tourism, H. E. Gede Ardika and many others. The meeting was chaired by the Minister of Tourism and Antiquities of Jordan, H. E. Dr. Taleb Rifai.

The speakers varied in theme, yet overall agreed the impact on tourism has been international. Some of them stressed the fact that in some generic markets the reason for a decrease in outbound is a bad economic performance, for example in Germany. On the other side the British economy is doing really well, but the prices, most of all real-estate, went sky high, so although people, especially regular travellers are reluctant to spend. Some participants thus argued, that the economic situation in Europe is a more important obstacle in tourism development than attacks in Bali, Djerba and the USA.

One of the presenters, President and CEO of the Travel Industry Association of America, Mr. William S. Norman, addressed the state of the U.S. tourism industry by asserting that "more than 345,000 jobs were lost in our industry in the twelve months since September and through August of this year employment is still running 4.4 percent below 2001. The weak performance that we now see in international markets is really just the latest in a series of challenges the United States has faced in developing international tourism. While the U.S. did enjoy some growth in international visitors during the 1990s, the fact is that travel to other world destinations actually grew seven times faster, reducing the U.S. share of worldwide tourism by a very serious thirty percent between 1992 and 2001."

Agreeing that the tourism crisis has had global influence, the speakers expressed that some destinations or regions were more affected than others. The areas that experienced the worst setback were those who depend on U.S. generating markets - long-haul travel in general, the U.S. itself as a destination and the Arab-Muslim world. Emphasis was placed on the current impact of tourism in Indonesia.

The Minister for Culture and Tourism of the Republic of Indonesia H.E. Mr. Gede Ardika stated that "in the aftermath of the Bali tragedy, Indonesian government has set a recovery action plan that is based on four stages namely rescue, rehabilitation, normalization, and expansion. The aim of this recovery program is to restore confidence in the international and domestic markets towards Indonesia, principally Bali, as an interesting and pleasant destination. The recovery program spread over four main aspects of tourism development; firstly, security; secondly, social; thirdly, product development; and finally, marketing."

"We suspect that we will confront the fall of income from the tourism sector. The earnings from international tourists will plunge by USD 1.8 Billion, as the income from domestic tourists will be reduced at least in an equivalent of USD 2 Billion. These figures will trigger a 6.6% drop in our Gross Domestic Products. That is really quite significant to our economy. The occurrence might also create unemployment in the tourism industry. It is predicted that by the first six months there will be at least 2.7 million people unemployed all over Indonesia due to this incident," said H.E. Mr. Gede Ardika as he predicted the dramatic impacts on the economy for Indonesia.

The impact of the crisis varied widely according to market segment, for instance air travel was most affected, particularly long haul, and that numbers must be read with lower yields. Consumer behaviour has changed, which caused shorter stays in vacation destinations accompanied with later bookings. According to the speakers from the private sector, structural changes on the supply side were accelerated. However, various sectors experienced a wide range of decline in various aspects of the industry.

Related sentiments were expressed by the ASEAN countries. The desire for "the international community… to reinstate the confidence of visitors to travel to this region" and "encourage the tourist-generating countries to refrain from issuing unnecessary negative travel advisories…unless supported by reliable intelligence and analysis," stated Tourism Authority of Thailand Advisor Mr. Pradech Phayakvichien.

The World Tourism Organization will react immediately to the above mentioned challenges facing tourism. One of the first steps will be to establish an internal "Emergencies Task Force," which will be chaired by the WTO Secretary-General, which will be directly linked to the Recovery Committee. WTO will take all actions necessary to help the consumer regain confidence and in addition, develop a process for its Executive Council, in accordance with the Global Code of Ethics, to help guarantee fair, balanced and accurate travel advisories.

A challenging task will be to emphasize the importance of security for the entire tourism network and to connect with other responsible organizations to promote the further expansion of instruments for monitoring the recovery and responses of tourism industries. This can be accomplished by means of urging states, such as tourism authorities, to implement Tourism Satellite Accounts which provides help with recovery impact assessment and action priorities. WTO is also working to ensure that developing states are not adversely affected through supply side impairment.

WTO stressed its commitment to:

· upgrade its assistance to members in crisis evaluation and communication focussing on transparency, timeliness & accuracy,

· aid affected members analyse optimum promotional tactics and strategies based on the WTO´s extensive research base,

· advocate increased collaboration between public and private sectors and using the Recovery Committee as a catalyst for these efforts,

· drive the global quest for continuing safe, secure and sustainable tourism and

· stress the interdependence of all sectors in the tourism supply chain as well as all members of the global tourism community in the response to the challenge of terrorism and recovery.

Ananova.com - London has many of the UK and Ireland's top hotels, according to the latest AA star awards.

London accounted for four of the top 10 UK establishments and for 19 of the British Isles' top 200 hotels in the AA assessment.

The four were Claridge's, the Dorchester, the Landmark and Hyde Park's Mandarin Oriental.

Of the top hotels, 130 were in England, 36 in Scotland, 13 in Wales, 18 in Ireland and three in the Channel Islands.

Of these 200 hotels, 26 have been awarded five red stars, 46 have four, 82 have three, 35 have two and seven have one.

There are also four establishments classed as "restaurants with rooms" which do not have star ratings, but which make the top 200.

Among Scotland's top 10 were Inverlochy Castle Hotel in Fort William, Lochgreen House in Troon and Glenapp Castle in Ballantrae.

Bodysgallen Hall in Llandudno and Tan-y-Foel Country House in Betws-y-Coed were among the top Welsh hotels, while Cliveden in Buckinghamshire and Chewton Glen Hotel in New Milton, Hampshire, were in the top 10 country house retreats.

The AA's hotel services business manager Albert Hampson said: "We anticipate that competition to be in this new annual list of the AA's top 200 hotels, and be awarded red stars for 12 months, will be intense. It will help raise standards even higher right across the British Isles."

The blueprints include Hong Kong's largest ballroom and a Los Angeles-style Avenue of the Stars

SCMP - Disney executives unveiled plans yesterday for two hotels to be built next to the Disneyland theme park, and said more than $ 1 billion worth of construction contracts would be signed with local companies in the next 18 months.

Construction of the theme park was due to begin on January 12 - after consultation with a fung shui expert - and the company would recruit at least 50 people in the next six months. Most jobs would be in sales and marketing, information technology and human resources, the executives said.

New curriculums and internship programmes for future recruits in the hospitality industry would also be developed with local universities and training institutes.

The Disney project would recruit another 500 people by the end of 2004 and staff numbers would quickly swell to 5,000 after 2004, 15 per cent of whom would be at managerial level, they said.

Hong Kong Disneyland group managing director Don Robinson said focus groups and advisory committees comprising experts in the SAR's hospitality industry had been set up.

"We wanted head chefs, for example, to advise us on staffing, menus, restaurant set-up, etc," he said. "We've also been looking into what kind of entertainment would be appropriate in the cultural context of Hong Kong."

Mr Robinson said Disney had unearthed tremendous talent in Hong Kong in its current round of hiring. The executives, including Walt Disney Imagineering managing director John Verity and executive vice-president Wing Chao, unveiled artists' impressions of the two hotels to be built on the site: the five-star Victorian-style Hong Kong Disneyland Hotel and a three-star Art Deco-inspired Hollywood Hotel.

The hotels will feature a grand bauhinia-shaped fountain, the largest hotel ballroom in Hong Kong at 888 square metres, an Avenue of the Stars similar to the one in Los Angeles, and extensive convention and wedding facilities.

"Weddings are big business for us - there are more than 8,000 weddings a year at Walt Disney worlds," Mr Robinson said. "Last week we received our first request for a wedding at Hong Kong Disneyland, with the bride willing to postpone the event for three years."

Mr Verity said several partnerships with local businesses were being negotiated and a further 15 to 35 construction-related contracts worth $ 1 billion would be awarded.

"With 37km of pipes to be laid, 11km of cabling, 1,000 manholes, roads, utilities, there's a lot of work to be done," he said.

On the discovery of World War II bombs and artillery shells at the theme park site in Penny's Bay, Lantau, Mr Verity said Disney had been working closely with the government and international experts, who had said the risk was minimal.

Disney would take all possible precautions recommended by experts to ensure the safe construction of the park, he said.

The park is due to open in 2005, but Mr Robinson said it would begin taking reservations nine months to a year before it opened. It has been estimated that the project will create 18,000 new jobs at its opening, growing to 36,000.

Government Economist Tang Kwong-yiu has estimated the park is worth $ 148 billion in economic value to Hong Kong.

120 foreign buyers at the 13th Philippine Travel Mart

The three-day 13th Philippine Travel Mart (PTM), which kicked last Friday, is expected to shape up much better than before with the participation of some 120 foreign buyers.

“Before, we invited buyers through operators who brought in wholesalers. Now, we invited through our [PHILTOA international] alliances,” explained Perry Alegre, PTM chair and president of event organiser Philippine Tour Operators Association (PHILTOA).

The foreign buyers’ support comes at a critical time when Philippine inbound is taking a beating from travel advisories released by governments. Unlike in the past when the industry players looked at the domestic market to prop up their business, they are showing a new brand of aggressiveness by continuing to seek out the international market as well.

The travel agents came from New York, Toronto, Bangkok, Los Angeles, India, China and Singapore.

Newsletter - November 25, 2002