"While
Travel Agent electronic hotel bookings reflect the challenges the
hospitality industry faced in the first quarter, consumer online bookings
made over the Internet continued to show growth," said Bruce W.
Mainzer, senior vice president of marketing for TravelCLICK. "Going
forward, we expect GDS bookings in 2002 to reflect improving industry
performance." Performance
by Market Segment
Top
Destination Markets
To receive a free listing of first quarter results by top 50
cities worldwide in electronic bookings, please e-mail emonitor@travelclick.net. CONDO
HOTELS – EVOLUTION TOWARD A COMMERCIAL HOTEL STRUCTURE By:
Michael T. Sullivan &
Marshall A. Bendelac
HVS Capital Condominium hotels, or
condo hotels, have become an increasingly popular format for development,
particularly in resort-oriented locations. Obviously, the nightly
rental of condominium units, which are placed in a rental pool by
condo-owners, is nothing new, as this practice has occurred for years in
resorts and a few urban locations. What has changed, however, are
the scope and nature of these properties and the relative relationships
between the condo-owners, property managers, traveling customers, and
project developers. This article will explore the scope and nature
of these changes. In this new generation of condo hotels, the size and
complexity of the physical development of these properties has tended to
increase. The individual condominium units are designed to have
ample lock-off capabilities, which can dramatically multiply the overall
key count of a condominium property (to provide individual
bedroom/bathroom configurations). Additionally, these properties offer a
wide array of amenities and services, similar to those found at typical
full-service hotels. Condo hotels now often feature expanded food
and beverage facilities, recreation, front desk/concierge services,
retail, and generous amounts of meeting space. Previously, these areas were managed and maintained by either
the project developer and/or a Homeowners’ Association (“HOA”).
Under such a structure, rooms were rented on a best efforts basis (at
times, by a hired local operator) without the benefit of aggressive
marketing or a widespread reach to attract vacationers. Today, the
industry has shifted its strategy toward the outright sale of the hotel
management opportunity to nationally-affiliated hotel companies,
operating these properties similar to that of a conventional hotel
operation. This has been achieved by separately deeding all of the
hotel-like features mentioned above as individual condominium units (even
including the maids closets on each floor). These commercial condos
are then sold to a hotel operating company. Along with rental
agreements from the individual condo buyers, this allows the hotel
operator to effectively manage the property as a hotel. From the
traveler’s perspective, these properties (other than having larger guest
room facilities) seem to offer an experience identical to that of a luxury
resort hotel, in terms of services and amenities. From the condominium buyers’ points of view, these types of
developments can offer enhanced financial returns when owners choose to
place their units in a rental pool. During periods in which owners are not
utilizing their units, the hotel operator manages the condos. By
capitalizing on a hotel’s national affiliations, reservation systems,
brand recognition, and management expertise, unit owners are more likely
to receive a higher level of rental income through a rental pool agreement
with a recognized professional operator, despite having to surrender a
portion of their units’ revenues. This type of development also provides an interesting
approach for hotel operators. In some respects, it is similar to
owning a hotel outright, because the operator does own some real estate (i.e.,
the commercial condominium units appurtenant to running a hotel), however,
individual condo buyers own the actual guest rooms. As such, the
overall cash investment by the manager is not as great as that found in
typical hotel deals. To a certain extent, the manager is essentially
granted a long-term management contract, because a long-term management
relationship is expected to exist with the condo owners. The
difference lies within the fact that condo hotel operators are able manage
these properties without a specified termination date, since they actually
own real property in the project (in perpetuity). In order to place a unit in the rental pool, a management and
rental agreement is signed between the unit owner and the hotel management
company. This agreement provides for a number of things, as follows.
A portion of the revenues received from the nightly sales of rental
pool units flows through to the condo owners. The hotel management
company retains the remaining portion of the rental revenue stream. Additionally,
a usage agreement (stipulating frequency and notice requirements for owner
usage of condos) is implemented between condo owners and the
operator. Furthermore, the agreement will provide for the impound of
an FF&E reserve (maintained by the hotel operator). The FF&E
furnishing packages (including replacements) within rental pool condos
need to conform to certain standards. Failure to comply with such
standards may either necessitate immediate refurbishment (at the unit
owners’ expense) or the expulsion of non-conforming condos from the
rental pool. Given that owners of such units are attempting to
maximize their rental revenues, they are so induced to keep their
furnishings in optimal condition. Although, several such incentives exist for prospective condo
buyers to purchase units in a condo hotel and place them in the rental
pool, typically, owners are not legally obligated do so. Directly
renting one’s unit to others or hiring a third-party property manager to
oversee the renting of a unit, is possible. However, this renting
option is usually not a very viable approach, since guests may not have
full privileges and/or usage of areas otherwise controlled by the hotel
manager. Financial responsibility for maintenance and repairs of
common space is allocated among condominium unit owners, based on their
pro rata shares. An HOA is usually instituted to retain ownership of
such areas and oversee the collection of dues from unit owners. Such
dues typically cover reserves, common area maintenance, property
insurance, and utilities expenses. Real estate taxes are usually
paid for directly by the condo owners and the hotel manager pays for its
costs of operations (i.e., salaries and other direct hotel
expenses). Developers of condo hotel projects are attracted to this
development approach due to their ability to quickly monetize the
management function of the property. In essence, the sale of the
hotel management opportunity becomes akin to another condo unit that can
be sold for immediate profit. If the hotel management opportunity is
sold upfront (during the sell-out phase of the residential
condominiums), the developer may be able to receive rental revenues from
the completed, but unsold units, being rented nightly to hotel guests. In undertaking this type of approach, it is also important to
note the potential for securities law issues to arise out of the sale of
condo hotel units. Sales of condominiums may be deemed to be the
sales of securities if certain conditions exist at the time of sale.
Such terms may include the expression of projected rental revenues to
potential buyers, execution of long-term management contracts (10 to 25
years) with a hotel operator for the management of units, absence of a
sales force control program, requirements of rental pool participation,
and required rental company stipulations. In order to avoid coming under the scrutiny of any federal or
state securities agencies, however, developers may take several simple
preventative measures while planning condo hotel projects. These may
include refraining from setting rental revenue expectations for
prospective buyers (the responsibility of generating financial projections
should lie with the interested purchasing parties); instituting a
third-party agent to oversee the sales of condo units and distribute
rental program information, thereby, relieving developers from directly
promoting rental programs; permitting condo owners to either rent their
units to third parties or not rent their units at all; and allowing owners
to appoint a rental management company of choice to manage the rental of
their units (although selecting a manager other than the condo hotel’s
management company would be impractical in attempting to effectively
maximize rental income, as previously described). This is a new and interesting approach to the development of
lodging properties. As its use becomes more commonplace in the
market, levels of understanding and acceptance by both the lodging
industry and the condo buying universe is expected to increase. Michael T. Sullivan KOREAN
HOTELS MISS WORLD-CUP BOOM If there was one particular segment of the economy
that expected a boom during the World Cup, it was hotels. But with the
finals in full swing, there are empty rooms everywhere. For
another, the business people who normally fill up the rooms during the
peak months of May and June right before the hot summer season and
vacation have decided to keep away. Under
contracts 'stronglyrecommended by the Federation Internationale de
Football Association or FIFA, Byrom exercised an exclusive right to 70
percent of all hotel rooms and they had little regrets about returning 75
percent of them at the last minute at the end of April. The
result is that aside from the Shilla and the Grand Hyatt Seoul, which are
headquarters and VIP accommodations for FIFA, it has turned out to be a
good time for hotels to do facility renovations. At
the Hotel Lotte in downtown Seoul, which recently completed extensive
renovations in time for the World Cup, no more than 70 percent of its
1,486 rooms are occupied, 15 percentage points lower than last June,
toward an optimistic monthly average of 75-80 percent. The
situation is similar at the Novotel Ambassador, a deluxe hotel in southern
Seoul which usually boasts of average room occupancies of more than 90
percent, where 25 percent of the rooms are idle. The
Seoul Plaza is recording a room occupancy rate of 75-80 percent as with
the Grand Hilton, the new branch of the Swiss Grand Hotel, which is
reporting a depressing 75 percent. ''Some
of the hotels where national teams are staying are doing well, perhaps not
as well as expected, but the situation overall is disappointing for most
other deluxe hotels, said one marketing official. He
said the World Cup would have been a golden opportunity to organize
international events during which participants can engage in business and
yet make time to catch a few matches. ''Normally,
events of such scope and size, which take up more than 100 rooms, need to
be organized at least a year in advance. We simply received no information
about the lack of demands for rooms from Byrom until way too late, the
marketing official complained. However,
unlike the reportedly obvious errors that Byrom made in selling World Cup
tickets, for which it is facing legal action by tournament organizers and
the Korean government, it has yet to be found to have violated any
contracts with the domestic hotels. ''There
is little that we can do but this is criminal. If we had the time, we
would have absolutely no problem completely filling our rooms, said one
general manager of a Seoul hotel. Meanwhile,
most Seoul hotels are refraining from slashing room rates in an effort to
attract more guests, as they perceive this would lead to cutthroat
competition and damage the market in the long term. ''For now, we are sending out information to frequent guests of the current situation and saying they will have no trouble doing business in Korea during the World Cup, the manager said, adding that the focus will be on selling rooms once the World Cup is over. ST REGIS HOTELS SEES SIGNS OF RECOVERY AFTER SEPTEMBER
11
Atef
Mankarios, president and chief executive of St Regis Hotels & Resorts,
admits to becoming a little emotional when his car pulled up outside the
Lanesborough hotel at London's Hyde Park Corner last week. Although
it was his first visit since St Regis won a contract to operate the
95-room hotel, it was Mankarios, in his previous incarnation as head of
Rosewood Hotels & Resorts, who had conceived and implemented the
conversion of the listed 173-year-old building into London's most
exclusive hotel. Despite
his four-year absence, he says he immediately recognised most of the faces
in the welcoming party, including the man he had appointed to run the
Lanesborough when it opened ten years ago, Geoffrey Gelardi, who is still
its managing director. "I
didn't know what to expect," he says. "The car pulled up as it
had a thousand times before, but when I saw all the faces I teared up. It
was a very emotional return. I didn't realise one could get so attached to
a building." The
reputed bid of Pounds 120 million, for a hotel with just 95 rooms, would
have made the Lanesborough the most expensive hotel ever sold. However,
the impact of September 11 on international travel, particularly from the
Lanesborough's key US market, meant that the deal fell apart and ADIA has
decided to stay put for the time being. Although Rosewood was reckoned to
have done a good job during its ten-year tenure, consistently achieving
the highest average room rate in London, the expiry of its contract was an
opportunity for ADIA to reappraise how the hotel was run to see whether it
would benefit from being part of a bigger, more powerful group than
Rosewood. "The
basic product is just about as good as it can be," says Mankarios
gazing around the plush suite in which we are sitting. "There are
areas we will work on, but the biggest impact will be from the incredible
infrastructure in areas like sales and marketing that comes with Starwood.
"It
is no secret that occupancies have not been the same for the last couple
of years. It's nobody's fault. But when we left in 1998, occupancy was at
just over 91 per cent and I believe it was in the mid-70s last year. There
are lots of reasons, but our focus is to build back to those levels and we
have the infrastructure to do it." Mankarios
says he has no plans to make any changes among the nearly 150 staff, some
40 per cent of whom have been at the Lanesborough since the day it opened
- an incredible feat in an industry not noted for its staff retention
rates. The only real change will be an expansion of Gelardi's role to
vice-president, Europe and Middle East, for St Regis. At
the moment, that means overseeing the Grand Hotel in Rome, formerly part
of Ciga Hotels and one of ten other hotels in the St Regis collection.
However, Mankarios admits he has his eye on a number of other Starwood
hotels that, with some investment, might be suitable for St Regis. These
include two other former Ciga Hotels, the famous Gritti Palace in Venice
and the Grand in Florence. Although both are up for sale, together with
the rest of Ciga, Starwood has said that it will sell only if it can
retain a management contract. Mankarios,
together with the rest of his ex-Rosewood management team, was recruited
by Starwood a year ago to establish St Regis -a name taken from the
98-year-old St Regis Hotel in New York -as the company's most luxurious
brand. He
says that he is now ready to move to the next stage of development,
adding: "We are on a very aggressive growth path. I would like to
have 30 St Regis hotels within a five to seven-year period." Although
St Regis, like the rest of the hotel industry, has suffered a sharp fall
in business since September 11, the Egyptian-born Mankarios says that
trading is improving all the time. "I think you will see a full
recovery by the end of the second half of this year,'' he says. "But
we are already seeing a strong recovery." For
now, he is focusing his attention on getting the Lanesborough, famous for
its 24-hour butler service in all rooms, back to its levels before 2001,
when it recorded an average room rate of Pounds 463 and turnover of about
Pounds 24 million. And he clearly relishes the prospect. "I always believed I would have the Lanesborough again," he says. "I used to say to Geoffrey (Gelardi), 'I'll be back'." MONGOLIA – INTO THE GREAT WIDE OPEN TravelAsia.com
- Mongolia, land
of the Gobi Desert, boundless steppes, nomadic herdsmen and Genghis Khan,
is a very big country (1.5 million sq km) with very few people (2.4
million). Historically a province of China, the country aligned itself
with the Soviets in 1921 and a communist regime was subsequently
installed, one that lasted almost 70 years. Now, open and democratic
tourism to Mongolia –– which has some of the most expansive and
uninhabited terrain on earth, is thriving. And the government is promoting
‘Visit Mongolia 2003’ next year. Hongkong’s Mongolian
consulate representative Damdinjamts Turbileg says visitor numbers
currently average more than 100,000 per year, and are rising. He says the
tourists come primarily from Japan, Korea, China, Russia and the West and
each tourist stays two weeks on average. In the year 2000, Mongolia had
158,205 foreign visitors from 125 different countries, of which 33,232
were tourists: 25 percent were from Japan, 22.2 percent from China, 10.7
percent from Russia, eight percent from the US, 7.3 percent from Korea,
4.5 percent were Germany, 2.5 percent from the UK, and 2.1 percent from
France. Mongolia’s extreme
weather conditions mean most tourists visit during the short summer
season, which lasts from late May until mid-September. The highlight is
the Naadam Festival that arrives this year from July 11 – 13. The
festival is an ancient tournament featuring wrestling, archery and horse
riding. Turbileg says visits to Mongolia outside the summer months are
still possible although the weather may be “quite chilly”. Travel Advisers
director Brian Smith sends “a trickle” of visitors to the country each
year because of the “very short season”, which does make the country
fairly expensive to tourists as organisers have only a short period of
time to make their money. He says Mongolia’s greatest asset is its
incredible expanse of wide open spaces. Smith says getting visas used to
be a problem, but not any more, as the political situation in the country
is now relatively stable. He says the tourism facilities in the country
get better every year. Excella travel managing director Surrinder Sethi
says until recently Mongolia was only a destination for the bold, “it
was only writers and adventurers that went there,” but says things are
changing as the country opens up. Karakorum Expeditions
specialise in adventure holidays around Mongolia and was awarded the
Pacific Asia Travel Association – 2002 Gold Award for Ecotourism at this
year’s Pata conference in New Delhi. Managing director Graham Taylor
says getting a 30-day tourist visa with a 30-day extension is very
straightforward, wherever the visitor is from. He points out that visas
are not required for US passport holders. Turbileg adds that with regard
to visas, it is important not to pigeonhole the country alongside some of
its more bureaucratic neighbours. “No need to compare Mongolia to
Russia. Mongolia is a very flexible country. we have an open door policy
and try to give less hassle to our visitors,” he says. Taylor says the
pitfalls to running a company in Mongolia include its ambiguous and
conflicting laws and the short travel season. “Otherwise Mongolia is
very open to foreign investment.” To get to Mongolia
there is a train service from Beijing twice a week, and direct flights
from Tokyo via Mongolian Airlines (MIAT), Beijing via Air China and MIAT,
Seoul via MIAT and Korean Air, Berlin via MIAT and Moscow via Aeroflot.
Taylor admits Mongolia is relatively expensive compared to other Asian
destinations due to the short season and high domestic costs. He advises
clients to have a budget of US$100 to $150 per day, depending on the
nature of the trip. Asiahotels.com
consulting editor John Chan says the capital city Ulaanbaatar does have a
few government-owned mid-range hotels of reasonable standard though more
are in the pipeline. “At the moment, the hotels are in Ulaanbaatar. Away
from the city, accommodation tends to be by gers (nomads’ tents).” Rooms at prominent properties like the Continental, Tuushin and Chinggis Khan hotels range from $70 to 170 per night. CEO PROVIDES A BRIEF HISTORY AND OVERVIEW OF PEGASUS SOLUTIONS TWST interview with John Davis III, Pegasus Solutions / JOHN F. DAVIS III is Chairman of the Board and Chief Executive Officer of Dallas-based Pegasus Solutions, Inc. TWST:
Could you give us a brief history and overview of Pegasus Solutions (Nasdaq:PEGS)?
Mr.
Davis: We were started in 1989 by the 16 largest hotel companies.
They got together in late 1988 and began to talk about e-commerce.
E-commerce in the hotel industry back in 1988 and 1989 was a pretty simple
subject. E-commerce meant trying to electronically connect the hotel
reservation systems to what we call the GDS, the global distribution
systems. You know them as Sabre, Galileo and WorldSpan. The hotels wanted
a link or interface to the GDSs, and it was not possible to do so without
spending an enormous amount of money and an enormous amount of time. So
the hotels looked around and came up with the idea of creating and
building a switch that would sit in the middle between the hotel systems
and Sabre or Galileo, as it were. That led to the creation of Pegasus,
with GDS connectivity as its first product, linking the 16 largest hotel
companies to the GDSs around the world. From
there we’ve grown and expanded to where we now have five different
business units that provide services to the hotel industry. We’re the
leading provider of hotel technology services to the hotel industry. The
first business is the oldest, Electronic Distribution. That continues to
be the link between more than 42,000 hotels to the GDSs. In 1994, we
expanded to the Internet, and linked our hotel customers to the Web for
real-time bookings. We were the first company to use the Internet as an
online hotel catalog. In 1994 we put up 16 Hyatts on our Web site,
TravelWeb.com. From there, our TravelWeb technology has grown to where we
now own and operate the largest hotel image database in the world, and
today almost every Website that offers hotel reservations uses us for
processing hotel reservations. Hundreds of travel sites use our Online
Distribution Database to get access to the pictures of the properties and
pictures of the rooms. They use us for the booking and the processing on
the back-end. The
next business unit provides central reservation services on an ASP basis
or as an outsourcer. Every major hotel chain in the world has a central
reservation system. You know the hotel is using a central reservation
system when you call the 800-number — the person who picks up the phone
is connected to the central reservation system to make your booking. In
1995, many hotel companies began to consider outsourcing their technology
rather than doing it themselves, because IT is not a core competency for
hotel companies. Today Pegasus is the largest ASP provider of central
reservation services in the world, so if you call hotel companies such as
Leading Hotels or Preferred Hotels, AmeriSuites, Loews or Fairmont, the
person answering the phone may indeed be a Pegasus employee. If they’re
not, they may be an employee of the hotel; nonetheless, the system they
are using to take your reservation is basically our software and our
hardware, and we are paid a transaction fee from the hotels for each net
reservation that we process. The
third business is Commission Processing. In 1992, we started a separate
company that provides centralized clearing of travel agency commissions.
If you stay in a hotel as a result of a reservation made by a travel
agent, that hotel should send your travel agent a check representing 10%
of your room stay. We are the central clearing house for most of those
commissions. We collect check-out information, commission information and
the commission payments from 32,000 hotels around the world. Once a month
we send out a statement and a check to each travel agency signed up for
our Commission Processing service. Today tens of thousands of travel
agents in 200 countries have joined the service. We get paid a small
percentage of the hotel commission — this is how we derive revenues from
that transaction. The
fourth piece of the business is Utell. Utell is a wholly owned subsidiary
of Pegasus Solutions. It is the largest hotel representation company in
the world. Independent hotels and small chains typically don’t have the
resources necessary, in terms of money or people, to market themselves to
travel agents around the world. A hotel in New York would love to be able
to call on travel agents in Paris or Rome. The problem is they can’t
afford a salesperson that speaks French or Italian and then have them fly
over there and make sales calls. So what they do is hire a company to
represent them, to market their hotels to travel agents worldwide, and
that’s what Utell does. We represent approximately 5,400 independent
hotels and small chains around the world. The
other service that Utell offers to independent hotels is access to the
electronic distribution systems, the Internet, travel agents and the GDSs.
GDSs won’t connect to an individual property; it doesn’t make economic
sense, and it would require the independent hotels to operate their own
central reservation system. Utell provides a central reservation system,
called Unison, to those 5,400 hotels. The
fifth and last part of our business is the newest part. It’s Property
Systems and Services. Just about every hotel in the world has software
that runs the hotel operations. You can see this when you check out if you
receive a printout of what your telephone calls were, what movies you
watched, what you ordered in the restaurant or bar, as well as the room
rate, etc. The systems that process those charges are historically all
licensed software products. There are about 35 companies that provide this
type of software to hotels on a licensed basis and then charge a monthly
maintenance fee. We’ve come up with a brand new product that, instead of being license-based, is Web-based. It’s a comprehensive Web-based property management system that’s available on an ASP basis. It’s a Web browser linked to the key-lock system to open the door of each hotel room. It’s linked to the movie system, it’s linked to the telephone system, it’s linked to the credit card system and the bar, etc. But it’s accessed via a Web browser. So instead of paying a huge license fee upfront, a hotel owner pays Pegasus a transaction fee per occupied night. So we’ll charge a hotel $0.50, for example, per night per occupied room, rather than an upfront fee of $50,000 or $60,000 for a license and then an ongoing maintenance fee. It’s a brand new way to look at this piece of the hotel’s operations. We are the first company to market this type of product, and it’s targeted right now to limited service hotels, meaning hotels that don’t have restaurants and bars. There are about 42,000 of those types of hotels in the United States alone. So, those are the five businesses that have grown out of the original concept started by the hotel companies in 1989. HOTEL ASIA PACIFIC MAGAZINE HONOURED FOR EDITORIAL EXCELLENCE
Website: http://www.hotelasiapacific.com
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