Global Hospitality News: eHotelier Newsletter

UK hotel performance in October showed evidence of a solid recovery pattern - but it continues to be a slow process that focuses on building occupancy and provides little immediate hope of increasing room rates, according to PKF's preliminary figures just released.

London rooms yield rose 19.8% to £79.95 in October, due to a 20.6% hike in occupancy to 77.2% and a 0.7% drop in average room rate to £103.51. However, the impressive rooms yield this year doesn't make up for the 34.1% rooms yield dive in October 2001 in the immediate wake of September 11. The 77.2% occupancy level is also relatively low for the time of year. The recovery was evident at all levels of the market, including the crucial upper end which has been most affected, especially with the decline in the number of lucrative long-haul business travellers.

Regional hotels, which were much less affected by 11 September, performed reasonably well compared with last year. Occupancy rose 2.9% to 74.7% compared to a 4.1% dip in 2001, while average room rate edged up 0.6% to £62.71 against a bigger drop of 2.3% last year. Rooms yield was up 3.5% to £46.87.

The figures for October suggest that the recovery is continuing but still at a slow pace

Melvin Gold, managing director of hotel consultancy services at PKF, said, "The figures for October suggest that the recovery is continuing but still at a slow pace. We would expect hoteliers to continue to look at building occupancy before room rates can increase and so it's encouraging to see the occupancy figures moving in the right direction. However, we have to be cautious, since the industry - especially in London - is still some way from demonstrating figures that overturn the slump experienced last year. And with the current uncertain global political and economic situation it's difficult to predict just when we will see a return to the figures achieved by UK and London hotels in the late 1990s."

Definition of the key terms used in the surveys table are given below:Room occupancy: the ratio of total occupied rooms to total available roomsAverage achieved room rate (AARR): rooms revenue divided by the total number of guest rooms occupied during the yearRooms yield: room occupancy multiplied by the average achieved room rate (also known as RevPar).

PKF is the eighth largest firm of accountants and business advisors in the UK with more than 1,600 partners and staff operating in over 25 offices around the country. Principal services include: assurance and advisory; consultancy; corporate finance; corporate recovery and insolvency; forensic; and taxation. The firm has particular expertise in sectors such as charities; technology and e-commerce; hotel consultancy services; medical; professional partnerships; and public sector. PKF also offers financial services through its PIA regulated company, PKF Financial Planning Limited.

TravelWeeklyEast.com - Travel businesses were again the target of terrorism last week, as twin attacks in Kenya saw suicide bombers kill 12 people at an Israeli-owned beach resort; while two missiles narrowly missed an Arkia flight en route to Tel Aviv.

The attacks could easily have killed many more. Associated Press reported the bombings hit the beach-front Paradise Hotel, 15 miles north of Mombasa, around 8:35 am, as new guests were checking in and others were eating breakfast. In the attempted attack on the Isreali-owned Boeing 757, none of the 261 passengers and 10 crew were hurt, and the plane landed safely in Tel Aviv.

The Kenyan events are the third hit on tourist targets since April, with Bali and the Tunisian island of Djerba both victims.

"Once again the victims of ruthless terrorists were innocent tourists. We cannot tolerate this," said Francesco Frangialli, Secretary-General of the World Tourism Organisation.

Frangialli did not elaborate on any specific actions. WTO established a crisis and recovery committee after September 11.

The US State Department immediately issued an advisory, warning Americans in Kenya to exercise "extra caution" at hotels, tourist locations and urban areas, especially in coastal regions.

For airline bosses, the new scare comes as IATA this week warned the world's airlines were headed for a combined loss of between $5 billion and $7 billion on international routes this year.

HVS International - European Hotel Transactions Country Analysis - Belgium France & The Netherlands

Belgium - Historically the Belgian hotel investment market has been relatively illiquid, due to an oversupply of hotels and relatively weak trading performance. Nevertheless, in recent times its capital Brussels, has experienced a change of fortune with improved operating performances, thus resulting in a number of significant single asset sales over the past two years.

France - The majority of all hotel investment activity in France centres around its capital, Paris. Following a year dominated by corporate transactions during 1999 (including the €504 million disposal of the Vivendi portfolio), the hotel market witnessed a number of single asset transactions during 2000 and 2001, as investors realised their capital gains following three years of strong trading. Hotels transacted during 2000 totalled approximately €160 million and included the leasehold interest in the 111-room Hotel de la Tremoille for €23 million (€207,000 per room) and the 388-room Hyatt Regency Charles de Gaulle Airport for €50 million (€130,000 per room). In 2001 the most significant transaction was the purchase of the 764-room Nikko Hotel by Accor and the US private investment fund Colony Capital for €100 million (€131,000 per room). In addition, approximately 2,000 rooms exchanged hands in the Parisian market as part of Nomura's acquisition of Le Méridien, which included Le Méridien Montparnasse and Le Méridien Etoile. Meanwhile, in terms of portfolio sales Accor's ten-strong Parisian chain of Jardins de Paris Hotels, some 429 rooms, was sold to SITQ for an undisclosed sum.

The Netherlands - Due to the relatively small size of the Dutch hotel market, the investment market in the Netherlands has largely focused on Amsterdam. In 1999, the Cok City Hotel Amsterdam transacted for approximately €10 million (€91,000 per room). Meanwhile, two transactions were reported in 2000, the most significant being the 279-room Radisson SAS Schiphol Airport to Miller Global for approximately €48 million (€171,000 per room). The second transaction was the 76-room Hotel des Indes, in The Hague, to a private group of investors. No single asset transactions which meet our criteria (hotels transacting at or above €7.5 million) were recorded in 2001 or year to-date 2002, although most recently, the private equity fund Hospitality Europe announced that it is to sell both the 230-room Sheraton Hotel Pulitzer and the 408-room Sheraton Hotel Schiphol Airport, both of which are in Amsterdam.

TravelWeeklyEast.com - Asia can expect more travellers from the Middle East now that the US has been pretty much written off as a holiday destination for Arabs.

Salah Ibrahim Sharaf, managing director of Sharaf Travel, one of the top five travel companies in Dubai, said, "The US is now out of our scope. There is a big line between the Middle East and the US. One, we are not treated well when we visit, and there is some discrimination that because you are an Arab, you are a terrorist. Two, it takes 45 days to get a visa." Sharaf, whose company also owns Oasis Adventures, Cruise Arabia and Sharaf Holidays, said demand was high for Malaysia, Singapore and Thailand, as well as Australia. In Europe, Germany and the UK were popular.

Sharaf expects that interest in the US will continue to be low for "the next five to 10 years".

"We will focus on Malaysia not just because it is a Muslim country but because Asia in general is friendly towards Arabs."

Sharaf dismissed the travel warnings that have been placed by the US, Europe and Australia on parts of South-east Asia and the Middle East.

"Everywhere is as safe as it's always been. These warnings are made up by the West to target the Middle East. They think we are the home of the cave terrorists and the rest of the world is a safe place."

Sharaf said Middle Eastern travellers were not afraid of travelling in today's climate. "Anywhere we go, we are not afraid but we think people are afraid of us."

Six Continents Hotels Pulls Out of Thai Partnership Developing Hotel on Siam Paragon Site; Kempinski and Accor Considered Front Runners

Bangkok Post - Six Continents Hotels, one of the world's largest hotel groups, has exited its partnership with Bangkok Intercontinental Hotels Co (BIHC), the operator of Siam Centre and Siam Discovery shopping malls, after it became apparent that it would not be part of the new Siam Paragon development.

BIHC is a partner along with The Mall Group in the 12-billion-baht Siam Paragon project, currently being developed on the site of the demolished Siam Inter-continental Hotel opposite Siam Square.

Six Continents, which owns the Inter-continental and Holiday Inn brands, on Tuesday sold its 4.68 million shares in BIHC for 927 million baht to MBK Development Plc, the operator of the Mahboonkrong centre just 200 metres from the Siam Paragon site.

Six Continents had been the single largest shareholder in BIHC, with 28.58 percent, and its involvement dated back 36 years ago when it began running the former 400-room hotel on a 72-rai plot next to Sra Pathum Palace in Bangkok's Pathum Wan area.

The sale of Six Continents' stake in BIHC confirmed that the former was not in the running to operate the new hotel planned for the Siam Paragon site, said a source to the deal.

BIHC executives said the company was negotiating with a number of global hotel chains to run its new property at Siam Paragon.

Industry sources said the two front-runners appeared to be Kempinski of Germany and France's Accor group.

Chadatip Chutrakul, chief executive of BIHC and Siam Paragon Development Co, could not be reached for comment yesterday.

But top executives of BIHC and MBK are scheduled to make an announcement related to the Six Continents-MBK deal this afternoon.

Six Continents is currently looking for a site in the Ratchadamri and Wireless Road area for a new Inter-continental.

There were earlier reports suggesting that Six Continents had held talks with the Srivikorn family to rebrand the two Meridien hotels the family owned near the Ratchaprasong intersection.

But family patriarch Chalermphand Srivikorn denied the reports, telling subordinates recently that he would continue the relationship with the Meridien group.

The sale of Six Continents' holding has made MBK the largest shareholder in BIHC, with a 30.60 percent stake, up from only 2.02 percent previously.

BIHC is looking at a deluxe hotel brand to match the top-end image it is trying to project at the Siam Paragon site, which is scheduled to open in 2005. "They seem to be looking at a Ritz class of hotel," an industry source said.

MBK paid Six Continents a premium for BIHC shares over the book value of 56.23 baht, to complete the acquisition of one of the country's top shopping and hospitality service assets.

Its holding would also help MBK expand its retailing business horizon and find a synergy with the MBK centre, an industry source said.

The other major shareholders in BIHC are the Finance Ministry (21.74 percent), Ladawal Investment Co (11.06 percent), Siam Commercial Bank (10.08 percent) and minor shareholders (12.58 percent).

MeetPie.com - The Scandinavian Hospitality Incentive & Event Exhibition (SHIE), Scandinavia's largest trade fair for the meeting industry, is increasing its focus on the event sector by developing the EventSolutions concept.

The organiser says it has attracted major international names to the 2003 trade fair, to be held on January 21-23 at the Sollentuna Exhibition Centre, Stockholm.

The EventSolutions section is based on four themes: an event exhibition, speakers on the main stage, workshops and a case race, in which the industry competes for the award of the best event case of the year. Those appearing on the main stage include: Charlotte DeWitt, the former chair of the International Festivals and Events Association (IFEA) Jon Teeman, event consultant responsible for the mobile operator O2's partnership with Arsenal Football Club in the UK
Kevin McNaulty, sales director at event organiser Momentum

Australia's Grand Hotel Group's Grand Plan Fails The Proxy Test

Australian Financial Review - Shareholders of the troubled Grand Hotel Group have rejected a move to internalise its management structure, leaving the listed hotelier to continue under its current system.

The board of the $ 100 million group raised the plan with shareholders at the company's annual general meeting in Melbourne yesterday. The plan involved buying the responsible entity from the major shareholder, the Singapore-based Tuan Sing Holdings.

However, the proposal was never put to the vote because 26 per cent of shareholder proxies, lodged on behalf of several major institutions, opposed the special resolution which required a 75 per cent majority to be carried.

Grand's chairman Bill Conn said it would be business as usual under the existing management structure.

Mr Conn said the company had been criticised by some investors and overseas institutions for its current management structure and decided to propose the change.

Mr Conn said the move would have allowed GHG to refine its corporate governance and remove the perception of a difference within the group. "The move would have ensured that people knew that the expertise resided within the group and not within the management," he said. "There are one or two institutions that have opposed it and we have tried to speak to them before proxies were lodged yesterday. They said they would talk to us after the meeting later this week. So, we can only speculate on the reasons at the moment."

GHG is the second-largest hotel owner in Australia, with 3,500 rooms around the country under the Hyatt, Chifley and Country Comfort brands. The group floated at the top of the hotel cycle five years ago and has since returned an average of negative 12 per cent per year.

Grand's managing director Garry Cameron announced at yesterday's meeting that the group had decided to sell two Country Comfort hotels in New South Wales.

Mr Cameron said the two small hotels in Blakehurst in Sydney and Batemans Bay on the South Coast, had a book value of $ 6 million, but the sales could exceed that figure.

Mr Cameron said at least two other underperforming hotel assets in NSW and Queensland were likely to be sold in coming weeks bringing the total amount raised to about $ 20million. The proceeds would be used to reduce the company's substantial debt which is at about 50 per cent gearing.

Mr Cameron flagged the sale of non-core assets at last year's annual meeting after the group called off a review of its capital management being conducted by Merrill Lynch.

GHG has already offloaded the Austral House building at 115 Collins Street, next to Melbourne's Grand Hyatt, for $ 10.3 million which exceeded its book value of $ 7million.

ABC Radio Australia - Fiji's tourism industry has called for greater commitment from the government to reach its Billion dollar target.

Mika Loga reports tourism is regarded as the country's main revenue earner while the ailing sugar industry undergoes major reform.

A Fiji tourism forum underway in the northern town of Savu Savu has heard concerns against the government's controversial decision to increase the Value Added Tax on food, various essential items and cost of services. Major tourism players in Fiji say the increase would have direct implications on the cost of marketing in Fiji. They say the two percent tax increase will set back the tourism industry's aim to reach the billion dollar mark by the year 2007. The industry has proposed to the government to waive its ten million Australian dollars marketing investment to the Fiji Visitors Bureau in 2003 to enable it to form its international functions effectively. The tourism industry players have also called on the government to intensify its effort in resolving the country's worsening law and order situation which has continued to affect the tourism industry. The industry is targetting a net revenue of 546-million Australian dollars in 2003.

New Zealand Herald - In a deft change of fortune, Australians are casting an envious eye across the Tasman to a tourism market outpacing their own.

Only just starting to recover from the aftershock of September 11, tourism in Australia has now been rocked by the Bali bombing and Canberra's announcement the country is in a state of high terrorism alert.

The industry was doubly concerned when New Zealand - which has now outstripped Japan as its leading source of foreign visitors - warned Kiwis to take care while holidaying in Australia.

After an 11 per cent fall in Kiwi visitors last year, New Zealand arrivals increased by 6 per cent in the eight months to August, helping to underpin a market that has remained flat for two years.

A report by Gold Coast investment analyst Alan Midwood issued this week says New Zealand has clearly outperformed Australia since the 1997 Asia meltdown.

In the past four years, the number of international tourists visiting New Zealand has soared by 34 per cent, compared with a 13 per cent rise across the Tasman.

Over that period, the New Zealand market grew by 498,000 visitors to a shade below 2 million. Visitors to Australia grew by 548,000 to 4.76 million.

Within this, the Midwood Queensland Investment Report says, fortunes have been mixed.

Although more New Zealanders visit Australia than vice versa, the numbers of Australians crossing the Tasman increased marginally, and they remain the largest source of international visitors.

Asia powered growth by rising by 11 per cent and 18 per cent over the past two years, and non-Japanese Asians rose from 8 per cent of total arrivals a decade ago, to 18 per cent.

In New Zealand, the number of Chinese arriving last year rose by 50 per cent, and the number of South Koreans by 33 per cent.

British visitors to New Zealand continue to increase and are expected to overtake business from the United States - the country's second-largest single market - although the report says Americans continued to arrive despite their post-September 11 fear of flying.

The report, prepared in conjunction with Market Economics NZ, says terrorism and the volatile aviation industry rule out confident forecasts. But, all things being equal, it says New Zealand tourism expects to maintain 6 per cent annual growth for the next few years to reach 2.5 million visitors by 2006.

TravelWeeklyEast.com - Organisers of EIBTM 2003 hope to make Geneva’s farewell show next year the “most innovative industry event ever”.

EIBTM's events director, Debbie Jackson of Reed Travel Exhibitions (RTE), said, "EIBTM 2003 from May 20-23 at Palexpo, Geneva, will be the most innovative and effective event the industry has ever seen.

“We have undertaken extensive independent research and listened to what exhibitors and visitors have to say. We believe the improvements we have planned for 2003 will be ground-breaking and well received."

The expansion of technology platforms and the strengthening of co-operation with industry associations are part of numerous new initiatives. EIBTM hopes to spearhead greater environmental consciousness and technology understanding.

“Executives of associations have limited time, just like any small business. Providing them with a comprehensive educational programme helps them to clarify their role in this industry,” said Terrance Barkan, director of European Association Services (EAS).

Together with the European Society of Association Executives (ESAE) he has further developed the seminar programme for Association buyers.

Newsletter - December 3, 2002