Newsletter - January 7, 2002

2002 – YEAR OF HOPE, OR GLORY?

In this opinion piece Melvin Gold, Managing Director   PKF  Hotel Consultancy Services (UK) and PKF Partner, looks at the prospect for the hotel industry in the coming year.  

For the hotel industry, 2001 was a year   which we always felt was going to be difficult. The heady days of the millennium proved to be a catalyst for an exuberant level of performance across the continent’s hotel industry, almost without exception. Given that, we felt that a hangover was likely to be a consequence. But it was to be worse than that as the industry met with a series of accidents on the way home from the party.

At the start of 2001 all the talk was of the downturn in the US economy. How deep was it? How long would it last? How far would it spread? And  while the talk went on the travelling slowed down. While cities were worrying about economic downturn creeping in from the USA, rural areas of the UK suddenly found a far bigger threat in their midst – foot and mouth disease. There was some spread to the continent but this was limited. However, the television images spread the story far and wide and much more quickly than the disease itself had ever threatened to do. The fallout was felt by the tourism industry, perhaps to an even greater extent than the agricultural community.

Then, having weathered a quite difficult summer season for tourism (especially in the UK), an event took place that was to put all previous difficulties into the shade. 11 September 2001 is a date that will be branded into the annals of history forevermore. The horrific pictures from New York challenged the psyche of every right thinking human being. It did not take long for those connected with the tourism industry to realise that images of aeroplanes being flown into buildings would shake the confidence of the air traveller for some time to come and change the traditional paradigms of the tourism industry, probably forever.

September’s figures for the industry in key gateway cities were awful. October’s were worse, including a 34.1% rooms yield decline in London, the worst single-month deterioration ever recorded by our 29-year-old survey. While average rate in the British capital fell by a similar amount in November, around 15%, the drop in occupancy was less severe – some consolation, but still enough to put most hoteliers off their Christmas pudding.

So basically that’s where we are today. The big question is, what happens next?

This time last year we expected 2002 to be a better year than 2001. The economic forecasts showed improved growth in many European countries, while a wide range of events promised a boost to tourism, not least in the UK with the queen’s Golden Jubilee and the Commonwealth Games in Manchester. But 2002’s party looks like being spoiled by the events of 2001.

In the UK, the queen’s Silver Jubilee in 1977 was one of the most-successful years for tourism. The pomp and pageantry proved a perfect magnet for attracting our cousins from across the Atlantic. The way things feel right now there is no magnet yet invented that can help gold emulate silver, and the Commonwealth Games is also set to be a more-subdued occasion. However, we should not despair entirely.

The Afghanistan situation appears to be drawing to a close, with the extremists and terrorists routed. If that were the end of it then we may see Americans (and others) travelling almost in celebration and undertaking previously cancelled trips. I have to say that I am sceptical about this happening, but some upturn is not impossible. Then there is the marketing money available, not least that allocated to the British Tourist Authority in the wake of foot and mouth and which, to my knowledge, has not so far been spent.

Furthermore, the UK’s situation is far from unique. Paris’s suffering is even deeper than London’s, and Rome, Amsterdam, Madrid and other major gateway cities are all experiencing uncomfortably low numbers. Tourism providers have been hard-pressed in the final quarter of 2001 and the supply–demand equation is sufficiently out of balance to ensure that there are some attractive deals available, not just in hotels but also on airlines, from car rental companies and at some major attractions. Although this is not a pricing issue, low prices will not do any harm in boosting visitor numbers. So we cannot rule out a really major push for the American visitor if there is a glimmer of hope that such a campaign may be successful. A period of calm is a prerequisite for such initiatives and we may get this just in the nick of time.

Then there is the economy. Or in fact the economies, since there are many separate ones that have a bearing on the overall situation. America has been on the brink for the whole of 2001 and 11 September just made things worse. Recently Germany announced it was technically in recession. Japan has been swimming against the tide for a long time, although it is a strong swimmer. No one seems to be able to agree about the UK and no consensus has really emerged. There seem to be more economists about at present who believe we will avoid a recession than those of the contrary view, but then does anyone really know? What we do know is that it is possible to broadly correlate hotel industry performance against economic performance for long periods of time. Therefore, once we get out of the shadow of terrorism, the longer-term trend is likely to more-closely correlate with that of the economies of key source markets and the country of domicile.

To compound this, in 12 continental European countries a brave new dawn arrives with the introduction in January 2002 of the euro in a tangible form. Many questions arise. Will people be tempted to travel across borders just because it is easier to do so? Will there be logistical problems in the distribution of currency that prove disruptive to eurozone countries in early 2002? Will the level of increased spending late in 2001 to clear a backlog of sometimes ‘black’ old currency reduce spending in eurozone economies early in the new year? Will the eurozone countries have enough economic instruments at their disposal to act in the interests of their own economies in more difficult economic times than have been experienced to date? These are all valid questions to which the answers are currently unknown. I put them before you on a rhetorical basis. We will know the answers soon enough. But the reality of the euro will be an event that changes the face of Europe – let’s hope it’s for the best.

So let’s try and pile all this information onto the scales and weigh up the balance of fortune for the hotel industry in 2002. Hope or glory? I have one proviso and two basic scenarios.

The proviso is that I am assuming a period of calm will ensue in the ‘War against Terrorism’ – from all sides. The Israeli–Palestinian conflict will probably continue – it is difficult to see an end in sight although we can but hope – but we must believe that it will not spill over, either into a cross-border regional conflict or into wider international terrorism.

Based on that proviso the optimist in me can see a return to a flat or positive growth trend in key gateway cities around May/June time, assuming that some marketing takes place in long-haul markets this winter to give travellers impetus to travel and that economic news is reasonably positive. Under this optimistic scenario we are still unlikely to see a return to trading levels even at 1999 levels until 2003 at the earliest.

The more pessimistic scenario has it that recovery will not be evident until late 2002 or early 2003 and will take place at a slower pace. This scenario will most likely follow on from poor economic performance, whether driven by the euro or more traditional factors. This would have a heavier impact on domestic markets and the wider hotel markets stretching well beyond the gateway cities. In other words things will get worse before they get better. 1999 level performance would therefore not be seen until 2004, or later.

Forecasting is an imprecise science at the best of times. I lay out the arguments and make no apology on this occasion for a less than satisfactory conclusion. I live in hope of an industry that will return to strong growth in both supply and demand in the medium to longer term. I hope the more optimistic of the above scenarios will come to pass. But in 2002 I suspect that glory will not be a word associated with the hotel industry very often, so we will have to rely on the queen, the athletes at the Commonwealth Games and the successful introduction of the euro. Happy New Year.

Melvin Gold is managing director of PKF's hotel consultancy services department and a PKF partner. He rejoined PKF as a director in September 1996 having previously been a senior consultant with the firm from 1989 to 1992.

PKF - Hotel Consultancy Services
http://www.pkf.co.uk/
New Garden House - 78 Hatton Garden
United Kingdom - London EC1N 8JA
Phone: +44 (0)20 7831 7393
Fax: +44 (0)20 7404 8112
Email: hotels@uk.pkf.com

Source:  PKF – UK

SRS-WORLDHOTELS EXPANDS “PRIVATE LABEL” SERVICES

SRS-WORLDHOTELS, one of the world’s leading and most dynamic hotel marketing and representation consortia, has announced that the German hotel group Lindner Hotels AG will be marketed as a private label client effective January 1, 2001. Lindner Hotels & Resorts is a group of ten city hotels and seven resort hotels located throughout Germany and Switzerland.

Under its private label services, SRS-WORLDHOTELS enables smaller and regional hotel and resort chains such as Linder, Steigenberger Hotels & Resorts and Asia’s Pan Pacific Hotels & Resorts, to take advantage of the group’s extensive worldwide sales, marketing and reservations services while at the same time maintaining a separate group brand identity and its own tailor-made sales and marketing promotions within the group.

"SRS-WORLDHOTELS is not only effective for individual hotels, but also for small hotel groups who do not have their own international sales, marketing and reservations infrastructure, " said Roland Jegge, Vice President Asia/Pacific of SRS-WORLDHOTELS.

"They can still have their own group identify and group sales and marketing promotions, but at the same time take advantage of our global marketing reach."

Currently, SRS-WORLDHOTELS has more than 400 member hotels in its portfolio, representing over 70,000 rooms in 65 countries and 250 destinations worldwide. In 2000, SRS-WORLDHOTELS generated over 1.2 million room nights for its members and a total turnover of US$192 million – an increase of 17% over the previous year.

SRS-WORDLHOTELS’ Asia/Pacific operation has grown dramatically to 20 staff in four offices around the region. The company has over 50 properties in Asia/Pacific and SRS-WORLDHOTELS saw an increase of over 40% in it room night production from the Asia Pacific region in 2000.

Issued on behalf of SRS-WORLDHOTELS by Grebstad Hicks Communications.

For further information, please contact:

Grebstad Hicks Communications                 SRS-WORLDHOTELS

Mr Paul Hicks Tel: 852 2810 0532                Mr Roland Jegge Tel: 65 227 5535

paulh@ghc.com.hk                                         rjegge@srs-worldhotels.com

LODGING EXECUTIVES SENTIMENT SLIPS BACK – ROBUST FEELING OF FUTURE RECOVERY HAS WANED

Durham, N.H., Dec. 31, 2001 -- The current hospitality industry sentiment has executives feeling ever so slightly better than the previous four months about present conditions and still highly optimistic about the future. According to the latest attitudes of lodging industry executives, the Lodging Executives Sentiment Index (LEsI) slipped back to 50.0, flatlined in December, down slightly from November's reading of 54.7. With present conditions inching upward, to 14.7 in December from 9.4 in November, the decrease is attributable to the future situation index reading of 85.3 down from 100.0 last month. This indicates that the robust feeling of recovery has waned a bit among lodging executives. In contrast the December ISM Non-Manufacturing Business Activity Index (formerly the National Association of Purchasing Manager’s Index — NAPM) increased by 2.9% in December to a level of 54.2%. This is the second straight month that the index has been above 50%, indicating expansion in the general economy, and a continued recovery for the services side of the US economy. A LEsI reading of 50+ indicates that the lodging industry is generally expanding; and below 50, the industry is generally declining. The distance from 50 is indicative of the strength of the expansion or decline.

Separately, the executives projected reservations over the next 12 months to a 67.6 Reservations Expectations Index reading in December versus a 73.5 November reading compared to the last 12 months. 76% of the lodging executives rated the current business as “bad,” with the same percentage, 76%, expecting the business activity to be “about the same” in the next twelve months. 

The Lodging Employment Index indicated a slight increase reading 53.1 from 50.0 last month, November. Now recording a year of history, for the employment index lodging industry executives are asked whether, over the next 12 months, do they expect to: 1) add non-management employees, 2) keep the number about the same, or 3) reduce the total number of non-management employees. The US labor market continued to weaken in December with the jobless rate rising to 5.8% and employment shrinking by 124,000. However, the losses were smaller than expected and the worst is likely behind us. While manufacturing continues to lose ground, services, government and construction payrolls increased at the end of the year. 
 

About the Index

Following the Institute of Supply Management’s Index method of tracking leading indicators, the LEsI satisfies the need for real-time information for executive decision making in the lodging industry. The LEsI is a leading indicator based on opinions of lodging executives. The LEsI is a diffusion index--a convenient summary measure showing the prevailing direction of change and the magnitude of change for the Lodging Industry as expressed by executives in the industry. The LEsI has reported a monthly index reading for 56 consecutive months.
 

About LodgingForecast

LodgingForecast publishes several lodging related indicators each month. Using
proprietary forecasting models, researchers at LodgingForecast generate
the LEsI along with the Lodging Industry Barometer (LIB) and several other
indices each month

TAJ GROUP TO SELL 7 HOTELS

The Taj group of hotels, as part of a restructuring exercise, is planning to sell seven out of its 60-odd hotel properties in India and overseas.

Confirming the development, R K Krishna Kumar, managing director of Indian Hotels said: “We feel there are some properties that do not quite fit the Taj profile which we would eventually like to sell. In all, we have identified seven such properties.”

However, Krishna Kumar refused to divulge the names of the properties which are to be put on the block.

He added though that the City Inn —which it acquired along with Blue Diamond in Pune —in Baramati, Maharashtra, was one of them.

According to sources, the reason for selling these seven properties could be their uneconomical size and lack of demand.

"These seven hotel properties clearly are not up to the Taj standards and the image the group was trying to create," Krishna Kumar added.

The Taj group is India's largest hotel chain offering 56 hotels in 40 locations across South Asia and 6 hotels in other parts of the world.

It operates in luxury, business and leisure categories. The luxury hotels division is the largest with a turnover of Rs 451 crore.  

Source: Business Standard - India

THE EURO AND THAI TOURISM INDUSTRY

The Thai tourism industry has welcomed the introduction of the euro, the new European single currency, in anticipation that it will further boost visitor arrivals from Europe to Thailand. According to Tourism Authority of Thailand Governor Pradech Phayakvichien, the euro should help bring a greater degree ofstability to financial relationships between tour wholesalers, travel agents and buyers in Europe and Thai sellers like hotels, tour operators and other tourism products. ?Global financial instability and currency fluctuations are one of the biggest problems facing the industry, especially for small- and medium-sized companies,? the Governor said. ?The euro should make it easier for buyers and sellers to do business and maintain prices.?

The impact of the euro on commercial and economic relations, including the important travel & tourism sector, was discussed at a seminar at the Thai Foreign Ministry on December 27, 2001.

Co-organised by the Economic Affairs Department of Foreign Ministry, European Studies Centre of Chulalongkorn University and TAT, the seminar featured presentations by the Director of Chulalongkorn University?s Economic Research Centre Dr Chayodom Sappasri and Director-General of Economic Affairs Department Mr Pradap Pibulsonggram, as well as Governor Pradech.

As of January 1, 2002, the euro became legal tender in 12 European Union (EU) member countries, namely Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Spain and Portugal. Three other countries, the UK, Denmark and Sweden, have chosen not to join at the moment.

Its introduction, replacing the old currencies like the lire, franc, etc., has been described as a turning point in the world?s financial history. The eurozone countries, with a total population of more than 300 million, are major generators of visitors for Thailand in terms of both arrivals and foreign exchange revenue.

In 2000, Europe (including EU and non-EU member countries) was the second biggest source region of visitors with a total of 2,168,996 arrivals in 2000, an increase of 8.97% over 1999. During January-October 2001, European visitors totalled 1,682,612, up 7.16% over the same period of 2000.

In 2000, European visitors spent an average of 3,174.09 baht per person per day (or US$79.13), contributing about 88.95 billion baht (or US$2.22 billion) foreign exchange revenue to the Thai
economy. That comprised 31.18% of total foreign exchange earnings, and the second highest after earnings from Asian visitor arrivals.

The seminar at the Thai Foreign Ministry was designed to help participants better understand the impact of the euro on Thai tourism-related businesses.

Governor Pradech noted that development of both trade and tourism go hand in hand, especially because strong economies lead to strong travel for leisure, business and conventions/exhibitions.

?Trade within Europe accounts for an average of 20% of global trade. We expect the euro to become an important world currency, similar to the dollar. This will help Europe?s trade-partner countries and nearly all industries including travel and tourism,? the Governor said.

According to TAT analysis, most Thai tour operators still quote their tour price in US dollars or in local European currencies or directly in Thai baht. This will change in future, as the operators will no longer have to quote in several different European currencies.

Many websites also are expected to start quoting their prices in euros.

Within Europe, denominating prices in euros is expected to lower the cost of goods and services by eliminating the costs of exchange conversions and currency fluctuations which are estimated to account for between 0.5% to 1% of the EU?s GDP.

This will make it easier for companies to do business, increase consumer purchasing power and boost intra-regional trade. The economies of the EU are projected to enjoy a 2% growth rate in 2001 and a higher growth rate after usage of the euro becomes commonplace.

The euro was initially inaugurated on January 2, 1999 and underwent a three-year transition period to give time to banks and other businesses to make the shift. The transition period ended on January 1, 2002, when the new euro banknotes and coins were introduced throughout the eurozone.

Additional information on the euro can be downloaded from http://www.visiteurope.com/euro.htm

REED TRAVEL EXHIBITIONS TO CREATE COMPREHENSIVE MICE DATABASE

Reed Travel Exhibitions (RTE), organisers of EIBTM, AIME and the ICCA Exhibition, is to pioneer the world's most comprehensive database of buyers and sellers in the incentive, business travel and meetings industry. The unique venture, which will be offered online at minimal cost, will help to revolutionise an industry intent on capturing quality data for effective, precision targeting. Investment for the project has already been approved and discussions are now taking place with a number of leading database software companies around the world.

Tom Nutley, Managing Director of RTE revealed news of the development, which is expected to take two years to reach optimum levels of excellence. We are good listeners at RTE and have based the success of our 22 years of experience on face-to-face discussions with customers as well as studying regular detailed market research with exhibitors and visitors. It is important to have a deep knowledge and insight into our customers, their processes and needs. ?We are therefore keenly aware of exactly what the industry needs to help it consistently improve and grow. Our mission has always to be customer driven and customer friendly.

"I have never promised anything that we could not deliver and I never will. Knowledge is 'doing', not just 'being' and I want this to be a valuable, practical application of a verified and constantly updated information source for customer 365 days a year.

He emphasised that EIBTM would continue to work with third party intermediaries to identify and recruit buyers. "We value their goodwill and assistance enormously, "he said " and we will not want to change these relationships which continue to develop and grow."

Mr. Nutley said that one of the most important elements of such a huge database is the quality of the information. Because RTE has 11 regional and sector events throughout the world, the company will constantly re-evaluate the quality of the information and its accuracy.

?This will allow sellers and buyers to easily identify better business opportunities and because we already have three events tailored to the international incentive, business travel and meetings industry spread evenly throughout the year, we will be able to arrange appointments with targeted contacts at our next event."

"This kind of knowledge-based investment would be cost prohibitive if it was used for just one event. This is why RTE is able to offer a unique, customer friendly service that goes far beyond the basics of an exhibition.?He said that he had been thinking about an ultimate industry database concept for two years. "I could only drive forward once I was satisfied that the latest IT solution for a new and crucial one-stop, paper-free business proposition was fully operational", he commented.

One-Stop 'Shop'

News of this latest move by EIBTM follows the successful two-year IT development to offer a faster, effective and more efficient paper-free solution to the often heavy burden of administration associated with the build-up to a leading international industry event such as EIBTM.

Now exhibitors can register, book their flights and hotels, access and, if necessary change their travel itinerary as well as make appointments and view their appointments schedule - at the click of a computer mouse."We had some problems with the new software for EIBTM 2001 but these have been ironed out and improvements made to increase the speed, simplicity and efficiency of the programme. "Time is the most precious commodity for our clients and this development will now do much to cut down on time and hassle.""Reed Travel Services (RTS), with its instant access to a range of travel alternatives at preferential prices, is another example of an investment that is only cost effective if it is developed for the kind of wide portfolio of industry events currently operated and owned by RTE," said Mr. Nutley.

Exhibitors and visitors can carry out all their requirements for EIBTM 2002 online, including:

*Booking exhibitor and non-hosted visitor hotels and flights via the newly launched Reed Travel Services, offering competitive prices, instant response and on-screen itineraries* Hosted Buyers being able to view their own personal web page for full details of travel arrangements made on their behalf* Buyers having the ability to change flights and book additional accommodation* Request appointments* View pre-scheduled appointments* Trade visitor pre-registration* Exhibitors can update their product information and display press releasesPractical Customer Service

He cited EIBTM's SPOCS idea as typical of RTE's attention to detail and customer service. "SPOC stands for Single Point of Contact, which means that each exhibitor is provided with their own personal contact during the busy build-up period and on site to ensure that their participation is as problem-free as possible. "This is a concept that we have successfully and uniquely tried and tested on other RTE events and introduced to EIBTM 2001 for the first time. There is nothing more annoying than be passed from one person to another, particularly when the chips are down."The SPOCS are able to smooth away any problems and act as a reassuring personal and dedicated contact from six weeks before the event through to stand building at Palexpo."

*AIME 2002 will be held at Melbourne Convention and Exhibition Centre, Melbourne, Australia 19-20 February and EIBTM 2002 at Palexpo, Geneva 21-23 May.

LONDON’S HOSPITALITY MANAGERS ‘WORK HARD AND PLAY HARD’

Hospitality industry managers in London and the South-East work an average 50-60 hours a week and the divorce rate among them is higher than the national average, according to a survey.

A lifestyle questionnaire carried out by recruitment agency Chess Partnership found managers worked an average 11-hour day. Less than 1% of those questioned worked fewer than 40 hours a week.

The rate of divorce or separation was 33% among managers over the age of 30, just above the national average. The rate among men (43%) was higher than that among women (28%).

But Chess managing director Chris Sheppardson did not think the above-average divorce rate was related to the long hours worked.

"Most managers in most businesses work about 50-60 hours. I was actually quite encouraged by the figure. It is comparable with other professions."

Sheppardson thought the divorce rate was rather related to the pressures of the job. "It is a very stressful business, but even then the divorce figure is very close to the national average."

There was better news on the salary front. More than a third (36%) of hospitality managers over the age of 30 were earning in excess of £40,000 a year.

More than 60% of those over 30 owned their own homes.

Further findings revealed the Daily Mail as the most popular newspaper among female managers, while men preferred The Daily Telegraph or The Times.

Male managers said Caterer & Hotelkeeper was their favourite magazine, while females preferred lifestyle and travel titles.

Dining out was the favourite pastime, although fine-dining restaurants were only popular with those over 40. Only 7% of managers aged 18-39 cited fine-dining restaurants as their first choice when eating out. Italian food was the most popular.

Wine was the most popular alcoholic drink and 63% of respondents were non-smokers. Most people enjoyed two or three holidays a year.

Watching and playing sports was a favoured pastime for males, and also for females under 40.

Said Sheppardson: "What we're seeing is a new generation of managers coming through. They are more sporty and more health conscious."

Chess polled more than 340 managers from the hospitality industry who had attended interviews with the agency. Of those completing the questionnaire, 24% worked in hotels, 27% in restaurants, 29% in contract catering and the remaining 20% in related sectors.

Source: Caterer & Hotelkeeper magazine, 3-9 January 2002  www.caterer.com
             Chess Partnership   www.chess-partnership.com/