Global Hospitality News: eHotelier Newsletter

Hilton International Chief Executive Anthony Harris dies

Caterer.com - Anthony Harris, chief executive of hotel group Hilton International, has died aged 47. He is survived by his wife Jackie and their three children – Tom, Ella and Anna.

Hilton Group chief executive David Michels said: “I am deeply shocked and distressed by the death of Anthony. A colleague and friend of more than 25 years, he will be a great loss to me both personally and professionally. He will be sorely missed.”

A funeral for family members only takes place in Israel this Thursday.

Harris was appointed chief executive of Hilton International in June 2000. He joined the group as managing director for the UK and Ireland in March 1999 and became chief operating officer in early 2000.

Prior to Hilton, Harris was chief executive and managing director of hotel group Stakis.

Hilton bought the Stakis chain of hotels in 1999 for £1.2b.

Six Continents blow for Osmond

Corporate raider Hugh Osmond's audacious £5.5bn ($8.8bn) bid to take over the world's biggest hotel group has been rejected by shareholders in the first round of voting.

In a show of hands, Six Continents shareholders voted instead to accept the hotel and pub giant's demerger plans.

The vote is a major blow for Mr Osmond, who must now wait 48 hours for the official result, which includes millions of proxy votes.

His offer for Six Continents was dependent on shareholders rejecting the board's demerger plan.

Earlier, Mr Osmond failed in his bid to have the company's extraordinary general meeting, at London's QE2 Conference Centre, delayed so investors could have more time to consider his offer.

Osmond plea

The pub entrepreneur, who made the bid through his Aim-listed Capital Management & Investment vehicle, made a plea to shareholders to back his proposal to abandon the demerger.

"Leopards do not change their spots... and this demerger will not change the management," he told the meeting.

Meanwhile, Six Continents bosses appealed directly to shareholders to approve their plans.

"We do strongly believe the demerger closes no options," said Chairman Sir Ian Prosser.

The company needs 75% support to see the demerger through. Any vote on that is expected to be close.

Analysts have suggested shareholders are unhappy with the small amount of cash being offered by Mr Osmond as well as no partner being named to run the hotel chains.

Mr Osmond has freely admitted he has no hotel experience and would concentrate on the pub business while seeking partners for the hotels.

Further bids?

Meanwhile, the bid battle added a further twist this week, when the venture capital group CVC admitted it was considering a rival offer.

CVC said it had held talks with hotel firms and private equity groups about forming a consortium to bid for Six Continents.

At least two other potential bidders are thought to be waiting in the wings.

Sources quoted by Reuters news agency said private equity firms Kohlberg Kravis Roberts and Blackstone Group, owner of London's upmarket Savoy hotel, were considering a joint offer

Source: BBC News

The Standard - Six Continents has taken the highly unusual step of setting up a committee of directors with the sole task of evaluating takeover offers. The move comes as shareholders were today voting on whether to accept its plan to demerge its pubs and hotels divisions.

It was seen as a last-ditch attempt to fend off accusations from shareholders of intransigence in the group's poorly-performing boardroom. They have repeatedly complained that the group has stubbornly refused to countenance takeover offers that could bring value to long-suffering shareholders.

Hugh Osmond, whose £5.6bn bid was rejected by the board, has tapped into this frustration as one of his main reasons for shareholders to reject the demerger plan. Osmond wants a 66-day adjournment to today's meeting to 'give shareholders adequate time to explore options for maximising value'. 'There is no downside for shareholders from adjournment,' he said.

On Monday venture capitalist CVC Capital Partners told the Stock Exchange it was in talks to form a consortium to bid for Six Continents. CVC said it had not yet approached Six Continents formally nor called for today's meeting to be put off. A number of rival hoteliers have also privately suggested they would be interested in buying all or parts of the company. They include Marriott International, Starwood Group and even Hilton Group. Other financial buyers are also circling.

Six Continents said the non-executive committee on takeover offers 'is tasked with overseeing the process in respect of approaches or proposals, if any, made for any part of the business, or for Six Continents as a whole prior to the proposed demerger.

'The committee's mandate is to advise and provide recommendations to the board as appropriate.' It would not say how many such proposals the committee had so far assessed.

Roger Carr, former chief executive of conglomerate Williams Holdings and previously chairman of Chubb and Thames Water, heads the three-man committee. His colleagues are David Webster, who as chairman of supermarkets chain Safeway is already under takeover siege elsewhere, and the 67-year-old American investment banker Robert C Larson.

The company repeated its claim: 'The board of Six Continents has given an explicit and public commitment that it will seriously consider any proposal that might be attractive to shareholders and that has a reasonable prospect of delivery.'

Shares in Six Continents, which have fallen from highs a year ago of 783p to below 460 1/2p in February, today slipped 1/2p to 590 1/2p.

German hotel profits fell an average 12 percent in 2002, according to data released today by Deloitte & Touche at the International Hotel Investment Conference. All hotels recorded in Deloitte's HotelBenchmark survey of Germany reported declines in profitability, reflecting the high fixed costs of the business that could not be reduced in line with the fall in customer demand. Occupancy levels were down nearly five percent.

Performance varied significantly across the various segments of the market. Those hotels with an average room rate of under €50 experienced the smallest decline in profitability – 1.3 percent. The budget bracket was also the only one to report an increase in revPAR (revenue per available room) for the year, up 1.6 percent over 2001 levels, due mainly to a marginal increase in average room rate. In contrast, hotels with an average room rate of over €100 reported an average profitability decline of 15.4 percent fuelled in part by a seven percent fall in occupancy combined with a two percent decline in average room rate.

Julia Felton, a director in travel, tourism and leisure at Deloitte & Touche commented: “As economic conditions deteriorate further, the budget sector has been aided particularly by business travellers for whom cheaper hotels have become a real option with the need to reduce costs. Being generally located along roadsides rather than city centres, these hotels have also benefited from increased road and rail travel following the shift in consumer travel patterns, post September 11 2001. Conversely, larger hotels and those located in primary cities have suffered the greatest declines in demand which has resulted in falls in room revenue and therefore profitability.”

A key measure of efficiency is the ability of hotels to convert revenue in profit. On average, all German hotels converted 30 percent of total revenue to profit, compared to 32 percent in 2001. By contrast, the European average in 2001 was 38 percent. Hotels with an average room rate of under €50 were the least efficient at converting revenue to profit, with a profit conversion ratio of 21 percent, whilst hotels in Frankfurt and Munich were the most efficient with profitability conversion ratios of approximately 39 percent.

Julia Felton said, “Hotels with higher average room rates and therefore higher rooms revenue should be able to convert more revenue to profit because the rooms department is the most profitable for the hotel. One of the reasons why German hotels have a lower profit conversion ratio than hotels in the rest of Europe is that German average room rates are some of lowest in Europe. In 2002 our sample of German hotels reported an average room rate of €84 compared to €109 for the rest of Europe. Low average room rates combined with low occupancy levels (average occupancy in Germany during 2002 was 60 percent) meant that rooms revenue in Germany for 2002 was €18,269 per available room compared to €25,915 per available room for Europe. Given the current outlook for the global economy and the German economy in particular, we would anticipate a continued erosion in profitability levels during 2003, and we do not anticipate any significant uplift in profitability until occupancy and average room rates move back towards to 2000 levels.”

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 and 1.1 million rooms every month. Four regional monthly rate and occupancy reports are produced covering Asia Pacific, Caribbean and Latin America, Europe and the Middle East & Africa. These are supplemented by country reports for Australia, Belgium & The Netherlands, Germany, Italy, New Zealand, South Africa, the UK and a city survey for London. Annual profitability surveys are run across all regions of the world, whilst in Germany and London monthly profitability surveys are conducted. Our German survey collates data on the performance of some 700 hotels representing 125,000 rooms on a monthly basis making it the most comprehensive and authoritative independently operated survey available.

For further information on how to purchase data or details on how to join the survey please visit us www.HotelBenchmark.com or contact Lorna Clarke on +44 207 438 2870.

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 across the world.

Authorized 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.

Despite Low Consumer Confidence, Traveler Sentiment Shows Slight Improvement In First Quarter Of 2003 - TIA Reports

After dropping nearly 10 percent in the past two quarters, the Travel Industry Association of America's (TIA) Traveler Sentiment Index rebounded slightly in the first quarter of 2003. The overall index now stands at 97.1, up nearly four percent from the fourth quarter of 2002, when the index stood at 93.7. Still, traveler sentiment is below the stronger levels seen in the first half of 2002.

The rise in the overall Traveler Sentiment Index is due primarily to consumers feeling that they had more time available to travel, with this index rising 17.5 percent to 100.0. Consumers also show slightly more interest in taking pleasure trips, with that index increasing 3.3 percent from last quarter to 97.8. General consumer interest in travel is still on a positive upward trend since dropping to an all-time low in the fourth quarter of 2001. Yet, consumers are still concerned about having the money available to take a trip. The index measuring consumers' ability to travel based on personal finances, at 80.8, is relatively flat over last quarter. This index has not recovered since reaching an all-time high in the second quarter of 2000.

Consumers perceptions about the affordability of pleasure travel continues to decline from an all-time high of 149.8 in the first quarter of 2002. However, this index—at 112.2—is still above the baseline of 100.0. The decline could be a result of travelers reacting to higher gas prices or getting very accustomed to seeing travel bargains since September 11, 2001.

OVERALL INDEX CHART WILL GO HERE

Due to industry concerns about the effects of September 11, 2001, a question on travel safety was added to the TIA Travel Survey starting in the fourth quarter of 2001. This quarter, the Travel Safety Index—at 120.8—is more upbeat, showing a gain of 9.4 percent from fourth quarter 2002.

Generation X and Y (age 18 to 34) travelers show a strong increase in their perceptions about the affordability of travel, as well as in their interest and time available to travel. However, their ability to travel based on personal finances is at its lowest point-to-date. Baby Boomer (age 35 to 54) travelers show a significant increase in their time available to travel and were more confident about traveling based on their personal finances. Boomers continue to feel less confident about the affordability of travel.

When the overall Traveler Sentiment Index is examined on a regional basis, the South shows the only substantial gain, rising 12 percent to 100.9. Among those travelers living in the West, the overall sentiment index is up 3.7 percent to 98.1. The overall sentiment indices for the Midwest and the Northeast have declined to 94.6 and 91.3, respectively.

Members of the media can obtain TIA's latest Traveler Sentiment Index report, including additional analysis and charts for each index, by sending an e-mail to ckeefe@tia.org.

NOTE: TIA's quarterly Traveler Sentiment Index (TSI) is conducted four times per year and is a running gauge of consumers' interest in leisure travel and their perceived ability to travel. The study consists of five criteria: interest, time, finances, affordability, and service quality. The TSI is based on quarterly interviews with approximately 1,000 U.S. adults who have taken at least one trip in the past year. Each criterion is measured individually and then combined to create an overall index score. The baseline year for the Index is the year 2000.

TIA is the national, non-profit organization representing all components of the $537 billion travel industry. TIA's mission is to represent the whole of the U.S. travel industry to promote and facilitate increased travel to and within the United States.

Middle East Region's leading publisher calls on tourism and hospitality sector to 'know its customer'

AME Info - Robert Serafin, managing director of Middle East publishing group ITP, urged the tourism and hospitality sector in Dubai to 'truly know its customer' in order to achieved continued success.

Serafin was addressing industry leaders at the Dubai chapter of Skal in his capacity as publisher of Time Out Dubai and Abu Dhabi.

He said: “With new restaurants and hotels springing up across Dubai, what makes the difference to us as consumers is consistent quality and service.

“And if you want to know what we as intelligent consumers mean by good service, look at what you as hoteliers want – because you are consumers too.”

The Dubai chapter of Skal, the international organisation of tourism leaders, was launched in November with the support of Dubai Tourism & Commerce Marketing (DTCM), and 20 founding members. The membership has risen to 50 in just four months.

Registered as Dubai Chapter 672 through the Skal headquarters in Torremolinos, Spain, the Dubai members join more than 25,000 tourism professionals in more than 525 clubs in 80 countries in their pursuit for the sound development of tourism worldwide.

Gulf Daily News - THE Bahrain Hotels Company (BHC), which owns the Gulf Hotel and the Gulf Cellar, increased its net profit by 11 per cent to BD2.58 million last year, it was revealed yesterday.

The Gulf Hotel has maintained the leading position in the market, achieving the highest number of rooms sold and highest number of food covers served, board chairman Farouk Almoayyed told the annual general meeting at the hotel's Awal Ballroom.

"The political situation prevailing in the kingdom has contributed positively towards business growth," he commented.

BHC's gross operating revenue of BD14.29m exceeded 2001 by 9.6 per cent, said Mr Almoayyed.

The board approved a dividend of 20pc (BD1.69m) to the shareholders and proposed a one-for-10 bonus issue.

A total of BD50,000 was allocated for charity, academic research and national promotional institutions.

Mr Almoayyed announced the restructuring of the company with James Hogan, Ahmed Al Hamadi and John Butler as new board members, Mohammed Buzizi as managing director and board member and Aqeel Raees as chief executive officer.

"With these changes, I am confident that BHC will achieve new heights in financial results and effectively manage future expansion plans," said Mr Almoayyed.

He revealed that a BD2m expansion and renovation project was underway at the Gulf Hotel complex.

It includes the interior and exterior renovation of the south wing, work on which was started last month and is scheduled for completion in September this year. "Upon completion of the project, the Gulf Hotel will have 366 five-star rooms available, the highest amongst the five-star hotels category in Bahrain," said Mr Almoayyed.

The landscaping and upgrading of poolside has been completed, and the Royal Thai Seafood Restaurant has been opened overlooking the pool.

Tenders for the construction of the Iranian Restaurant are in progress. The restaurant is scheduled for opening by mid-2003.

"BHC's first international venture, the $7m (BD2.6m) Ocean Paradise Resort - Zanzibar, is expected to open in the second half of this year," he said.

"The company has also signed a letter of intent authorising 25 per cent equity participation with management rights in the 250-room Al Amwaj Resort Hotel in Bahrain."

The project is being developed at Amwaj Islands, off Muharraq, by Ossis Property Developers. No date has been set for work to begin on the hotel, which is expected to create about 300 jobs.

The uncertainty created by the potential conflict in Iraq has led the World Travel & Tourism Council to produce two sets of research to more fully explain the potential outcomes.

WTTC has identified a base case scenario in which there is a diplomatic solution or victory after a short, contained war. Secondly, the more devastating impact of a prolonged war scenario was analyzed.

The WTTC research, produced for 161 countries worldwide, demonstrated the importance of Travel & Tourism to the world economy when the direct and indirect economic impacts of the industry are assessed. Under the base case scenario it is estimated that, in 2003, the Travel & Tourism industry will in 2003 account for:

* 195 million of the world's jobs or 7.6 per cent of total employment
* US$3,527 billion of economic value (gross domestic product) or 10.2 per cent of total GDP

The demand in 2003 associated with Travel & Tourism can be further broken down as representing:

* 11.2 per cent of all exports (US$1,010 billion),
* 9.6 per cent of all capital investment (US$686 billion)
* 3.9 per cent of all government expenditures (US$224 billion)

Travel & Tourism is forecast to see real growth (accounting for the effects of inflation) of 1.1 per cent.

A prolonged war in Iraq (war scenario) would destroy more than three million jobs in the global Travel & Tourism industry and eliminate more than US$30,000 million of economic value in 2003, the latest research from the World Travel & Tourism Council shows.

"In the event this worst case scenario takes place, we will look for immediate and decisive action from governments to protect and secure this vital world industry," said WTTC President Jean-Claude Baumgarten.

In particular, Baumgarten called for strong and proactive public-private partnerships to develop emergency contingency plans that would help mitigate the impact of events. Key interventions might range from tax breaks to increased levels of investment by governments in security, tourism promotion and infrastructure.

Developed and developing countries alike stand to suffer significant loss of economic value and employment on par with the damage caused by the terrorist events of September 11, 2001. Richard Miller, vice president for research and economics at the WTTC, said: "The industry should brace itself for a possible repeat of post-September 11 losses if the conflict is not resolved peacefully or quickly."

The impact of a prolonged war will not, however, have a uniform impact on all countries. The world's largest economy, the USA, will suffer a massive shock with an estimated loss of 450,000 jobs and a decrease in the economic value of the travel and tourism industry of 3.7 per cent.

Within the European Union close to 260,000 jobs would be lost and the Travel & Tourism industry would see its GDP slide by 0.7per cent (about US$270m of economic value).

WTTC has posted its 2003 research on its website (www.wttc.org) for immediate access.

The World Travel & Tourism Council (WTTC) is the Global Business Leaders Forum for Travel & Tourism. Its Members are Chief Executives from all sectors of the travel industry. Its central goal is to work with governments to realise the full economic impact of the world's largest generator of wealth and jobs - Travel & Tourism. The Council's policy framework for sustainable tourism development is encompassed within "Seven Strategic Priorities".

The Florida Hospitality Services Industry is recovering from its most difficult year in recent memory. The combination of the cooling economy, war on terrorism, and prolonged reductions in international and leisure travel, combined to make 2002 one of the worst for the hospitality industry in the last twenty years. In general, most Florida markets will improve in 2003, but only by the smallest of margins.

According to Ernst & Young the average occupancy for Florida hotels should increase to 62.2 percent in 2003, up from 60.8 percent in 2002. Meanwhile the average daily room rates in the state will also increase ever so slightly from $89 per night in 2002 to $90 in 2003. While those increases won’t set the lodging world ablaze, they are going up instead of down for the first time in three years, giving hotel owners something to celebrate.

As the second most visited state in the nation, just behind California, Florida is very dependent on both domestic and international tourism. Compared to other states, however, the effects of the global reductions in travel are more pronounced in Florida. In conjunction with U.S. vacationers staying home, struggling economic conditions in Brazil and Argentina have further impacted the slowdown.

Generally speaking, operators and owners of hospitality real estate have taken appropriate measures to cut costs and increase revenues in the challenging environment of the past two years. Most of the changes made in the past few years are now helping to improve conditions across the state. RevPAR, a key indicator of how hotels are performing, is up across the board in most every market for 2003. As the markets continue to rebound and business and leisure travel increases, those efficiencies are likely to have an even greater impact on the bottom line.

Mark Lunt, Ernst &Young’s Florida and Caribbean Hospitality Practice Leader, says it’s good to see conditions going up instead of down. “We’re not out of the woods yet, but the Florida lodging industry is getting better this year and it is still the second most visited state in the nation,” said Lunt. However, Florida’s performance is highly dependent on Miami and Orlando – both of those markets are dependent on international and leisure demand, and both are dealing with new supply concerns.

Lunt is bullish on the long-term prospects of Florida’s hospitality industry. “Overall performance is improving and hotel operators have become more efficient in the past two years, so I’d say that by 2004 we’ll be in much better shape. We’ve got some of the best weather in the country and an infusion of great new hotels. On the bright side, the slowdown has created some excellent values for travelers, so take advantage of it now before rates go back up,” Lunt added.

The Hospitality Services Group of Ernst &Young is considered one of the largest and most effective advisory practices in the world. The Hospitality team is focused on delivering value-added solutions that are focused and quick to implement.

The Serbian Tourism Organisation said Monday that some 2.2 million tourists visited Serbia last year, bringing in $65 million in revenues, up 63 percent against the previous year.

There were 7.2 million overnight guests in hotels across Serbia, unchanged from the previous year.

Domestic tourists mostly visited spas (32 percent), mountains (32 percent), other tourist centres (18 percent), cities and towns (15 percent), and miscellaneous attractions (3 percent).

Serbia's leading tourist attractions last year were: Belgrade, Mount Kopaonik, Vrnjacka Banja spa, Mount Zlatibor and Sokobanja spa.

The majority of foreign visitors vacationed in cities (64 percent), while 16 percent of them visited the country's spas and mountains.

Foreign tourists mostly visited Belgrade, where they accounted for a 23 percent rise in the number of overnight guests against the previous year. Meanwhile, hotels in Novi Sad recorded a 28 percent increase in foreign visits.

Mount Kopaonik ski resort saw the number of foreign tourists skyrocket by 137 percent, compared to 2001, while one of the most popular spas in Serbia, Vrnjacka Banja, saw a 20 percent drop.

Foreign visitors mostly originated from neighbouring countries. Visitors from Bosnia-Herzegovina accounted for 94,525 overnight guests, followed by Macedonians and Slovenians at 48,967 and 47,020 respectively.

Newsletter - March 13, 2003