Newsletter - July 12, 2002

U.S. hotels post 2nd weekly rev gain since Sept. 11

IWon.com  -   U.S. hotel room revenues rose 2.7 percent last week, as the ailing industry posted its second weekly gain since Sept. 11, largely due to the long July 4 weekend, according to data released on Wednesday.

The jump in room revenues, a widely watched industry benchmark, was fueled by a 3.3 percent jump in occupancy rates that was partially offset by a 0.7 percent drop in room rates, according to Smith Travel Research.

Analysts welcomed the development, but cautioned that the timing of this year's July 4 holiday were partly behind the change.

They said that while last year's holiday fell on a Wednesday, making long weekends difficult to plan, this year's Thursday holiday may have led more people to take off Friday and hit the road for a four-day weekend.

"In our view, the increase ... is primarily the result of an unfair comparable week resulting from July 4 occurring on a Thursday rather than Wednesday last year," wrote Bear Stearns analyst Jason Ader in a research note. "We do not see this one week improvement ... as the beginning of a sustainable trend of week-over-week positive (room revenue) growth."

Lehman Bros. analyst Joyce Minor said the strong week was driven largely by vacationers, who have show more willingness to keep traveling despite the economic slowdown.

Business travel has been sluggish for much of the year. As a result, room revenues, after improving steadily from double-digit losses at the year's outset, have stalled at about 5 percent down compared with year-ago levels.

"We are hesitant to get too excited about this week's results as a closer look at trends indicate business travel is less a driver of the week's results than leisure travel is," Minor wrote in a research note.

Apart from last week, the only other week in which room revenues rose since Sept. 11 was the week ended April 13, which was tied to the Easter/Passover holiday . Easter this year fell in March, but was in April the year before.

Since travel over holidays tends to be lighter than other periods, this year's second week of April, which had no holiday, easily beat out the prior year week that included the Easter/Passover period.

The nation's largest hotel operators are Marriott International Inc. (MAR), Starwood Hotels & Resorts Worldwide Inc. (HOT) and Hilton Hotels Corp. (HLT).  

Trust is more critical than service, price or brand in a food-service purchaser-supplier partnership, new study at Cornell finds

Trust and effective communication are more important to food-service purchasing agents than good service, price or brand, according to a new study from the Center for Hospitality Research at the School of Hotel Administration at Cornell University.

“Strong partnerships between purchasers and suppliers have come to be viewed as a competitive advantage for food and beverage purchasers who are looking for long-term economic success,” says Judi Brownell, professor of organizational communication at Cornell. “This partnership is cemented by trust, communication and personal connections. Turnover in supplier representatives, therefore, is emerging as one of the most troublesome challenges facing purchasers today.”

With Dennis Reynolds, Cornell assistant professor of food and beverage management, Brownell surveyed 73 food-service purchasing agents from several segments of the food-service industry nationwide.  The study was sponsored by Cornell’s Center for Hospitality Research (CHR) and Richmond Events, an organizer of strategic business forums on cruise ships based in London and New York. The four-part survey included open-ended questions regarding which supplier behaviors and characteristics were most important to purchasing agents in developing strong partnerships. The findings are published in a 30-page CHR report, “Strengthening the Purchaser-Supplier Partnership: Factors That Make a Difference,” which is available online at no cost from Cornell at   http://www.hotelschool.cornell.edu/chr/

“Trust may be the single most important ingredient in making the purchaser-supplier partnership work,” says Reynolds. “Trusted suppliers are described as communicating effectively, listening well and demonstrating a willingness to work collaboratively to anticipate and solve problems.” They also were perceived as being straightforward and enjoyable to interact with.

The researchers found that more than 55 percent of the purchasers surveyed communicated in person with their suppliers at least once a month and nearly half also communicated by e-mail at least once a week.

The Center for Hospitality Research at Cornell’s Hotel School conducts and sponsors research studies aimed at improving the hospitality industry’s fundamental operating knowledge. For more information, see the CHR web site at www.hotelschool.cornell.edu/chr , or call 1 (607) 255-9780.

Jurys Doyle profits fall 8%

The Irish Times  - The Jurys Doyle hotel group has reported weaker profits in a difficult year but remains optimistic its business will show signs of improvement in the Autumn.

In the year to the end of April, the hotel group's profits declined to E51 million, down 8 per cent on the previous year. Jurys Doyle chief executive, Mr Pat McCann, blamed a combination of foot-and-mouth disease, the negative impact on tourism following the US terrorist attacks on September 11th, 2001, and slower economic conditions for the downturn.

The figures were in line with analysts' forecasts and the group's own indication earlier this year that it was experiencing a difficult trading environment .

Mr McCann said the company had delivered a "creditable performance" for the year. "The group performed very well in a very difficult year. We have achieved reasonable levels of profits and despite the upheaval we remain on track with our growth strategy," he said yesterday.

Earnings per share fell by 8 per cent to 70.5 cent. Shareholders will be paid a dividend of 21.9 cent per share, a 10 per cent increase on 2001.

Some 50 per cent of the group's profits were generated in the UK market, where it operates a number of hotels and budget-style Jury's Inns. The Irish market contributed 39 per cent and the US, where it operates three hotels, brought in 11 per cent of day-to-day profit.

Turnover rose by 6 per cent to E266.4 million during the year, with lower occupancy rates and tighter margins depressing profitability. During the 12 months the group's average occupancy rates were 5 per cent lower at 75 per cent, while the average room rate fell by E2 to E93. Demand for meeting rooms was strong while there was some improvement in margins on food and beverages served throughout the group.

Mr McCann said its four- and five-star hotels in Dublin, which include the Berkeley Court and the Towers at Jurys, were affected by the weaker economic conditions. Profits at its Washington hotel were down 7 per cent, but the group maintained UK profits.

The Inns made another solid contribution, accounting for six out of the group's top eight best performers in terms of occupancy rates during the year. The Jurys Inn in Birmingham was the second-highest earner across the group, with operating profits from the Inns up 23 per cent overall.

Jurys Doyle revalued its properties during that period which added a further E182 million to the value of its assets. It has been reviewing the range of hotels within the group and recently sold two, Jurys Skylon in Dublin and Jurys Waterford Hotel, for E14 million to Donegal hoteliers Brian and Sean McEniff.

Mr McCann said the group has no plans to sell any other hotels even though its continues to receive unsolicited offers for them.

Sydney to top the world

IMA.com  -  Sydney is set to become the top city in the world for conventions, based on forecast figures compiled by the International Congress and Convention Association for 2002.

Currently it is sitting at the number five spot behind London, Paris, Madrid and Vienna. But early indications for 2002 make Sydney the most popular destination, with 40 meetings proposed and 16 confirmed.

The Sydney Convention and Visitors Bureau (SCVB) said the 16 meetings were worth about A$57.9 million (US$29.4 million), a 60 per cent increase on the value of meetings won this time last year.

In 2000-2001, official figures showed Sydney hosted 49 meetings, London had 56, Madrid and Paris had 55 each and Vienna had 54.

Sydney moved ahead thanks to its exposure from the Olympics. The SCVB’s managing director, Mr Jon Hutchison, said the encouraging aspect of the results was that not only were more delegates turning up, but they were big spenders.

He said the results of the fifth Sydney Convention Delegate Study by the SCVB showed that international convention delegates to Sydney last year spent A$749 per day, around nine times more than other international visitors.

“International convention delegates are the big spenders of Australia’s tourism industry,” Mr Hutchison said.

“New South Wales’ (NSW) meetings and exhibitions sector is worth more than A$7 billion to Australia, and Sydney holds the largest portion, valued at A$2.3 billion.”

The study showed significant increases in total spending in areas such as domestic air travel (up 87 per cent), shopping (up 21 per cent), tours (up 78 per cent), accommodation (up seven per cent) and restaurants (up 10 per cent).

“During this time of economic instability, and while the tourism industry is facing huge challenges, business tourism is demonstrating its resilience and ability to produce economic benefits for Sydney and Australia,” Mr Hutchison said.

“As a result of the global economic slowdown, international tourists are spending less.

“However, this study shows visitors attracted by conventions are defying this trend and continue to spend at high levels.

“It is not profitless volume tourism. This is a remarkably powerful income stream, new dollars, which goes straight to the core of the Sydney economy and generates income for other parts of NSW and Australia.”

Hong Kong:  Centre undergoes review

Blueprint for the proposed exhibition centre at the Hong Kong International Airport is dissected as the government is lobbied on all sides.

IMA.com   -  Controversy is swirling around the planned exhibition centre to be located at the Hong Kong International Airport, with legislators refusing to approve spending on the project based on the existing plans.

This has meant that Invest Hong Kong, the Government agency overseeing the project, will have to amend the plan and return to the legislature for funding approval.

Now industry group Hong Kong Exhibition and Convention Organiser’s Suppliers Association (HKECOSA), is lobbying the government to double the size of the proposed facility.

Chairman, Mr Louis Cheng, was quoted in a local newspaper saying a 49,496m2 facility was useless given the constraints already being faced by event organisers at the existing Hong Kong Convention and Exhibition Centre (HKCEC). Under the proposal, a 49,496m2 facility would be built by 2005 as the first phase, to be later expanded to 79,120m2.

Mr Cheng said: “We don’t want to sound negative or critical about the project, since it’s something that we support and feel that is needed by the community. We just want to make sure that the government spends its money wisely.”

Mr Cheng said there was a long waiting list at the existing convention centre in Wan Chai which also has plans to expand including an underground exhibition hall.

He said: “There is demand for a (79,120m2 to 89,240m2) facility right now. But we feel the Trade Development Council’s proposals to expand the HKCEC are unrealistic given the traffic congestion in Wan Chai.”

However, Airport Authority (AA) commercial director, Mr Hans Bakker, insists that plans for the new centre would proceed as normal. The AA is currently tendering for an exhibition operator for the centre.

He said: “We have spent the last few months visiting exhibition operators in Europe and the US as well as presenting the SkyCity concept to local developers.”

Mr Bakker said exhibition organisers in Germany had endorsed the idea of opening the exhibition centre with 50,000m2 with additional outdoor capacity.

“The idea is to expand the centre to 80,000m2 but that is also up to the developer. We have the room to expand it to 100,000m2 if necessary.

“We have also spent time visiting exhibition centres overseas and learning from their experience. While the focus will be on the exhibition area we will also provide smaller function areas for exhibitors and delegates to hold conferences and briefings.

“We have also spent time talking to HKECOSA to get an idea of what the local industry wants. They told us they would like to see a more basic centre which is also strong enough to cope with heavy machinery. Of course, they also wanted a lower rental!”

Mr Bakker said it was important to remember that the centre was part of an overall project called SkyCity with an integrated transport system, hotel and business and retail area.

He said: “2005 is the opening key date because Disneyland will be opening in that year and we want to be able to offer a complete integrated transport system out on Lantau.

“The numbers forecast for the first year of visitors for Disney is five million with a majority from the mainland.

“The Airport Express train will run over to the exhibition centre which will also house a car park. A cross-border ferry will open next to the hotel and a coach terminal, opposite the main air terminal, will also be operational.

“The transportation centre for cross-border coaches will also be built. Right now we have 160 tour coaches a day coming through the airport to and from the mainland and that number is set to rise.

“The terminal will have proper waiting rooms with screens showing the numbers of arriving and departing buses - there is nothing else like it in Hong Kong.

“On top of that terminal will be a retail area and a check-in centre for the tour groups and maybe an IMAX theatre.”

Study: Americans to Travel on Credit This Summer

Half of all Americans plan to take a summer vacation more than 75 miles from home, and nearly a quarter of them (23%) will charge their expenses to credit cards, according to a recently released survey by the Cambridge Consumer Credit Index.

Based on the responses of people who have called the company for credit counseling services in June, the study suggests that wealthier and older Americans are “vacationing far more than lower-income and younger Americans,” says spokesperson Jordan Goodman. Moreover, when on vacation, “they are feeling free to use their credit cards much more,” forcing a six-point surge in the July index—a move which represents Americans’ increasing willingness to assume additional debt.

The jump follows a six-point gain in June.

STR: RevPAR and Occupancy Down Average 5 Percent and 2 Percent, Respectively, in June

Preliminary data from Smith Travel Research suggest an average 4 to 6 percent year-over-year decline in domestic RevPAR in June. Occupancy is expected to be down 1 to 3 percent from the same period last year.

The midscale without F&B segment remains least depressed across both performance indicators, with RevPAR down 1 to 3 percent and occupancy flat to down 2 percent. By comparison, the upper-upscale segment expects to report a 7 to 9 percent decline in RevPAR.

Final numbers will be released by month’s end.

Much Ado About Technology

Article from the June issue of Lodging Magazine    By Robyn Taylor Parets

Assessing hotel automation in the post-dotcom era

There's no denying that technology evolves rapidly. In the hotel industry, some systems have made such major transformations that many companies have had to completely re-adapt their business plans— or go back to the drawing board altogether.

Over the last 18 months, the industry has witnessed massive changes in the areas of high-speed Internet access, e-procurement, reservations, database management, and more. While some chains, like Wingate Inns, continued to include all sorts of technological bells and whistles, others have chosen, or been forced to, scale back their offerings.

The new "high-tech" hotel brands, such as Matrix eSuites Hotels and InternetInns.com, have backed off their aggressive initial development plans. Last June, Matrix said it hoped to have 30 hotels within two years; it has broken ground on nine properties, and its first hotel is scheduled to open next March. InternetInns.com, which envisioned having 50 properties under development by December 2001, has one property open, plans to open a hotel and convention center in Bethany, Oklahoma by next year, and expects to announce its next 14 hotels soon. The company has also abandoned plans to franchise—at least for now. "We're not jumping headfirst into franchising. All of the hotels will be under our corporate umbrella," says founder David Littlefield. Both of these mid-market offerings plan to feature an array of standard tech-focused amenities, including high-speed Internet access, in-room computers, ergonomic work stations, and more.

Reasons for the retrenchment include the economic downturn and the bursting of the dotcom bubble, but lodging experts say technology is already showing signs of rebirth.

"Technology for technology's sake has withered," says Carl Cohen, vice president of broadband business at Starwood Hotels & Resorts Worldwide. "Investments are being reviewed more carefully for economic returns and the impact on guest experiences."

Perhaps the best example of a technology that has undergone growing pains is high-speed Internet access. Four years ago, high-speed access from guestrooms and meeting space was the talk of the industry: vendors were popping up left and right, wiring hotels across the country.

Things sure have changed. Although high-speed Internet access is still a top priority for hotels, the way in which they're approaching the business differs vastly from just a couple of years ago. There no longer are dozens of vendors offering high-speed and wireless installation services. Many of these companies have gone out of business or have had to restructure, says Rich Jackson, AH&LA vice president/CIO and staff liaison to the association's industry-wide technology committee. Some of the largest high-speed companies, including CAIS Internet (now called Ardent Communications), pulled the plug and refocused on selling DSL connectivity to other industries.

So what was the problem? According to lodging executives, a number of high-speed providers—and their hotel clients—expected road warriors to immediately begin plugging in and paying an average of $9.95 daily in access fees. Most of these providers installed the networks for free and expected to earn their money on a revenue-share basis, says Mike Kistner, CIO / vice president of Best Western International.

"There was tremendous promise, but these companies were coming to major hotel groups with business models that didn't make sense," Kistner says. "They didn't really know if they were going to make money. It's been a real mess for everyone." And, adds Pegasus Solutions' senior vice president of property systems and services Robert Bennett, "High speed never really exploded the way everyone thought it would."

Part of the reason travelers weren't taking greater advantage of high-speed access was that they often needed to configure their laptops for compatibility or weren't able to access their corporate networks.

Michael Squires, president of hospitality consulting firm Softscribe Inc., agrees. Two years ago, high-speed access "take rates" were less than 5 percent. "Guests either didn't want to pay the $9.95 or there were too many issues to make it work with the protocol."

Carlson Hospitality rolled high-speed access out to 100 hotels in early 2001, only to cut them off early this year when its high-speed and videoconferencing provider, VirtualLinc, went out of business, says David Sjolander, Carlson's vice president of hotel information systems. Carlson promptly went back to square one and selected two preferred providers (GuestTek and Goldentree Communications) for its 700 primarily franchised properties. This time around, Sjolander says, Carlson is recommending that franchisees build the access fee into the room rate.

And even companies that didn't have to start over again have amended their relationships/agreements with vendors. Marriott International was pleased with the service provided by STSN, which "was fast, easy-to-use, and guests could plug-and-play with no reconfiguration," says Lou Paladeau, vice president of technology business development. But when the free-installation model started to crumble, Marriott stepped in and changed its deal with STSN. Today, Paladeau says most hotel companies either participate in the initial capital outlay or work with the vendors under a lease agreement.

High-speed access is readily taking off with Marriott's guests, even though the hotels still charge a $9.95 daily fee. Other hotel companies are now teaming with vendors to aggressively rollout high-speed service and other features like in-room billing and video on demand. Hilton Hotels Corporation recently announced that it has selected Montreal-based TravelNet Technologies' DataValet as the high-speed solution for its North American properties "because it provided Hilton with a comprehensive communications platform," says Stuart Broster, president of Hilton Canada.

Other companies, like Starwood and Fairmont Hotels & Resorts, have opted to partner with networking giant Cisco Systems to build out their broadband infrastructure. Both are members of the Cisco Mobile Office, an initiative that provides travelers with secure, high-speed network access via in-room ports and wireless access from public spaces like lobbies and restaurants.

Balky Start for E-Commerce

E-procurement is yet another concept that has experienced mixed results. Two of the larger companies, Zoho and Hsupply.com, folded. Some of the larger survivors which provide e-commerce software and services so chains can offer online buying services to their hotels include PurchasePro and Avendra. (Avendra, which was started as a joint venture between Marriott, Six Continents, Hyatt, ClubCorp, and Fairmont, is now privately operated.)

The problem with e-procurement was not only the fact that many of the e-commerce companies didn't make enough money to cover their capital costs, but that suppliers realized that they were going to lose their relationships with hotels by selling to a third-party aggregator versus selling to multiple properties, says Scott Anderson, president of High Country Hospitality, a hotel management and technology consulting firm, and chairman of AH&LA's Technology Committee.

"As a result, some major vendors have created their own password-protected intranets, where hotel employees can log on and buy direct," he says. "On the flipside, the stronger e-procurement companies will likely survive, including Avendra, GoCo-op, and PurchasePro. But not without growing pains."

Besides flawed business models, many hotel operators didn't factor in the time and money necessary to train employees in the operation and use of e-procurement systems, says Julian Sparkes, managing partner of Accenture's Travel Services Industry Group. Executed properly, e-procurement can save a hotel both time and money, he says.

Best Western, for example, implemented BestWestern-supply.com in October 2000. Fueled by PurchasePro, the system offers the chain's members 30,000 items, complete with product descriptions and photographs, says managing director Rich Bennett. "We've had great success in the last couple of years in growing our sales to members," Bennett says. "Our charter is to leverage the buying power of the world's largest hotel chain. The more people use it, the more they see the time and money they can save."

Rolling Right Along

Despite the tight economy, some technologies have forged right ahead. Web-based reservations, integrated property management systems, and in-room entertainment technologies seem to be gaining ground daily.

"We have found the least amount of disillusion is the whole area of distribution and the way we sell rooms through the Internet," Sjolander says. "That never slowed down. We try to concentrate our inventory on our website and on other travel sites. We want to be everywhere the guest wants to buy."

Marriott has likewise watched its online bookings increase dramatically. Last year, the company generated more than $900 million in online bookings, up from $570 million in 2000. Bookings on Marriott.com jumped from $430 million in 2000 to $715 million last year. And customers booked more than five million room nights through the company's website in 2001—nearly double the amount booked in 2000.

Robyn Taylor Parets is a contributing editor of Lodging who writes frequently on technology.