Budget sector proving resilient

Findings from an analysis of data provided to the HotelBenchmark Survey

Our research examines the relative performance of the European hotel sector over the last 12 months and highlights strategies that have been adopted to cope with 9/11 and the deteriorating economic conditions.  To mitigate the impact of seasonality we have tracked the performance of a consistent sample of hotels between January 1999 and September 2002 and analysed the data on a rolling 12-month basis. 

Our analysis looks at hotel performance data for both the UK and continental Europe by segmenting the hotels that contribute to our survey into four different categories – namely luxury, first-class, mid-market and economy/budget.  Since there is no official grading system across Europe, Deloitte & Touche have applied a classification to each brand in the survey, which broadly recognizes the positioning of each of the brands. 

Our research reveals, as illustrated in Chart A, that on a rolling 12-basis the luxury, first-class and mid-market sectors have all experienced significant occupancy declines post 9/11 across continental Europe.  In the case of first-class and mid-market hotels this decline actually started at the beginning of 2001, in the main caused by a slowdown in the world economy, which lead to curtailing of travel budgets, although the events of 9/11 exacerbated the decline.  Prior to 9/11 luxury hotels managed to maintain occupancy levels but in the wake of changing travel patterns post 9/11, as non-essential travel plans were scaled back, this sector came under the most pressure with occupancy levels falling rapidly from 70 percent to 62 percent.

By contrast, the budget sector has proved very resilient with occupancy levels actually increasing, albeit marginally (up one percent) to 63 percent.  One reason for this is that budget hotels are generally located in either suburban areas or on motorways, and as consumers have preferred to stay closer to home and travel by car or rail, these properties have been well located to attract this extra demand. 

Chart A – Continental Europe rolling-12 occupancy analysis by grade of hotel

Source:  HotelBenchmark Survey by Deloitte & Touche

Despite this fall in demand, all sectors in continental Europe have managed to improve average room rate when measured in euros between January 2000 and September 2002.  First-class, mid-market and budget hotels have all witnessed rate growth of circa 12 percent, whilst the luxury sector, which trades at a 100 percent premium to the market average has experienced a 31 percent increase in average room rates as demonstrated in Table 1.

Table 1 - % change in KPI’s between January 2000 and Sept 2002 on a rolling 12-basis

Note: Continental Europe data in calculated in euros, UK data calculated in UK£

Source:  HotelBenchmark Survey by Deloitte & Touche

The resilience of the budget sector is further demonstrated by the performance of the UK hotel market where occupancy has moved ahead five percent between January 2000 and September 2002.  This sector is the only market sector in the UK to have exhibited an occupancy increase, and its performance contrasts particularly with the luxury sector which has seen occupancy levels plummet 15 percent from 77 percent to 63 percent (see Chart B).  Despite an overall fall in UK average room rates of 1.3 percent, the budget sector rates have held up well with room rates improving by 2.5 percent over the same period.

             Chart B – UK rolling 12 occupancy analysis by grade of hotel

            Source:  HotelBenchmark Survey by Deloitte & Touche

One of the reasons that UK hotels have experienced average room rate declines whilst their continental neighbours have reported significant real average rate growth has been due to the relative strength of the UK pound against the euro.

Chart C – GBP-EUR Exchange rate

Source:  The Bank of England

As a result, the UK has become comparatively more expensive relative to other European destinations.  In addition, with the introduction of the euro in January 2002 this has created further transparency in the marketplace, allowing consumers to more readily identify the relative cost of a room in each country.  However, despite the falls in occupancy, UK hoteliers have remained relatively robust in keeping price discounting to a minimum, especially in the luxury sector where average room rates are just 0.1 percent below their January 2000 levels, despite the 15 percent fall in occupancy.

Commenting on the findings, Julia Felton, director travel, tourism and leisure at Deloitte & Touche says: “The budget sector has proved the most resilient across Europe during the recent tough trading conditions.   These properties have been well located to benefit from increased travel by road and rail, as consumers have opted to engage in intra-regional travel rather than fly to destinations further afield.  Depressed economic conditions have also encouraged business travellers to seek more reasonably priced accommodation, and so we have witnessed a trading down effect occurring across the spectrum of hotel types.  What will be interesting to observe is what proportion of these travellers trade up once economic conditions improve in the future.”

The HotelBenchmark Survey contains the largest independent source of hotel performance data outside of North America and tracks the performance of over 6,000 hotels every month.  To complete this analysis data for a consistent sample of hotels across Europe was collated between January 1999 and September 2002. To mitigate the impact of 9/11 data was computed on a moving 12 basis so that the real underlying trend in performance could be analysed.  For further information please see www.HotelBenchmark.com.

Deloitte & Touche is the UK’s fastest growing major professional services firm.  It is based in 23 locations, has over 10,000 staff nationwide and fee income of £713.6 million in 2001/2002.  Deloitte & Touche is the UK practice of Deloitte Touche Tohmatsu, a global leader in professional services with over 98,000 people in 140 countries and fee income of $12.5 billion for the year ended 31 May 2002.

The dedicated Travel, Tourism, and Leisure practice serves owners, investors, operators and developers throughout Europe, the Middle East, India and Africa.

Authorised by the Financial Services Authority in respect of regulated activities.  The information contained in this article is correct at the time of going to press. For further information on Deloitte & Touche, you can access our website on www.deloitte.co.uk.

For further information, please contact:

Laetitia Mowat

Media & Public Relations,

Deloitte & Touche on

+44 (0) 20 7303 4820

www.deloitte.co.uk

HVS International’s European Hotel Transactions 2002 Report

The UK continues to dominate the European singe asset investment market, recording a total of 30 qualifying transactions in 2001, some 37% of total transactions activity. Other Eurpean countries with significant publicly available sales activity included Spain (13), Germany (9) France (6), Sweden (4), Belgium (4), Austria (4), Ireland (2). In 2002 the UK contnues to be the most liquid hotel market, with up to September year-to-date, then qualifying transactions representing 28% of all activity and 35% in terms of total investment volume.

For detailed HVS Intl. European Hotel Transactions 2002 Report, Click Here
(Acrobat Reader required)  

Hotels.com cuts earnings outlook

Conrad N. Hilton Humanitarian 2002 Award to SOS Kinderdorf International

Cairo, Egypt, December 1st, 2002. In effort to support the community, Conrad Cairo recently sponsored SOS Kinderdorf International Press Conference held to announce Conrad N. Hilton Humanitarian award of $1 Million.

The conference was honored by the presence of many public figures involved in humanitarian work and particularly in child welfare. Dr. Eisha Rateb, Mrs. Ekbal Baraka, Movie Star Safeya El Emary and SOS Kinderdorf Egypt board members were among the participants.

The conference was of success, covered by many Egyptian and Arabian TV channels who complemented Conrad Cairo’s fine organization and hospitality.

The International Prize is the world’s largest humanitarian award and ranks as one of the largest monetary prizes in any category-equal to the Nobel Prize.

The million dollar award will be used to expand several pilot projects in Africa testing new ways to support AIDS orphans and assist children and families affected by AIDS.

Seen in the photo from right to left: Mrs. Ruth Badawy, Regional Sponsorship Advisor, Samah El Shalakani, SOS Egypt Children Villages Board Member, Mr. Lucien Roca, SOS Kinderdorf International Regional Director for the Middle East, Mrs. Ikbal Barak, Editor in Chief of Hawa Magazine & women defender, Mrs. Simat El Dika, Area Public Relations & Promotions Manager of Conrad Egypt Hotel & Resorts. 

Hong Kong 2002 arrivals headed for record high  

TTG Asia  - Hong Kong is heading for a record 16 million visitor year. November’s arrival statistics, released this week, showed 1,570,192 people came to Hong Kong, up 37.5 per cent the same month in 2001, the Hong Kong Tourism Board says.

Arrivals from Mainland China were up an incredible 71.8 per cent year-on-year. All long-haul and short-haul markets showed substantial growth last month, led by North Asia (174,488 arrivals, 31.7 per cent), South & South-east Asia (172,031, 23.5 per cent) and The Americas (129,646, 25.2 per cent). Arrivals from Europe, Africa & the Middle East grew by 20 per cent to 125,128 and those from Australia, New Zealand & South Pacific by 19.4 per cent to 35,539.

In the first 11 months, total arrivals jumped 19.9 per cent to 14,897,908. Mainland China alone passed the six million mark. HKTB executive director, Ms Clara Chong, tips a year-end score of more than 16 million. “This will be a tremendous achievement, especially when you consider the difficult economic conditions that have persisted in many of our key markets during 2002 and other deterrent factors like the Bali bombing,” Ms Chong said.

“Our WinterFest programme has been very encouraging, drawing 180,000 visitors from short-haul markets on specially-organised packages alone.” She said there was a slight increase in numbers staying for one night or longer, which grew to 65 per cent from 64.3 per cent in the same month last year.

Hotels enjoyed a good month with occupancy rates averaging 92 per cent for all categories, compared with only 81 per cent in November 2001. Medium-tariff hotels were especially busy, averaging 96 per cent occupancy, but even those in the top tariff category achieved 90 per cent occupancy, compared to only 75 per cent a year earlier. For the 11 months of the year to date, average occupancy stood at 84 per cent, compared with 78 per cent in the same period in 2001.

Source:  TTG Asia  

eTourism Association founded

Experienced e-tourism professionals established a unique e-tourism-platform. The association acts independently and aims to reach the tourism industry, introducing eBusiness concepts.

"The tourism industry has the problem of keeping pace with rapid technological advances. More and more corporations, web-platforms and marketing-agencies are offering their products. Disappointingly the customers can't fully exploit these products in an optimal way.", Dietmar Winkler, co-founder of the eTourism Association, stating the current sitution.

"The first step is the launch of the online-platform www.etourism.at. At this portal the users will find current, comprehensive and independent information in the field of e-tourism.", Mr. Winkler summarising the first project of the association.

This accociation plans to establish itself as an important information-hub for the tourism industry in the next years. Beside the online-platform they want to organise special events, competitions and further projects.

For further information, visit the website:  http://www.etourism.at/206.html

Uganda Tourism 2003 - challenges and opportunities, hopes and expectations

eTurbo.com  -  With 2002 now history we can set out to tackle the challenges of the coming year. Figures released for the tourism sector last year show, that for the year 2000 the sector managed to produce about 112 Million US Dollars, while for the year 2001 we came top of the economic performers list for foreign exchange earnings with over 163 Million US Dollars - not a mean achievement for a sector which has for long been looked at like a step child, i.e. much lip service in public but little serious attention or inputs behind closed doors.

Travel advisories have done much harm to our sector, not only in Uganda but for the entire East Africa, keeping scores of visitors away, while foreign embassy and high commission staff enjoy 'fact finding' missions to the areas they warn tourists to stay away from on many a weekend. Our lodges in Murchisons Falls National Park are financially bleeding over the effects of such travel advisories, simply by being located in an area projected as unsafe. Maybe in the new year I can make good of a promise I made to Mani Khan, Director of Tourism for the Madhvani Group, owners of Mweya and Paraa Safari Lodges, and walk with him from the Pakuba airstrip to the Paraa Lodge, and any of our media tsars like William Pike or Charles Onyango Obbo are invited to join, no special protection, just the transfer vehicle following a few steps away with some water and to carry the bags - so as to show that at least we ourselves in the tourism sector put our action where our mouth is :

Tourism Minister Hon. Prof. Edward Rugumayo in a recent address promised the President a return of 3 Shillings for every 1 Shilling spent on tourism promotion and support for the sector, and we in the private sector agree that once properly facilitated, we can indeed deliver this promise in terms of taxes paid, both direct and indirect. But facilitation must come first, as we often submitted in the past. With the national budget now just a few months away, we are starting under the apex of the Private Sector Foundation, to prepare for our annual budget memorandum in which we will as every year before submit our recommendations and wish list to government. Our neighbours were facilitated with all these, and even more considerations by their governments in recent years and decades and that is why their tourism sectors achieved over 650.000 visitors for Kenya and over 500.000 visitors for Tanzania, while we are yet to reach the 250.000 mark.

Accelerated depreciation for buildings and capital goods in lodges and tourist hotels and resorts, tax and duty free importation of capital goods equipment for such enterprises (duly approved and scrutinized of course by UIA and other relevant bodies), including vehicles for safaris and airport transfers, access to affordable credit without excessive 'loading' by commercial banks on international funding availed for our sector, reduction of our airport departure charge to regionally compatible levels, Visa free travel within the East African Community and making flights within the EAC domestic departures, zero rating for VAT on all tourism services - in line of being an 'invisible export' - and the implementation of our new mutually agreed tourism policy, including the passing of the new tourism related legislation, equitable treatment of local air operators like Eagle, Reliance Air and United with international airlines as far as spares and fuel are concerned, return of the tourism and hotel training school in Jinja to our sector to implement our visionary training programmes for our industry and the long awaited reform of the Uganda Tourist Board, in line with the 'Hogg report' and industry recommendations, which expect a joint ownership, management and financial responsibility between private and public sector.

After such restructuring the private sector is indeed willing to pay through a tourism promotion levy, as we are prepared to pay for our training school through a tourism training levy, BUT ONLY after the restructuring has been mutually agreed and is being implemented. UTB, as well as the school in Jinja, must be run along private sector principles and performance must be monitored continuously to ensure the best use of our limited resources. Once this is done, all talk of merging the UTB with others will cease, as the idea had provoked laughter in our neighbouring countries and outrage here in Uganda with the private sector. These are but a few of the catalogue of submissions made in the past to government, and now that we have managed to climb to the top spot of forex earners, maybe our submissions will be taken more seriously, as one can only speculate how far our tourism industry may have grown, with such support given in past years already.

We must attract the giants in the regional hotel and lodge management like Serena Hotels to come and invest in Uganda, because by their sheer presence - as amply shown in Tanzania and Kenya - they are giving tourism a boost, leave alone their marketing machinery, which has weathered all the storms of our industry in the past 10 years and persistently written profits even in the most difficult years.

The injection of such expertise and quality can only benefit our sector here in Uganda. Roads connecting our National Parks are of major concern, specially from Masindi via Hoima to Fort Portal, linking Murchisons with the Rwenzoris, Kibaale and the Semliki Game Reserve, and then of course the infamous road from Mweya to Ishasha, which is more impassable than passable, and from there on to Buhoma / Bwindi, Kabale and Kisoro, to at last open a full circuit for tourists and locals alike, without having to constantly return to Kampala.

The road via Mityana and Mubende to Fort Portal too falls into this category. And then there is security, an area where the tourism private sector supports appropriate spending measures by government, to ensure that our main inbound transit route from Entebbe to Kampala, but also the highways throughout Uganda - including the roads to Kidepo - are kept safe at all times. And to add further to this, it was recently recommended to initiate a joint security unit between UPDF and UWA rangers, both a rapid reaction force which deploys airborne and joint patrols on the ground, to deter, protect and preserve at all times in areas of importance for our tourism sector.

Finally, staffing at our Ministry must be re-visited, as levels there are still not satisfactory, after the over excessive pruning during the public service reform in the mid 90's, when pleasing the donors seemed more important than having Uganda's national interest at heart. After all that was the time too when we were pushed to cut our army into less than half, which then led to bandits and rebels to re-emerge and we all know what price we had to pay for that since and about the selective memory loss of those donors who forced this down our throats then.

And if a new reform wave would sweep our public sector, a marriage of tourism with natural resources and environment would seem more sensible than the heavily competitive situation with trade and industry, where much of the attention and resources focus on AGOA and WTO issues, with tourism still getting the long end of the stick so to speak.

This is not to say that AGOA and WTO do not deserve the attention they get, they must in fact, but tourism should not have to suffer because of this. And before I close a few words about our aviation sector. 2002 saw the birth of two new Ugandan airlines, AfricaOne and East African Airlines, and both are still struggling to pave the way for long-term survival. It makes no sense, Comesa agreements or not, to have third country carriers taking traffic on the Nairobi route from them and hiding behind Comesa, and those carriers must be encouraged and nudged towards agreements with our own airlines to accommodate their needs and sign equitable code share agreements, or be exposed as being anti Uganda national interest. We need to support our own, or be doomed because we don't.

I regularly fly with them myself and hope others will do likewise in the future. For 2003 our sector aims at reaching at least 250.000 arrivals and at least 250 Million US Dollars in forex earnings, and if we work together and government listens to us and acts upon our recommendations, there should be no reason why we cannot achieve this growth for our country. And then, in years to come, as I recently said, we will be laughing all the way to the bank and our Minister of Finance will have fewer headaches how to pay for his annual budget forecasts. Tourism can be the engine of growth for our country, and if we fail to make full use of the opportunities we have, we will be answerable to our next generation for mismanaging their future. by Dr. Wolfgang Thome for eTurboNews

Indonesia 2002 arrivals better than expected 

TTG Asia  -  Arrivals’ figures to Indonesia in 2002 turned out to be slightly better than the government’s projected numbers after the Bali tragedy last October.

In the year-end press conference, the Indonesia Culture and Tourism Board chairman, Mr Setyanto Santosa, cited a bureau of statistics’ report in which total arrivals to Indonesia reached 4.8 million, equivalent to 90 per cent of the targeted 5.4 million. Right after the Bali blasts in October, the office had projected 4.3 million arrivals. Mr Santosa said: “Looking at the fact that other destinations than Bali were less affected by the tragedy and the statistics reports up to mid December, the outcome turned out better than expected.”

Revenue from tourism materialised at US$3.2 billion, a massive drop from the US$5.8 billion targeted. Mr Santosa was not optimistic for 2003 either, projecting arrivals would drop significantly to only 3.8 million, and revenue from tourism would only be US$2.7 billion in 2003. “We could reach the number this year because the first nine months of the year was very good. But I’m afraid we are facing challenging months ahead with travel advisories still in place in some countries.”

But an “optimistic target” of 4.55 million arrivals with US$3.2 billion revenue has also been set. “This can materialise only if and when both the government and private sector are taking a serious part in the recovery and revitalisation programmes we have set together,” Mr Santosa said.

Source:  TTG Asia

Outrigger to Reflag Two Hawaii Hotels to Marriott

eTurbo.com  -  The home-grown Hawaiian lodging company, Outrigger Enterprises, will reflag two of its properties to Marriott in an attempt to attract more meetings and boost occupancy in general. Beginning in January, the Outrigger Wailea Resort, located on Maui, will be named the Wailea Marriott, an Outrigger Resort; and the Outrigger Waikoloa Beach, located on the Big Island, will become the Waikoloa Beach Marriott, an Outrigger Resort.

The reflagging will allow Outrigger access to Marriott's global sales organization for the two resorts along with 17 million members of Marriott's loyalty program. Outrigger will continue to manage the properties. "This franchise agreement allows us to introduce Outrigger's island hospitality to Marriott's customers, including Marriott Rewards members and corporate and meeting customers," said Outrigger chief executive David Carey. "At the same time, the hotels will continue to benefit from Outrigger's long-standing relationships with travel agents, who associate Outrigger with Hawaii and the Pacific."

The 521-room Outrigger Wailea Resort is situated on 22 oceanfront acres in the Wailea Resort Community, on Maui's south shore. The resort contains more than 40,000 square feet of indoor meeting and banquet space and more than 60,000 square feet of outdoor function space. The 545-room Outrigger Waikoloa Beach is situated on 15 oceanfront acres in the Waikoloa Resort Community, on the Big Island's Kohala Coast. It contains about 9,500 square feet of indoor banquet space in addition to extensive outdoor function space.

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