Hotels Bank On A Brighter Future

Findings from an analysis of data provided to the HotelBenchmark Survey

The global hotel industry was always going to be one of the sectors hardest hit by the September 11 attacks and geo-political uncertainty that followed.  A year on Deloitte & Touche have assessed the impact of events on different regions of the world by analyzing data collected for the HotelBenchmark Survey.                      

The good news is that the industry, outside of the US, appears to have reached the bottom of the cycle in terms of declines in RevPAR (see Chart A). The first signs of a turn-around were seen in Asia Pacific in March this year, when RevPAR leveled out at US$ 58. In July, the figures for Europe and the Middle East hit their lowest points  - US$67and US$45 respectively – but are now on the way up. In the US RevPAR is still declining albeit marginally.  

            Chart A – RevPAR in US$ calculated on a moving 12-month basis

As demand has declined across the world hoteliers have struggled with the dilemma of how to maintain their MarketShare.  Should average room rates be discounted to stimulate demand or should hoteliers hold out on rate in the hope that occupancy levels will recover. US hoteliers appear to have been the most bullish and seem to have resisted the temptation to sacrifice room rates, thus keeping shareholders happy in the short term. As a result the US is the only market to report an improvement in average room rates – up 0.9% over January 2000 levels when measured on a moving 12-month basis (see Chart B).

This strategy, according to Deloitte & Touche, could prove to be the most successful, as historical data shows that when average room rates have been slashed to bring in customers, it can take upwards of three years for real room rates to catch up to pre “crisis” levels.  Occupancy levels, however, tend to recover relatively quickly once the external environment settles down.

         Chart B  – Average Room Rate (US$) measured on a rolling 12-basis

 Source:  HotelBenchmark Survey by Deloitte & Touche; Smith Travel Research

And although RevPAR levels in the US don’t yet appear to have turned the corner, the market’s 4.8% decline between January 2000 and September 2002 is not as severe as the Middle East’s decline in performance(14.7% decline between January 2000 and July 2002). As a consequence the differential in the US between the lowest and highest revPAR is US$7 compared to US$10 in the Middle East.

“With shareholders demanding immediate returns, hoteliers face the dilemma of choosing whether to sacrifice room rates to keep the hotel full ,” said Julia Felton, director of Travel, Tourism and Leisure at Deloitte & Touche. “It’s a testament to hoteliers' confidence in the future of the industry that in general they have remained relatively steadfast on rate. They have taken short term performance hits in order to deliver longer term shareholder value.”

The HotelBenchmark Survey reports that in Europe and the Middle East, room rates have fallen along with occupancy rates. In Europe, room rates were down 3.7% and demand fell by 5.7%; and in the Middle East, room rates fell 4.7% and demand dropped by 9.3% 

The Middle East took the biggest plunge in the demand for rooms, with occupancy levels down four percentage points between September and December 2001 (when measured on a moving 12-basis), compared to three percentage points across the US and two percentage points in Europe and Asia.

Chart C – Hotel occupancy levels by region measured on a moving 12-basis

Source:  HotelBenchmark Survey by Deloitte & Touche; Smith Travel Research

In Asia occupancy levels have risen by 2.4 % over January 2000 levels and are currently only two percentage points below the highs recorded in February 2001, perhaps because the region was perceived as a relative safe haven, in the aftermath of the events of 9/11. However, this increase in occupancy came at a price, as the average room rates have tumbled 7.1% since January 2000, and the market is now trading US$ 7 below its September 2000 high of US$94.  It will be interesting to observe how the recent terrorist attacks in Bali influence the attitude and perceptions of consumers to continue travelling within the region.   

“With hotel performance now generally on the way up, it appears the industry may have turned the corner from the particularly difficult period,” added Julia Felton. “There is growing optimism now but we have to hope that consumer confidence is not hampered by the uncertainty over conflicts in the Middle East and the threat of terrorism.”   

The HotelBenchmark Survey contains the largest independent source of hotel performance data outside of North America and tracks the performance of over 6,000 hotels every month.  To complete this analysis data for a consistent sample of hotels was collated between January 1999 and September 2002 for the three main regions of the world, namely Europe, the Middle East and Asia Pacific.  Data on the US was kindly provided by Smith Travel Research. To mitigate the impact of 9/11 data was computed on a moving 12 basis so that the real underlying trend in performance could be analyzed.  For further information please see www.HotelBenchmark.com.

Deloitte & Touche is the UK’s fastest growing major professional services firm.  It is based in 23 locations, has over 10,000 staff nationwide and fee income of £713.6 million in 2001/2002.  Deloitte & Touche is the UK practice of Deloitte Touche Tohmatsu, a global leader in professional services with over 98,000 people in 140 countries and fee income of $12.5 billion for the year ended 31 May 2002.

The dedicated Travel, Tourism, and Leisure practice serves owners, investors, operators and developers throughout Spain, the Middle East, India and Africa.

Authorised by the Financial Services Authority in respect of regulated activities.  The information contained in this article is correct at the time of going to press. For further information on Deloitte & Touche, you can access our website on www.deloitte.co.uk.

Permira set to clinch 700 mln stg Travelodge, Little Chef deal - report

AFX  -  Venture capital group Permira is poised to clinch a 700 mln stg plus deal to buy Travelodge and Little Chef, the budget hotel and roadside restaurant chains being auctioned by Compass Group PLC, according to the Financial Mail on Sunday.

The newspaper did not name its source, but said Compass hopes to unveil the deal by Dec 3.

Compass put the Travelodge and Little Chef businesses up for sale in June to concentrate on its core food service and vending businesses.

It had inherited the 400 Little Chef sites and 220 Travelodge hotels following last year's demerger from media group Granada.

Online hotel deals mess up planning for conventions

Internet discounts are causing big problems for convention planners and hotels.

USA Today  -  Convention-goers are often finding bargains over the Internet that undercut the group discounts a hotel is making available for a convention or meeting.

As a result, some groups are having trouble filling rooms they have blocked for their conventions, forcing negotiations with hotels that can lead to penalty payments.

''It is a very significant problem for us,'' says David Kushner, president of the Professional Convention Management Association, which is polling members to gauge the extent of the problem.

About 20% of group business is having trouble meeting the terms of their contracts with hotels, estimates Christie Hicks, a senior vice president of Starwood, whose hotel brands include Westin, Sheraton, W and St. Regis.

Missing targets results in talks between the groups and hotels. Penalties vary. ''We try to be flexible,'' she says.

While the problem is worse now, it's hardly new. When groups decide to hold a convention or meeting, they negotiate deals in which hotels block off a certain number of rooms for attendees. The hotels also throw in meeting rooms, hospitality suites and other extras at a discount. But convention-goers discovered long ago that host hotels sometimes offer weekend rates lower than the published prices for a meeting.

The problem has become worse in the last couple of years because, using the Internet, attendees now can quickly find if a hotel has cheaper rates available.

The prospect of having to pay hotels extra after an event is making some convention planners gun-shy.

The American Academy of Audiology, whose annual meeting attracts 7,000, is trying to make decisions about meetings three and four years from now. ''I don't know what technology is going to do,'' says Cheryl Kreider Carey, deputy executive director.

Source:  HotelMarketing.com

China's Hotels Graded by Environmental Standard

China Daily  -  The benchmark of eco-efficient hotels are under way in China and the first group of green hotels and restaurants with eco logo will receive their certification this September.

Five grades have been set up from one A to five As, according to the new category adopted by the China Hotel Association in this June.

The classification for green hotels or eco-efficient hotels provides a benchmark on hotel's environmental performance rather than their facilities and service quality as the hotel star rating describes.

New evaluation items cover energy use, water and waste gas emission, air quality and prevention of fire and food poisoning.

The newspaper quoted Zhang Jun, assistant president of the association as saying, "Environmental concerns among travelers are growing worldwide."

He said the new standard aims to provide hoteliers with a green management system to minimize resource consumption and reduce environmental impact, "which may save money while saving the environment."

The standard is expected to lower operational costs of hotels and improve their public images.

The hospitality industry in China saw an annual growth of 15 percent last year. The figure in 2001 shows China had more than 3.3 million hotels and restaurants, which boasted a total turnover of more than 600 billion yuan (72.6 billion US dollars).

All-Hotels appoints new Managing Director

Industry expert takes the helm at leading online accommodation company

Jill Chalmers has been appointed managing director of All-Hotels Ltd, one of the web's leading accommodation companies and operator of the leading internet brand all-hotels.com.

Industry expert Chalmers has been appointed by Mark Jones, CEO of Online Travel Corporation (OTC) - the UK's leading online travel supplier and retailer, which purchased All-Hotels in September. Chalmers was previously sales director at All-Hotels, which she joined in September 2000.

In her new role, Chalmers will steer the implementation of a new merchant revenue model for All-Hotels - involving the use of marked-up net rates rather than a commission scheme - with the aim of significantly improving All-Hotel's turnover and mimicking the successful financial model established by OTC. Chalmers will also be responsible for integrating the current all-hotels.com database of hotels into OTC's portfolio of over 80 own-brand and white-label websites, a move that will offer these hotels significantly increased sales distribution.

Chalmers will additionally manage and develop All-Hotel's hotel inventory management and online booking platform a-Res, the reservations system, through which the company helps independent and mid-size hotel chains acquire a bigger share of the online hotel marketplace.

Before joining All-Hotels, Chalmers spent a year as sales and marketing director at luxury Skibo Castle in the Scottish Highlands, which enjoyed fame in 2000 as the setting for the wedding of Madonna and Guy Richie.

Prior to this, Chalmers held the role of international sales director with Scandinavian hotel chain Scandic. In the role, she was highly instrumental in the rapid growth of the company and the development of its international leisure sales division, building and heading a team across 10 offices worldwide, and pioneering sales development for 140 hotels across Scandinavia and Northern Europe.

About All-Hotels:  

All-Hotels is the provider of top hotel booking website all-hotels.com (www.all-hotels.com) and a leading provider of technology and services for the hotel industry. 

Based in Edinburgh and established in 1997, All-Hotels provides a round-the-clock service to customers worldwide, selling over 380,000 hotel rooms online during the past three years. 

UK trade pins hope on a strong start to 2003

TTG-Asia  -  UK tour operators are expecting bookings to surge in January/February and have called on Asian tourist boards to market hard during this period in order to win the business.

Majority of those interviewed by TTG Asia are banking on a repeat of this year’s January/February, in which bookings came in fast and furious, putting paid to fears that 9-11 would stop travel. In fact, their calmness in the face of the October 12 Bali bombing was a contrast to the gloom and doom which pervaded last year’s World Travel Market.

Most said they had recovered losses from 9-11, only to have Bali and “imponderables” such as an Iraq war cap growth. Other snippets from WTM 2003:

·  Derision, more than alarm, greeted Garuda Indonesia’s decision to pull out of the UK market from mid-January to end March, a move the airline announced at WTM.

·  AsiaWorld will launch a dedicated 16-page Go Bali brochure as soon as the travel advisory on Bali was lifted, using its own funds. The brochure will be distributed to more than 4,000 independent travel agents in the UK.

·  Westminster Travel UK, which operates AsiaWorld, has launched CaribWorld, but the Asian specialist - and others like it - say the Far East remains close to its heart.

·  Malaysia has joined Together In Asia, the joint marketing partnership that until now has comprised Singapore, Hong Kong and Thailand. This will raise joint funding to £120,000, equally divided among the four partners, which is used for brochure support and a common stand at WTM, among others.

·  Destination Asia is holding back on a planned China expansion. Chief executive and group managing director Mr James Reed said full attention must be given to the current business climate which called for new survival techniques among Asian destination management companies.

Source:  TTG Asia  

Carlson plans 18 more hotels in India by 2005

Asia Pulse  -  Carlson Hospitality Worldwide, the parent company of Radisson Hotels and Resorts, has firmed up plans to set up 18 hotels by 2005.

"We are planning to set up 18 hotels by 2005," K B Kachru, senior vice president, Calrson Hospitality, said here, adding the new hotels would come under the brand 'Radisson' and 'Country Inn'.

Announcing the opening of Radisson Hotel in Varanasi set up at an investment of about Rs 350 million (US$ 7.3 million), he said the company was keen on setting up hotels in mid-sized towns.

The hotel has been promoted by the Bhadohi Hotels Ltd, a joint venture between Khan Group of Industries and Unitech, while managed by Radisson Hospitality Worldwide Hotel Management Services, a joint venture between Radisson Hotels, USA, and Unitech Ltd.

Speaking on the occasion, A M Khan, director Bhadohi Hotels, said the company was planning to set up 3 more hotels in Lucknow, Agra and Kanpur which would also be under the brand name of 'Radisson'.

"We have plans to extend our relationship beyond this hotel", Khan said.

Khan, however, declined to divulge details on the proposed investment.

Hilton out of Taiwan after 30 years    

TTG Asia  -  After 30 years, Taiwan will bid farewell to the Hilton brand as the chain’s only property in the country, The Hilton Taipei, is rebranded Caesar Park Taipei from January 1.

But Hilton Taipei’s general manager, Mr Nicholas Wu, said Hilton was looking for other partners in major cities including Taipei, Kaoshiung, Tai Chung and Hsin Chu, and hotel owner Hung Kao, which owns the present property and the Caesar Park properties, may consider another contract with the chain.

All the employees of the Hilton would be retained. But dropping the Hilton name is not without cost. Currently the hotel enjoys 1:1 business to leisure business. The management foresees that without the Hilton branding, loyalty programme and booking engine behind the property, it is likely to lose 15 per cent of the business clientele.

In the transition period, it intends to fill this gap with leisure travellers by participating in the Taiwanese government’s ongoing programmes to promote leisure travel to the country.

Meanwhile, a new booking engine is being sourced for Caesar Park Taipei. Among those being considered are Utell and Unirez.

Source:  TTG Asia

New Otani  group seeking better things to do with garbage

Asia Pulse  -  Japanese Hotel operator New Otani Co. has built a basement research facility at its hotel in Tokyo's Chiyoda Ward to determine new ways of recycling food waste and wastewater.

The laboratory hopes to take microbes from garbage and wastewater from the hotel's restaurants and treat them for use in pharmaceuticals and other applications.

Garbage could be sold as a soil enhancement product, containing microbes that can purifying earth contaminated by petroleum. New Otani aims to turn the research into viable business ventures in three to five years.

Japan's new recycling law, which took effect in the spring of 2001, has stimulated efforts to find creative ways to reuse garbage. The New Otani has been simply converting its waste to fertilizer, but now is aiming for higher-value-added products.

The research lab has been set up in the third basement below the New Otani, adjacent to the water treatment facility. Next spring, the hotel itself will engage three researchers who will work with researchers from Tsukuba University, the Tokyo University of Agriculture and Hoshi University.

The hotel generates 5 tons of garbage, 1,000 tons of wastewater and 180 liters of waste oil daily. The steady, year-round supply of a wide variety of microbe-laden trash is an ideal resource for research.