Newsletter - June 4, 2002

PRESIDENT OF SONESTA INTL HOTELS OUTLINES THE AGENDA FOR THE NEXT 12-24 MONTHS

TWST Interview with Stephanie Sonnabend, Sonesta International Hotels  / STEPHANIE SONNABEND is President of Sonesta International Hotels Corporation

TWST: Would you give us a brief overview of Sonesta (Nasdaq:SNSTA) ?

Ms. Sonnabend: Sonesta Hotels is a hotel management company that has been in existence for over 50 years. It is a family-run business; my grandfather started the company and we have been solely in the hotel business. We operate first class, full service hotels and currently we have 24 hotels. They are located in Boston, two in New Orleans and two in Miami. We are also in Anguilla, Bermuda, Peru, Tuscany and Egypt, including three Nile cruises in Egypt.

TWST: Would you summarize the next 12 to 24 months the agenda for Sonesta? What specific accomplishments will make that time frame a success?

Ms. Sonnabend: The opportunity to get our rates back up to the level that they have been previously while maintaining high levels of occupancy to really generate additional revenue with some of the cost cutting measures that will have a significant impact in terms of our profitability. We also anticipate the successful opening of our newest hotel and the possibility of adding another hotel in the coming year.

TWST: I think investors would focus on Egypt and the Nile cruises that you have under your management. What are the positives there? How negative are the potential negatives from your viewpoint?

Ms. Sonnabend: We at Sonesta do not have any money invested in Egypt. We are purely a management company that generates fees based on how well the hotels do. Business has predominantly been off on the Nile cruises, which does rely quite a bit on the American market. The Europeans have started traveling again so we are able to generate additional business from them. One of the nice things about Egypt is that our costs are relatively low. Labor is inexpensive in Egypt and therefore when business does come back there is an opportunity to make money quite quickly. We have been through this before over there unfortunately, so again, we know how to react and how to really look to get business back. When one geographic market does not want to come there we have been approaching other countries. Recently we have been doing some business with the Russian market, which seems to be paying off for us.

TWST: The diversity that you have — Peru and Bermuda — do those markets actually balance out or help you to counter effect? Are they coming back sooner as far as international destinations?

Ms. Sonnabend: You have to look at each market separately. Bermuda is very dependent on the American market. Predominantly all the business comes from the United States and that has been soft. That has been slow to return. Peru has had its own internal problems. There we found that the tourist business is strong. We’re heading into the season of tourist business in that environment and tours seem to be coming back quite strongly. It is the corporate business that still is being very cautious about returning to Peru. In Egypt we find that our beach resorts are doing well with predominantly European charters. Our City Hotel in Cairo predominantly is a business hotel and that seem to have returned. It is just really what we call the classical tours, that business that has been slow to return.

Three analysts and top management from eight sector firms examine the lodging sector in this special 47-page Lodging Industry issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info557.htm

ANALYST CITES FOUR SEASONS AS AN EXCELLENT COMPANY

TWST interview with  Brian Egger, Credit Suisse First Boston  / BRIAN EGGER is a Director in the Equity Research Department of Credit Suisse First Boston

TWST: Brian, what’s your take on the performance of these stocks in the second half of 2001 and first half of 2002?

Mr. Egger: We began to observe some weakness in the stocks even before September 11 because we were beginning to see incipient indications of deterioration in transient business travel, which still remains relatively weak. In fact, we had begun to see signs of a rather harsh fall-off in business travel even before September 11. The terrorist attacks of September 11 precipitated a very sharp and very abrupt selloff in lodging stocks. Since that time, we’ve all been surprised by the degree to which the stocks have started to discount initial signs of a demand recovery in the hotel sector. That demand recovery has been more evident in certain segments of the lodging business than others. In fact, since September 2001, we’ve experienced a rather remarkable comeback for both gaming and lodging stocks. Investors seem to have been willing to look beyond the disruption of September 11 to what is going to happen going forward. We’re now in the final throes of a classic cyclical downturn in hotel demand. Barring the occurrence of another tragic event, it appears the stock and the fundamentals are peering beyond the events of last September.

TWST: Brian, how well have the lodging companies in general weathered the economic downturn and the decline in travel post-September 11?

Mr. Egger: They have suffered, although the general consensus seems to be that they’ve done a good job on the cost side and have tried to stay lean and mitigate the deterioration in the owned hotel margins that inevitably accompanies severe RevPAR declines. Industry-wide RevPAR fell about 7% in 2001. We estimate that RevPAR will increase moderately in 2002. Hotel companies cannot withstand that magnitude of RevPAR deterioration, particularly the very pronounced declines observed immediately after September 11, without suffering significant margin erosion. RevPAR was down in the neighborhood of 20% or so November and December of 2001, once business travel started to normalize after the severe downturn following September 11. But in view of the severity of declines in owned hotel margins and evaporation of management incentive fees, the leading hotel companies did a reasonably good job in stemming the erosion in margins.

TWST: Brian, are there any other companies that you’d like to highlight? Not necessarily companies that are screaming buys, but companies investors should certainly know about.

Mr. Egger: One name that I would touch that I think is an excellent company is Four Seasons (NYSE:FS). We’re not currently recommending the shares for purchase because of valuation issues and because a meaningful degree of their future development pipeline is being undertaken in the Middle East. Our concern is that construction or opening delays in that region could compromise the company’s long-term growth rate. However, it is certainly a fine company with a terrific business model and high quality hotels.

TWST: Brian, do you have a final word for investors?

Mr. Egger: Echoing a lot of what my colleagues have said here, I think it is true that we’re in an early-stage demand recovery environment. Our challenge as analysts is to assess what the market is already discounting with respect to an earnings recovery. I think “selectivity” is probably the single word I would use here. As Bryan Maher mentioned, the gaming and lodging sector has been stress-tested. There also appears to be a reasonable degree of support among investors for investing in a sector with reasonably transparent accounting, particularly among gaming companies, and economic recovery potential. There are several good business models out there. Many of these are great companies, but that doesn’t necessarily imply their stocks are attractive at current levels.

Three analysts and top management from eight sector firms examine the lodging sector in this special 47-page Lodging Industry issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info557.htm

INSTITUT  DE MANAGEMENT HOTELIER INTL (IMHI) STAGING CONFERENCE AND 20 YEAR ANNIVERSARY GALA JUNE 20-22, 2002 IN PARIS

“Celebrating 20 Years of Successful Partnerships”

Cergy Pontoise - Paris, France, 29 May  2002 – IMHI will be celebrating its 20th anniversary on 20- 22 June 2002. Created as a joint venture between Cornell University’s School of Hotel Administration and ESSEC Business School, IMHI (Institut de Management Hôtelier International) educates managers with an international experience and outlook to lead companies in the growing and dynamic hospitality sector. Over the last twenty years IMHI has evolved from a diploma based program with 40 graduates, to a fully-fledged MBA in International Hospitality Management, with over 900 alumni worldwide. 

This event will be a great networking forum for hospitality professionals from around the world. Industry professionals, partners and IMHI and Cornell Hotel School Alumni will participate in a high-level conference and special events highlighting the best of Parisian cultural and gastronomic pleasures, and an gala evening worthy of IMHI’s 20th birthday. Networking events include the Get-Together Cocktail on Thursday, 20 June, a dinner cruise on the Seine on the 21st June, and the Gala Evening on the 22 June at the historic Salon Gabriel, Potel & Chabot.

The conference on the 21 June will be launched with the keynote session “Globalisation – Where are we heading?” Jean-Marc Espalioux, Chairman of the Management Board, ACCOR and Marie-Laure Djelic, Professor, Department of Human Sciences, ESSEC will share their thoughts on the impact of globablisation on organisations and their strategies.  What are the implications of the 11th of September for the future of globalisation? What long-term competitive strategic responses should the hospitality industry be looking at? 

Moving on from the wider impacts of globalisation, the panel session “Leaders in Innovation” will focus on what it takes to stand out in niche markets in an increasingly globalised world with mega brands. Ajay Bakaya, partner and Executive Director of Sarovar Park Plaza Hotels and Resorts (Winner of FHRAI Young Hotel Entrepreneur of the Year, 2000-2001), Grace Leo-Andrieu, highly successful management consultant specialising in small independent luxury hotels, Philippe Bloch, Co-President of Columbus Café,  and Professor Hamid Bouchikhi, Professor and Director of the New Business Center, ESSEC, will be among the leaders in innovative concepts sharing their success stories and challenges in creating new products and concepts in today’s challenging environment

Underlining their support for quality managerial initiatives are key event sponsors ACCOR, Elior and Euro Disney S.C.A.  All sponsor acknowledgements and registration details are on www.imhi20.com

IMHI Website:   http://www.imhi20.com

THE TALENTS OF THE HOSPITALITY INDUSTRY  SET FOR COMPETITION  AT THE LAS VEGAS INTERNATIONAL HOTEL & RESTAURANT SHOW, JUNE 10-20, 2002

LAS VEGAS – It’s hospitality like you’ve never seen it at the 23rd Las Vegas International Hotel & Restaurant Show (LVIHRS)! The talents of the hospitality industry will be showcased in four exciting competitions that will be held throughout the two-day LVIHRS at the Las Vegas Convention Center on June 19 – 20.

Competitions that will be held during the LVIHRS will include the Las Vegas Culinary Challenge, the LVIHRS Hospitality Competitions, the Hospitality Hero Awards and the LVIHRS Menu Competition.

“Our competitions are an important element for the Show,” said Felix Rappaport, president and COO of New York-New York Hotel & Casino and chairman of the LVIHRS. “Not only do the competitions allow us to showcase the talent and achievements of the hospitality industry, but they are an avenue in which we, the industry, can show our appreciation.”

Las Vegas Culinary Challenge

The country’s next generation of chefs will compete during both days of the LVIHRS for American Culinary Federation (ACF) gold medals at the Las Vegas Culinary Challenge. Southwest Gas is once again sponsoring the event with additional support provided by the Real California Cheese, US Foodservice, the Art Institute of Las Vegas, and Anderson Dairy. The Culinary Challenge is hosted by the Fraternity of Executive Chefs.

Each competing chef will prepare a signature dish at one of six cooking stations according to the general rules and guidelines of the competition.  Prior to the competition, the chefs must provide recipes and a complete diagram or photo of the dish.  No advance cooking is permitted and competitors are allowed to bring in only whole and raw materials in the amounts stated in the recipes.  Competition categories include chicken or duck, pork tenderloin, fish, hot and warm dessert, cake decoration and decorative centerpiece.

Judging the competition is lead judge John Hui, Certified Executive Pastry Chef (CEPC) at Caesars Palace; Gustav Mauler, Certified Master Chef (CMC), at Spiedini and OXO at Rampart Casino, Sazio at The Orleans and Bull Shrimp at Green Valley Ranch; Jurgen Weise, CMC, chef instructor at the California Culinary Academy in San Francisco; Richard Schneider, CMC, food and beverage director at the Stardust; and David Kellaway, CMC, executive chef at Mandalay Bay.

LVIHRS Hospitality Competitions

Join the nation’s top housekeepers from more than 25 of Las Vegas’ major hotels Wednesday, June 19 from 2:30 - 4 p.m. as they compete in several exhilarating contests of skill, speed and accuracy including a bed-making competition, buffer pad toss, a Johnny mop toss and a vacuum relay. 

In the bed-making competition, contestants will be judged on the number of beds made during an allotted time and neatness of the beds. 

The buffer pad toss will measure accuracy and teamwork as a blindfolded contestant will attempt to toss five buffer pads to a person 20 feet away who will try to catch the buffer pads with a toilet plunger. Contestants will attempt to throw five Johnny mops into a toilet bowl from a distance of 20 feet in the Johnny mop contest and in the vacuum relay, contestants will assemble a vacuum and clean a carpeted area free of confetti. 

Hospitality Hero Awards

The Hospitality Hero Awards will honor hospitality employees who have demonstrated selfless acts of courage while on the job. Such acts encompass saving a life or lives, protecting a property from catastrophic loss or making a significant impact on the quality of life for citizens in the community. The awards committee will select recipients from both lodging and restaurant industries. 

The Hospitality Hero Awards are the industry’s way of showing its appreciation to the people that have gone above and beyond their duties by saving lives and property. Award winners will be recognized during the International Hospitality Awards Luncheon on Thursday, June 20 at 12:30 p.m.

LVIHRS Menu Competition

The LVIHRS Menu Competition will award restaurant menus based on design, creativity and merchandising power within seven categories including: restaurants with an average check less than $15, an average check of $15-$35 and an average check over $36. Other categories include: children’s menu; dessert/appetizer/drinks; wine; and room service. Finalists and award winners will be recognized at the the Menu Design Display on the LVIHRS exhibit floor sponsored by Heartland Payment Systems.

The LVIHRS is open to all hospitality industry professionals. Registration is available at www.LVIHRS.com or by calling 800-272-SHOW

SINGAPORE ARRIVALS SHOW MARGINAL SHOW

TravelWeeklyEast.com  -  Visitor arrivals to Singapore in April grew marginally by 1.4 percent over the same month in 2001, to a total of 621,957 visitors with China overtaking Japan to become the second largest visitor-generating market for Singapore.

The five largest visitor-generating markets were Indonesia, China, Japan, Malaysia and Australia.

Arrivals across all major segments performed well, with holiday and business-related traffic registering a growth of 5.4 percent and 10 percent respectively.

Holiday arrivals from the top 12 markets rose by 2.4 percent. Overall, business-related traffic from the top 12 markets increased by 6.1 percent.

EGYPT TOURISM MENDS

Middle East Times   -  Hit  hard by regional instability and travel fears, Egypt's depressed tourism industry is beginning to show signs of improvement.

Tourism was Egypt's leading foreign currency revenue earner in 2000, generating $4.3 billion from the 5.4 million tourists who visited the country.

The eruption of the Palestinian intifada in September 2000 cut deep into Sinai tourism, keeping away most of the 415,000 annual Israeli visitors. And, one year later, the September 11 terrorist attacks on the United States threatened to wipe Egypt off the tourist map.

Fortunately, though, worst-case scenarios were never realized. While official figures showed tourism down by 54.5 percent last November, Minister of Tourism Al Beltagui announced during a press conference in Aswan this month that tourism was off just 16 percent during the first quarter of 2002.

The figures suggest that tourism is on the rebound, but many in the industry wonder where the government is getting these numbers from.

"What improvement? My shop has been empty for months," said the owner of one Cairo souvenir shop.

Hotels have seen new reservations in recent months, but not the numbers that ministry officials are touting.

"Our bookings are at 30 percent, which is about 50 percent of normal for May," said Waleed Mazen, Assistant Manager of the five-star Helnan Shepherd Hotel in Cairo. "The [hotel's] jewelry shop and bazaars closed one month ago due to lack of customers."

Things are not much better at the hotel chain's Port Said branch, where a skeleton crew runs the hotel and lights are turned off during the day to cut operating costs. Reservations may be improving at the adjacent four-star Sonesta Hotel, but its highly acclaimed Russian dance show is gone, a victim of low occupancy rates, or "cold weather," depending on whom one asks.

Tourism officials stress that "isolated cases" of slow recovery like these do not reflect the general trend of rapid recuperation taking place all over Egypt. They also emphasize that despite eight months of hardship, tourist establishments have weathered the storm and are still in business.

"Surprisingly, the survival rate is very high," asserts Ahmed Al Khadem, general manager of the Egyptian Federation of Tourism Chambers (EFTC). "Of the close to 4,000 members of the EFTC, not one has gone out of business."

Khadem attributes their success to the fact that most Egyptian tourism companies are small and medium-sized businesses.

"Their operating costs can be kept at a very low level and they are buoyant," he said, explaining that struggling companies have shifted to alternative income-generating activities to pass the time until tourist numbers return to normal.

Threatened with bankruptcy last October, one papyrus showroom near Tahrir Square cleared its walls of papyrus prints and switched to selling children's shoes. At a nearby souvenir shop, glass cases of silver jewelry collect dust while black market currency trading pays the bills. Two blocks away, a tour company rents out its office space to clothing vendors.

With more tourists visible on the streets these days, all three businesses appear poised to resume normal operation. For travel agencies, believed to be hardest hit by the tourism slump, the wounds may take longer to heal.

"Bookings are still very slow. We're down 40 percent over last year," says Abdou Azeem, general manager of the state's largest travel agency, Misr Travel. With North American and European tourists steering clear of the Middle East, travel agents have stepped up marketing efforts in Eastern Europe, Scandinavia and China.

"We have succeeded in grabbing more tourists from these regions," says Azeem. "We also expect that the initiation of a direct flight to Shanghai in September will help compensate for the slow European market."

The good news for everyone in the industry is that the end of May marks the unofficial start of the Arab tourist season. However, while Gulf Arab tourists are generally very wealthy and prone to lavish spending, they prefer to rent apartments and travel independently during their stay of up to three months. If the tourism sector is to benefit from their presence this summer, it must find ways of changing these habits.

"We must convince our Arab visitors to join organized programs," says Azeem.

SHANGHAI’S LEGENDARY ASTOR HOUSE HOTEL

By Lu Chang, Shanghai Star

SITUATED in an inconspicuous corner near the Bund, the Pujiang Hotel, formerly the Astor House Hotel, seems to have lost its bygone glory.

The low-rise building has been eroded to be dated in colour, which was submerged among the eminent architecture of the Bund.

Few members of the city's younger generation are even aware that the hotel exists, let alone that it is considered the father of the city's luxury hotels.

The hotel was opened in 1846. In 1861 the two-story hotel was sold to Henry Smith who renamed it the Astor House Hotel. The building we see today was completed in 1910. In 1959, the hotel name was changed to Pujiang Hotel.

It was once the most renowned and luxurious foreign-owned hotel in the Far East.

The Victorian-style design was the work of an Englishman, which can be detected from the grand columns standing in the halls and arched gates.

The hotel has witnessed many breakthrough events in Chinese history. The first lamp bulb in the country was lit here, the first telephone in the country was switched on here, and the first sound film from the West was projected here.

Plus, China's first ball was held in the hotel, helping to bring to a close the tradition that women should not attend social activities.

It is said that Chiang Kai-shek had his last dinner here before withdrawing to the island of Taiwan.

A bellboy picked up a wallet belonging to a Russian at the main entrance to the hotel, and used one third of it to buy a car, serving as the first taxi in the country. He was the founder of Johnson, now Qiang Sheng Taxis.

Today, when you walk on the creaking wooden floor and see the simple furniture, you cannot imagine the brilliant days of the hotel. It is only a two-star hotel now.

Some of the 116 guestrooms, in which international celebrities such as Charlie Chaplin and Albert Einstein once stayed, are taken as historic spots with photos hanging on the wall to show guests.

The suites have been redecorated in their original style (except for modern electric appliances), and some of the furniture has been modelled with guidance from old photos.

The hotel still keeps its hulking and slow manual-operating elevators, which work from 7:00am to 11:00pm.

Close to an international wharf, the hotel changed some guestrooms for young travellers, known as the youth hostel. Here there are several beds in one room.

It's the first of its kind in Shanghai, and has been applauded by young student tourists.

DUBAI MUSCELS IN ON ASIA

TravelAsia.com  -  Dubai’s tourism is showing strong signs of growth from the Far East and the Dubai Department of Tourism and Commerce Marketing (DTCM) is stepping up promotional efforts by conducting a series of roadshows across Hongkong, Malaysia, Singapore, Thailand and Brunei.

“Buoyed by a 7.09 percent growth in hotel guests from the Far East in 2001, we stepped our drive to attract more visitors from this important market segment,”says DTCM’s director-general, Khalid A.bin Sulayem.

Meanwhile, the DTCM has also established a new office in Zurich on May 24. This is the DTCM’s 15th office in the worldwide network and the sixth in Europe.