By Mid-Year 2002, Hotel Profits Were Again Down, But Not Out

RevPAR Decline Only Tells Part Of The Story

U.S. hotels are in pain, but claims of sharp declines in RevPAR (rooms revenue per available room) - the traditional measurement of hotel financial health - tell only part of the story. The real concern for hotel owners and operators should be the declines in profitability they are facing.

A mid-year 2002 analysis performed by The Hospitality Research Group of PKF Consulting (HRG) finds that the average U.S. full-service hotel suffered a 21.3 percent decline in profits during the first six months of 2002 compared to the same period in 2001. During this same period, limited-service hotel profits fell 18.8 percent. For this study, profits are defined as income before deductions for capital reserves, rent, interest, income taxes, depreciation, and amortization.

More Frequent Bottom-Line Benchmarking

The dramatic and sudden downturn in hotel performance during the later part of 2001 and into 2002 emphasizes the need for more frequent benchmarking of not just hotel revenues, but expenses and profits as well. This idea is conistent with the editorials that have recently appeared in several hotel industry trade publications.

It is this demand for more frequent expense and profit data that spurred HRG to complement its annual Trends in the Hotel Industry survey with a special mid-year survey. This mid-year analysis enables hotel owners and operators to compare revenue, expense, and profit movements for the first six months of the current year to the first six months of the prior year. Going forward, HRG’s mid-year and annual Trends surveys will allow hotel owners and operators to benchmark their financial performance twice a year.

A Newer and Better Measurement

“The hotel industry has relied on RevPAR as the primary indicator of fiscal health, but for many in the industry it’s the bottom-line that counts,” says Jack Corgel, Ph.D., and Managing Director of Applied Research for HRG. “The well-documented declines in RevPAR accurately document the pain that U.S. hotels have felt since the beginning of 2001. Our research finds that there is a more general cause for concern when profits are off nearly twice as much as revenues.”

While franchise fees and some portion of management fees are driven by revenue, a large portion of income for management companies - and all the income for owners - is derived from the profits of a hotel. In turn, the ability of hotel owners to pay financiers and distribute money to investors is totally dependent on the cash flows generated by the hotel. Also, hotel lenders have keen interest in profit levels as they judge coverage and delinquency risk.

“We believe that analyzing profits on a per-available-room basis (ProfPAR) and as a percentage of revenue (profit margin) provides a better measurement of the operator’s effectiveness, ownership’s wealth, and lender security,” says Corgel. “The industry has been clamoring for a new measurement. These basic profit statistics go right to the bottom-line.”

Management Does React

The full-service hotels in the HRG sample averaged a RevPAR of $69.41 during the first half of 2002 compared to $80.25 in the first half of 2001. This represents a decline of 13.5 percent. With rooms revenue comprising 67 percent of total revenue at these full-service hotels, the decline in total full-service revenues was 12.7 percent during this same period.

Limited-service RevPAR held up slightly better. From the first half of 2001 to the first half of 2002, the RevPAR for the limited-service sample dropped from $43.42 to $39.09, for a decline of 10.0 percent. Because rooms revenue comprises most of the total revenue for limited-service hotels, the decline in total limited-service revenues was 10.3 percent.

In response to the double-digit declines in revenues, hotel managers continued to cut expenses following the extensive cuts made during 2001. Operating expenses at the average full-service hotel in the sample were reduced 9.1 percent during the first half of 2002 from the dollars expended in the first half of 2001. Limited-service hotel managers also reduced their expenses, but to a lesser degree. Given the lower cost structure at limited-service hotels, operating expenses were cut by just 3.8 percent in this segment.

For reference purposes, we should note that hotel managers cut their operating expenses 5.2 percent for the entire year in 2001 in light of the 9.9 percent decline in total revenue experienced for the year. “Hotel managers trimmed a lot of expenses in 2001, but continued to cut even more in 2002,” notes Corgel. “Some of the expense reduction has been the result of the decrease in business volume and resulting removal of the associated variable expenses. However, we noticed cuts in some of the traditional ‘fixed’ costs of hotel operations, as well.”

“Moving forward, it will be interesting to see if hotel managers continue to hold down their operating expenses when market conditions start to improve,” Corgel says. HRG is projecting U.S. hotel RevPAR to start growing again in 2003 and 2004. “In separate analyses conducted by HRG, we found that managers tend to increase their operating expenses fairly dramatically during periods of industry recovery. This practice somewhat depresses the profit rebound that a hotel could enjoy when revenues start to improve. If hotel managers find ways to control their operating expenses, we could see some dramatic improvements in hotel profits in the next two years.”

A historical analysis of hotel revenue and profit data from HRG’s Trends in the Hotel Industry database finds that profits tend to react with a greater degree of elasticity compared to movements in revenue. During periods of industry recovery, profit growth outpaces increases in revenue. Conversely, when industry revenues decline, profits drop to an even greater extent.

Labor Pains

When it comes to cost reductions, the first place hotel managers look at is their labor costs. Historically, labor costs have averaged approximately 40 to 45 percent of all dollars spent to operate a hotel. During the first half of 2002, the practice of cutting labor costs continued as 37.2 percent of all expense reductions at full-service hotels were attributable to a combination of salary/bonus reductions, reduced hours for hourly staff, and some layoffs. With lower staffing needs, the cuts in limited-service labor costs comprised just 23.7 percent of the total expense reductions.

On average, the typical full-service hotel in the study sample reduced their payroll and related expenses from $14,290 per available room (PAR) in the first half of 2001 to $13,243 per available room in the first half of 2002. For limited-service hotels, labor costs were cut from $3,593 PAR in the first half of 2001 to $3,508 PAR in the first half of 2002.

“While we observed labor cost reductions in all departments, it is interesting to note that the lowest percentage reduction in payroll occurred in the marketing department,” notes Corgel. “With such competitive market conditions, the need to maintain sales and marketing personnel was deemed to be of great importance by hotel management.”

Telephones Down, Booze Up

Since occupancy for the hotels in the survey sample declined, it follows that guest telephone revenue also would drop. From the first half of 2001 to the first half of 2002, telephone revenue for the full-service sample was off 28.3 percent. Telephone revenue for the limited-service sample declined 36.0 percent. This represents that largest percentage decline of any hotel revenue source.

In addition, the magnitudes of these declines were far greater than the
drop- off in occupied rooms. “Given the enormity of the decline in telephone revenue, it is apparent that hotel guests are avoiding the guest room phone all together and using their own cell phones or charge cards,” says Corgel.

While hotel guests may be avoiding the phone, they don’t appear to be leaving the lounge as quickly. Like all other revenues, full-service beverage (alcohol) revenue dropped from the first half of 2001 to the first half of 2002. However, the 7.4 percent decline in revenue was the lowest percentage decline of any hotel revenue source. “In addition to the relatively modest declines in alcoholic consumption among guests, hotel managers were actually able to cut costs to a greater extent,” notes Corgel. “While fewer dollar profits were made in the first half of 2002 compared to 2001, the beverage department was the only operating department to have achieved a higher profit margin during this same period.”

Profit Margins Show Some Health, Hotels Still Generate Profits

“Despite all the pronouncements of doom and gloom, the relative profitability of U.S. hotels is very sound from a historical perspective,” Corgel comments. “While no owner or operator enjoys seeing fewer bottom-line dollars from one year to the next, the efficiency of hotel managers in 2002 is relatively quite high.”

From 1980 through 2001, full-service hotels in the U.S. averaged a 22.4
percent profit margin. Through the first half of 2002, the full-service hotels in the study sample averaged a profit margin of 26.2 percent. This is down from the 29.0 percent mark achieved in the first half of 2001. For reference purposes, full-service hotel margins peaked in the year 2000 at 30.5 percent.

Limited-service hotels, on the other hand, are currently performing on pace with long-term averages. From 1980 through 2001, limited-service hotels averaged a 39.4 percent profit margin. Through the first half of 2002, profit margins for our sample of limited-service hotels averaged 39.1 percent. This is less than the 43.2 percent profit margin limited-service hotels achieved during the first half of 2001.

Few Difference Among Size, Market Position, and ADR

When analyzing the lodging industry, HRG frequently finds differences in performance among different groups of hotels, be they divided by geography, market orientation, size, or room rate categories. This underscores the notion that the hotel industry is typically driven by local market conditions. For the special mid-year study, HRG did divide the survey sample into various operating categories.


“It is interesting to note that we did not observe any significant differences in trending performance from 2001 to 2002 among the various descriptive categories,” says Corgel. When The Hospitality Research Group analyzed the samples by ADR, room count, or market segment, all full- and limited-service hotel sub-categories showed virtually equal changes in revenues and expenses. The only category that showed some resiliency was limited-service properties with fewer than 110 rooms. These properties experienced a decline in revenue of just 2.1 percent and a relatively small decline in profits of 6.6 percent. “This equal distribution of poor performance shows that the extreme and unique factors that caused this industry recession have affected all hotels,” adds Corgel.

Survey Results Available To Industry

To purchase a copy of the results of HRG’s special 2002 mid-year Trends in the Hotel Industry survey, please visit their website at www.hrgonline.com - Publications & Data / Annual. The report can be downloaded immediately for the cost of just $95.00.

* * *

The Hospitality Research Group (HRG), headquartered in Atlanta, is the research affiliate of PKF Consulting, the international consulting and real estate firm specializing in the hospitality industry. PKF Consulting has offices in New York, Boston, Philadelphia, Washington DC, Atlanta, Houston, Dallas, Los Angeles, San Francisco, and Singapore. HRG, along with their partners at Torto Wheaton Research , also provide an extensive series of forecast products focused on the U.S. lodging industry.

Optimism and Budgeting

By Alexander Feneck, Hospitality Research Group of PKF Consulting
November 2002

The budget season is just about over, and the hopes for 2003 have been factored into dollars and cents.  Whenever a general manager forecasts for the following year, he/she hopes and plans to do better than the competition.  This is as true today as it was in the fall of 2000.

When the hotel industry budgeted for 2001, it was expecting a slowdown in growth, but not a decline performance.  Due to the unforeseeable events and volatility of 2001, the hospitality industry experienced the largest single year deterioration in hotel performance ever.  No budget could have foreseen such a dramatic year, but it is still interesting to see what hotel managers expected, knowing they were headed into a slow year.

From our Trends in the Industry database of financial statements, we analyzed the budgets and actual operating performance of 552 properties for 2001.  This sample was then separated into full-service, limited-service, resort, convention, and extended-stay hotel markets.  The following highlights our findings.

Occupancy and ADR

By the end of 2000, the hospitality industry had already begun to slow down, and the average hotel expected this trend of moderate growth to continue.  The average hotel from our sample budgeted for a 1.8 percent increase in occupancy.  By the end of the year, occupancy was actually down 6.2 percent for the average hotel; this resulted in a variance of 12.3 percent from the budget.
Going into 2001, convention hotels from our sample budgeted for the largest increase (2.4 percent) in occupancy while the resort hotels expected the smallest growth budgeting for only a 1.2 percent increase.  Looking back at what actually occurred in 2001, convention hotels saw the greatest decline (-10.1 percent) in occupancy.  Resort hotels finished just behind them with a 8.3 percent decline in occupied rooms.  Extended-stay hotels experienced the softest decline in occupancy (-3.7 percent).

If 2001 had turned out according to the way our sample had budgeted, the average daily rate (ADR) would have grown by 3.5 percent.  This was not to be.  Fortunately, ADR did not decline to the same extent as occupancy, but the ADR did finish the year down by less than half a percent.

Unlike occupancy, resort hotels were the most optimistic when it came to their ADR.  Resort hotels budgeted for a 6.7 percent increase to their ADR.  Limited service hotels expected the smallest increase in ADR, budgeting for only a 1.7 percent improvement from year 2000 levels.  In actuality, resort hotels were able to sustain a 4.3 percent growth in ADR; this places them at the top of our sample.  Full-service hotels in our sample experienced the largest drop in ADR, declining nearly 2 percent.  Limited-service hotels remained relatively flat, in terms of ADR change, declining one tenth of a percent.
 
 

Revenue

Although in 2000 the average hotel saw revenues rise by 7.7 percent, the average 2001 budget from our sample called for only a 5.0 percent increase in revenue.  Unfortunately, even this modest growth was not to be.  Our total sample of hotels experienced a 7.8 percent decline in revenue in 2001.  This average hotel missed their budgets by almost 8 percent. 

The resort hotels from our sample budgeted for the largest growth in revenue (7.3 percent), while the limited-service hotels were the most pessimistic aiming for only 3.2 percent growth.

By the end of 2001, resort hotels experienced the lightest decline in revenue (4.4 percent).  Full-service hotels, which projected a 5.0 percent increase in revenue, were hit the hardest and suffered over a 10 percent decline to revenue.  The variance between what the full-service hotels budgeted for and what actually occurred was 14.6 percent. 

Just as with ADR, resort hotels were the most optimistic when they budgeted for revenue.   They were able to hold their revenue losses to only 4.4 percent, the smallest drop among our sample.  Limited-service hotels projected only a modest growth in revenue (3.2 percent) and ended the year falling short of their budget by the smallest margin (9.0 percent) compared to the rest of our sample.

Operating Expenses

As the year progressed, managers found the need to cut operating expenses as revenues began to decline.  In an effort to soften the eventual decline to year-end profits, operating expenses where cut wherever possible.  The average hotel budgeted an increase in operating expenses of 3.8 percent.  By the end of the year, operating expenses at these hotels had actually been reduced by 3.2 percent.  This is one area in which hotel managers were smart to have deviated from their budgeted amounts.

Going into 2001, the extended-stay hotels from our sample planned for a 6.2 percent increase in expenses.  The limited-service hotels were the most conservative budgeting for only a 2.1 percent increase in expenses.  Again, hotel managers responding to the decline in revenues reduced operating expenses.

By the time 2001 was over, those same extended-stay hotels had posted a modest 2.7 percent increase in operating expenses.  They were the only group to spend more in 2001 than they did in 2000, due in large part to their already relatively low operating expenses.  The convention hotels from our sample slashed operated expenses by nearly 6 percent and varied from their budget by nearly 11 percent.  Limited-service hotels cut operating expenses by only 1.7 percent, thus finishing the year with a 3.7 percent variation from their budget.

Profits

Despite the effort by hotel managers to reduce operating expenses, revenue declined at a greater rate, and profits suffered.  From our sample, the average hotel experienced a 16.6 percent decline in profits and missed their budgeted profit by 22.3 percent. 

Full-service hotels took the hardest hit in profits, falling over 22 percent from year 2000 profit levels.  Going into 2001, the full-service hotels had budgeted for an increase in profits of 9.4 percent.  The variance between what full-service hotels expected and what they achieved was nearly 30 percent.  Resort hotels from our sample expected the largest increase in profits (14.0 percent) and finished the year falling 11.0 percent. They missed their budgeted profits by 22.0 percent.  Limited-service hotels finished the year closest to their projected bottom lines, missing by only 16.0 percent. 

How to Budget for 2003?

Looking ahead toward 2003, we are again expecting moderate growth.  Going into a slow year, we should apply the lessons we’ve learned.  Specifically, despite the natural desire to aim high while budgeting, modest forecasts call for modest budgets.  This is not the year to aggressive, but rather to budget accurately and attempt to maintain modest growth in profitability.

As managers prepare their budgets, they may find some of the products offered by the Hospitality Research Group (HRG) helpful.  HRG provides Hotel Outlook reports, for 50 major U.S. lodging markets, containing annual and quarterly data covering 15 years of history and a 6-year forecast.  It includes RevPAR, ADR, occupancy data and more for both full- and limited-service hotels.  HRG also provides customized Benchmarker reports that allow the hotel owner to compare his/her property, in terms of both expenses and revenues, to a select group of comparable hotels in a comprehensive report.  To order any of these tools contact Claude Vargo at (404) 842-1150 ext. 237.

Alexander Feneck is a Research Assistant in the Atlanta office of the Hospitality Research Group of PKF Consulting (HRG).  Robert Mandelbaum, the Director of Research Information Services for HRG, assisted with the article.

PKF Consulting

Six Continents Hotels Highlights Success of Online Initiatives and Outlines 2003 E-Commerce Goals

/PRNewswire/ -- As the first hotel company to offer web bookings more than seven years ago, Six Continents Hotels, Inc. (www.sixcontinentshotels.com ), the world's most global hotel company, today at its annual Conference in San Diego, highlighted the success of its online initiatives, and outlined its aggressive 2003 E-commerce goals.

"We have seen a significant impact on the hotel industry since the Internet emerged nearly eight years ago -- and Six Continents Hotels has been instrumental in this tremendous growth," said Eric Pearson, vice president of E-commerce for Six Continents Hotels. "From the Internet's starting point in 1995, it took us just two years to book one million dollars in revenue from online reservations. Last January, we booked a million dollars in a single day. And earlier this year, we passed another major milestone -- $ 2 million booked in a single day direct to our Web sites."

One of the most important elements in the success of Six Continents Hotels Internet bookings has been the company's industry-leading Lowest Internet Rate Guarantee. The Guarantee promises if a consumer finds on the Internet a lower rate publicly viewable and bookable on another Web site for the same hotel and accommodations for the same dates and finds it within 24 hours of making his or her reservations, Six Continents Hotels will honor the lower rate plus give an additional 10 percent discount, upon its verification of the rate by Six Continents Hotels.

Since its launch in May, some critics have accused the Guarantee of starting a price war and dwindling profit margins. A six-month review proves differently.

According to initial highlights:

* Revenue growth for Six Continents Hotels' Internet bookings have shot

up 80 percent over last year -- compared to Internet bookings in

general, which averaged 40 percent;

* Hotels are regaining control of their inventory and capturing the

margins that would have otherwise gone to the wholesalers;

* Challenges to the Guarantee average about 1 out of 1,000 bookings, or

less than 1/10 of one percent of people who book on the Internet

confirming Six Continents Hotels' pricing is the best available.

According to Forrester Research, online hotel bookings will double in four years from $ 6.9 billion this year to $ 14.7 billion making travel the number one activity for Internet lookers and bookers.

Continued Pearson, "Clearly there is a great opportunity and potential with the Internet, and our goals for 2003 reflect the enormous upside this channel represents."

Six Continents Hotels Internet objectives for 2003 include:

* Growing Internet direct revenue over 40% by continuing to offer new

products and services, such as last-minute getaway packages and top

destination Web sites featuring Six Continents Hotels;

* Driving demand for the brand Web sites by expanding geographical reach

with regional sites available in multiple languages, offering targeted

online promotions, and taking stronger actions to bias Internet search

engines so that consumers are not hijacked to third-party web

wholesalers;

* And ensuring that all Six Continents Hotels properties are maximizing

the benefits of the Internet by instituting new training courses for

hoteliers, which cover pricing, positioning, and prospecting on the

Internet, including ways to maximize the benefits of the Rate

Guarantee.

"All of our activities will focus on delivering the best product at the best available price for our guests," stated Pearson. "Consumers want to book directly with brands they recognize and trust and with 50 years behind us, we have the most recognized and trusted brands in the world." Pearson went on to say, "Ultimately, our Rate Guarantee and our Web sites are also about ensuring our guests Book with Confidence. Confidence they're getting the best available rate. Confidence they actually have a reservation when they arrive. Confidence there is no hidden booking fees. And confidence their security and privacy are always protected."

Six Continents Hotels is a leading global hotel group whose brands include InterContinental Hotels & Resorts, Crowne Plaza Hotels and Resorts, Holiday Inn, Holiday Inn Express and Staybridge Suites. Six Continents Hotels owns, operates or franchises more than 3,300 hotels and over 515,000 guest rooms in nearly 100 countries and territories around the world.

Six Continents(SM) Hotels, the hotel business of Six Continents PLC of the United Kingdom (NYSE: SXC; London) (ADRs), owns, operates or franchises more than 3,300 hotels and 515,000 guest rooms in nearly 100 countries and territories.

The following are some of the service marks owned by Six Continents Hotels, Inc., its parent, subsidiaries or affiliates: Holiday Inn(R), Crowne Plaza(R), Holiday Inn Express(R) in the Americas, Express by Holiday Inn(SM) in Europe, the Middle East and Africa, Holiday Inn Select(R), Holiday Inn Garden Court(SM), Holiday Inn SunSpree(R) Resort, Staybridge Suites(R) by Holiday Inn(R), Holiday Inn Family Suites(SM) Resort , Holidex(R), Priority Club(R), InterContinental(R) and Forum(R). Centra(R) in Canada and Mexico; Centra(SM) in the U.S.; Parkroyal(SM) in the U.S. and Canada; Parkroyal(R) in Mexico.

Six Continents Club(R), Six Continents(SM), 6 Continents(SM) and the 6C logo are service marks of Six Continents PLC and used under license.

Six Continents Hotels, Inc. offers information and reservations capability on the Internet -- www.6c.com, www.intercontinental.com for InterContinental Hotels and Resorts, www.crowneplaza.com for Crowne Plaza Hotels and Resorts, www.holiday-inn.com for Holiday Inn hotels, www.hiexpress.com for Holiday Inn Express hotels, www.staybridge.com for Staybridge Suites by Holiday Inn, and www.priorityclub.com .

For the latest news from Six Continents Hotels, visit our online Press Office at http://www.pressoffice.sixcontinentshotels.com /

VIP Celebrations at The Grand Hotel Wien

Vienna's The Grand Hotel Wien launched new opening with exclusive Gala Event

The Grand Hotel Wien  in Austria's capital Vienna was officially opened as a member of JJW Hotels and Resorts and celebrated by a lavish party attended by Austrian and international celebrities.

The VIP guests, which included Lord Denman of Great Britain, Mr. Yoshiyuki Nakamachi, Senior Executive Vice President of ANA, All Nippon Airways, Count and Countess Kalnoky, Archduke Alexander from Austria, Rudolf Humer, general manager of Palmers Textil AG, Maria Rauch-Kallat, ÖVP-general secretary, FPÖ leader Mathias Reichhold, Tourism state secretary Marès Rossmann, Helmut Lohner, gastronom Toni Mörwald, and construction tycoon Hanno Soravia were entertained by the elite of musical and cultural artistes such  as Vienna Boys´ Choir, the State Opera Ballet and internatioally renowend Angelika Kirschlager, Stefan Vladar, Benni Schmid and Neil Shicoff.

At an earlier Press Conference it was announced that under its new ownership, the Grand Hotel Wien will become a member of Leading Hotels of the World.  Paul McManus CEO of Leading Hotels of the World Ltd, said, “Grand Hotel Wien is a beautiful and traditional hotel which we are delighted to welcome as a member of our network of the best independent Five Star Hotels in the World.

At the gala, the new general manager for the Hotel was introduced. Mr. Georg Weinländer,49, Austrian, former long-time Hilton general manager who will take over the hotel on the 1^st November.

“The intention of this party was to demonstrate our commitment to quality and the Grand Hotel Wien and to reflect the elegance and tradition of this magnificent city.”  Said Sheikh Mohamed. Guests departing from the cultural and culinary extravaganza commented on an unforgettable evening which was the event of the year.

About JJW Hotes & Resorts

JJW Hotels & Resorts is an international group with a value of $1.6 Billion whose business interests are in the acquisition, development and operation of hotels and leisure resorts in prime locations throughout Europe.  Founded in the late 1980s the Group has now acquired a portfolio of 40 hotels in Europe and the Middle East, including locations such as Paris, London and Cannes, along with Pinheiros Altos, a Five Star Luxury Golf and Residential Development in Algarve, Southern Portugal.  Current expansion plans in Portugal are going ahead with the acquisition of the Penina and Dona Filipa Hotels and their three associated golf courses including the renowned San Lorenzo Course, and under construction  is a further luxury hotel development with 54 Hole Championship Golf Course, along with a Five Star Hotel & Spa at Pinheiros Altos due to open in early 2004.

Present investments include majority shareholding in the Kingdom Hotel Investment Group (KHI) which was formed early this year with a capital of $400 million.  Through partnerships and leverage (KHI) controls over $1 billion of hotel real estate across the Middle East and Africa.  Its portfolio consists primarily of 13 hotels managed by international groups such as Four Seasons and Movenpick.  

JJW Hotels & Resorts has a corporate Head Office in London, England; and offices Paris, France; Quinta do Lago, Portugal; Vienna, Austria and Cairo, Egypt.

The Grand Hotel Wien was first opened in 1870 as the first Grand Hotel in Vienna and re-opened in 1994 following a complete re-development, retaining only its historic façade. It now combines classic Viennese style with state-of-the art technology. The five-star-deluxe 205-room hotel enjoys a prime location in the centre of Vienna on Kärntner Ring, adjacent to the Ringstrassen Galerien, and a short walk from the Vienna State Opera. Other attractions within the hotel include top class restaurants offering French, Japanese and Viennese cuisine, two bars, five meeting rooms and one of Vienna’s largest hotel ballrooms

HKTB defends methodology for tourism statistics

TTG Asia - Hong Kong tourism officials have struck back at criticism that they juggle figures to make arrival numbers look more healthy.

Deputy Commissioner for Tourism, Mr Duncan Pescod argues the Hong Kong Tourism Board’s (HKTB) methodology conforms to international standards defined by the World Tourism Organization.

Mr Pescod added the statistics also plainly show the difference between overnight visitors and those who arrive and leave the same day. What’s more, HKTB does not include 5.5. million annual transit visitors, he added.

He was answering charges by a hospitality academic and travel industry figures that Hong Kong’s real tourist arrival figures are inflated substantially because the government counts people who fly in and depart the same day, or who arrive from China and fly out the same day. They said this could lead to faulty financial planning.

Mr Pescod said it was important to realise the HKTB compiled a vast array of different statistics based on specific surveys into issues such as the per-capita spending, purpose of visit and mode of transport. All were broken down by source market and regions. This information is available to the trade and other interested parties. In addition, government issues statistics on employment due to the tourism industry and also compiled global statistics covering tourism and other sectors.

Source:   TTG-Asia

Hilton Hotels enters India in tie up with domestic partner

(AFP)  - International hotel chain Hilton said Tuesday it was entering the Indian market in collaboration with domestic group Blue Coast Hotels and Restaurants.

The joint venture will initially set up three hotels in India's financial capital Bombay, IT hub Bangalore and the coastal tourist resort state of Goa at a total cost of five billion rupees (104 million dollars).

"Hilton International has a long-term commitment to a presence in India, utilising a two-pronged strategy -- anchoring our presence with a strong local partner and participating in the equity of our hotels," Hilton's chief executive officer Anthony Harris said here.

Hilton has twice before entered the Indian market, lending its prestigious name to franchises in the country but later exiting.

In the new arrangement, Hilton will hold a third of the equity in the joint venture while the majority share will be with the Indian partner.

Harris said the Hilton group had set aside a certain portion of money for properties in India, but did not disclose the investment amount.

The group was also open to collaborations with other partners for setting up or developing hotel properties, Hilton officials said.

Hotelier Raymond Bickson is new COO for Taj Luxury Hotels

Leaves New York Behind for Assignment in India

After fifteen years as general manager of The Mark, New York, Raymond Bickson has accepted the position of Chief Operating Officer for Taj Luxury Hotels, the luxury division of the 100-year old Bombay-based The Indian Hotels Company (IHC) which operates Taj Hotels, Resorts and Palaces.  Mr. Bickson will report directly to The Taj Group's Managing Director R.K. Krishna Kumar and will be headquartered in Bombay.

Taj Hotels, Resorts and Palaces have 51 award-winning properties in 36 locations throughout India and an additional 11 properties in nine key international destinations outside of India. There are four main divisions of Taj hotels, each marketing to a particular niche. These are The Luxury Hotels, Taj Business Hotels, Taj Leisure Hotels, and the Taj International Hotels & Resorts.

The Taj Luxury Hotels division targets the CEOs and political leaders of the world and has a luxury hotel portfolio that represents 70% of the profit of the entire Taj Hotels, Resorts & Palaces company.  The Luxury Hotels include seven current properties (Bombay, two in New Delhi, Kolkata, Chennai, Bangalore, and Hyderabad) plus one new property with the recent acquisition of Taj Lands End Bombay (formerly The Regent of Bombay).  Mr. Bickson will be charged with overseeing the operations of these luxury properties and will be key to the expansion of future hotels.

Taj is India's oldest and most distinguished hotel group, with 7,477 rooms, making it one of the world's largest hotel chains.  Its properties reflect the Taj commitment to providing a living heritage of the culture of India and house one of the world's largest private collections of Indian art and antiques.  The company is owned by The Tata Group, India's revered Industrial conglomerate.

RAYMOND BICKSON BACKGROUND

Since January 1988, Raymond Bickson has been general manager of The Mark, New York, formerly the New York flagship of The Rafael Group Hoteliers and now owned by the Mandarin Oriental Hotel Group.  Mr. Bickson has extensive language, managerial and hotelier skills, acquired after nearly thirty years in various luxury hotels throughout Europe, North America, Australia and Asia.

Mr. Bickson was voted one of the Top 10 Best Hotel Managers by Leaders Magazine in 1997 and 2000 and Best Hotel General Manager by Gallivanter's Guide in 2000. He was nominated for the 2002 Independent Hotelier of the World award by Hotels Magazine.

Thailand says Phuket hotels hit by terror warnings

(Reuters) - Thailand said on Tuesday its popular resort island of Phuket had been hit by travel warnings by several Western countries after bombings on the Indonesian island of in Bali killed more than 180 tourists last month.

Sita Divali, chief spokesman for the Thai government, said Phuket hotel cancellations were on the rise.

"These kinds of rumours and warnings have scared tourists away from Phuket," Sita said, replying to questions about media reports that a foreign bank had warned its staff of possible terrorist threats to Bangkok in the November 17-21 period.

Local media reported this week that the bank had told staff to avoid "large, congested tourist areas frequented by Westerners", particularly during the next few days when Thailand will be celebrating the Buddhist festival of "Loy Krathong", which marks the end of the monsoon season.

Several Western countries have warned in recent weeks of possible attacks by Muslim militants in Thailand and other Southeast Asian countries in the wake of the Bali bombings.

Sita did not give details of tourist cancellations, but hoteliers in Phuket said hotel occupancy rates in October and early November had fallen because of the travel warnings.

"The occupancy rate has plunged to some 60 percent from around 75 percent at this time last year," Pattanapong Aikwanich, president of the Phuket Tourism Industry Association told Reuters.

"However, we hope the rate will improve next month after a strong PR campaign by the government to assure tourists of their safety in Thailand," he said.

Thailand's tourism industry accounts for about six percent of the country's gross domestic product and last year the country played host to more than 10 million visitors.

In recent weeks, Muslim-dominated southern Thailand has seen a series of low-level arson attacks and small bombings but officials have blamed these incidents on criminal gangs and have said they were not related to religion.

Hotels trim extras amid downturn

(Reuters) — Pour your own coffee. That's the message at some posh hotels eager to attract scarce customers in tough times with sweet deals but who also need to keep an eye on the bottom line.

With a nip here and a tuck there, U.S. hotel chains are trimming costs in ways they say are barely noticeable to guests but clear to managers and investors. Self-serve coffee, on offer at many Starwood Hotels, is just one example

The cost cuts are the flip side for travelers of a bonanza of deals from hotels desperate to win new clients and retain those already loyal.

The lodging industry has had an awful year in the wake of the September 2001 attack that destroyed the World Trade Center, and economic weakness that led corporations to keep road warriors at home.

Now hoteliers are coming to grips with the likelihood that 2003 will not be much better. Executives and industry analysts say room revenue could fall in the first half of next year and might not recover until 2004.

``Over the past several months, an industry recovery has appeared to be around the corner,'' Lehman Bros. analyst Joyce Minor recently noted recently, downgrading the sector to neutral. ``However, as the fourth quarter of 2002 progresses, it has become more apparent that industry trends are deteriorating.''

Luxury hotels risk ruining their reputations and alienating top customers if they cut back too much, analysts say. So instead, chains are focusing on behind-the-scenes efficiencies, like having neighboring hotels share some management staff.

``It will be mostly invisible to the customer,'' said David Matheson, vice president of investor relations at Starwood Hotels, which owns Sheraton and managed to cut total hours worked at comparable hotels by 2 percent from a year earlier in the most recent quarter.

Of course observant guests may notice changes at Starwood.

Hotel gyms are self-serve during off hours. Some menus have been shortened, so that a guest might have five main course choices rather than six. And coffee is now ready in carafes on breakfast tables rather than being served by circling waiters.

``The customer would much rather be in charge of pouring his or her own coffee,'' he said, making an assertion backed by other hoteliers.

Starwood Chief Executive Barry Sternlicht said in an Oct. 24 earnings conference call that room revenue and profit margins wilted at its St. Regis luxury hotels after the company improved service in order to keep guests loyal and rates high.

``That strategy we are reexamining,'' he said.

'BEST TIME TO TRAVEL EVER'

Nonetheless deals abound. Starwood's Sheraton offers $69-a-night weekend packages, with children eating and staying free and late checkouts.

No. 1 hotel manager Marriott International has been targeting leisure customers with weekend deals for at least a year. It also offers two weekend nights after three nights paid, while Hyatt will give a free stay for two nights paid, and Six Continents Plc's Holiday Inn offers one free for one paid.

``This is the best time to travel ever,'' says Tim Zagat, publisher of the eponymous series of restaurant and hotel guides, arguing vacationers should bargain hard.

``They look like country rubes if they don't,'' he said. ``It is better to pay a 3rd class price for a 2nd class joint than to pay a 2nd class price for a 2nd class joint.''

Some hotels have put off renovation and cut staff, Zagat said, recalling his fruitless attempt to find a bellboy at a Marriott in Virginia soon after Sept. 11, 2001, the nadir for the industry. ``There has been a visible decline in service in the last year in certain hotels,'' he said.

RETURN OF THE 'SHOE MITT'

No. 1 hotel manager Marriott — which noted Zagat's experience was a single anecdote — said it has cut costs as far as possible. It even plans soon to return to rooms amenities cut for fiscal reasons, such as the ``shoe mitt'' a disposable mitten for guests to polish their shoes.

Chief Financial Officer Arne Sorenson estimates that Marriott has cut about as far as it can at current occupancy levels. Meanwhile, some expenses, like wage hikes, health care and insurance, have climbed, putting pressure on margins.

In the midst of travel industry carnage, shares of industry titans are trading at a discounts of 30 percent to 50 percent of replacement value, says Lehman's Minor. Historically the stocks have traded between a 30 percent discount and a 30 percent premium, suggesting a limited downside for investors, she says.

But without the prospect of an economic recovery fueling corporate profits and thus corporate travel, analysts are not pushing investors to snatch up the bargains.

Minor in fact, just downgraded the sector to neutral from positive. ``There is no need right now to be an early investor,'' she concluded.

Howells explains UK tourism slump

The Independent - Forget foot-and-mouth, the prospect of war on Iraq or just the miserable winter weather. The reason for plummeting transatlantic tourism in the past year is that Americans have never heard of the United Kingdom. And those that have think it is somewhere in the Middle East.

That was the novel explanation given by Kim Howells, the Tourism minister, yesterday when he appeared before MPs to discuss the "dismal" failure to encourage tourists to leave London and explore other cities and the countryside.

Mr Howells, already infamous in government circles for his candid views on modern art, underlined his reputation for frankness by highlighting the American phobia of modern geography.

The minister said many Americans knew all about England and London but few had any idea what the United Kingdom actually was. He told the Culture Select Committee: "Very often people do not understand the title of the country ... In America, people had heard of London, some had heard of England, no one had heard of the United Kingdom. They thought it was somewhere in the Middle East."

He accepted that London was the "great icon" of the UK tourism industry but pointed out that half of the people who visited the UK from overseas last year did not go out of the capital except for day trips.

It had been argued the capital ought to be seen as a gateway, encouraging visitors to go to other areas. "I am afraid London and the other tourism boards have failed dismally to do this," Mr Howells said. Dispersing more people to areas outside London would not only spread tourism income but add to the country's attraction to potential visitors.

A spokeswoman for the Department of Culture said the minister was making a "light- hearted" comment to illustrate the need to use expressions in marketing that were familiar to customers. The Government spends 20p per head on tourism in England, compared with £8.28 in Wales and £5.50 in Scotland. Mr Howells said the results of that drew little relation to such discrepancies. Last year, overseas visitors spent £9.9bn in England, £250m in Wales and £760m in Scotland.

The Government announced plans last month to combine the resources of the English Tourism Council with the British Tourist Authority.

That move has prompted worries that the new body's role in marketing the United Kingdom abroad could clash with its duties in promoting England to domestic tourists.

Tessa Jowell, the Secretary of State for Culture, said "some offence" had been caused in the past by the perception that the BTA was an England-focused organisation.

You Say You Want a Revolution?

by Stephanie Cirihal

That's what it will take to reverse the current employee development wasteland that many corporations have become.

"Our employees are our greatest asset." That is a statement espoused in the values of many companies. But what does that statement mean to you? Does it have any meaning to you? Over the past decade, a shift in corporations has occurred - away from social responsibility towards employees to a "hands off" approach, where the employees are responsible for their own development. In making this shift, corporations have encouraged, in fact left little choice, to employees to leave their minds and hearts at the door every day. According to a Gallup poll of 1.7 million people globally, only 20% reported that they have the opportunity to do what they do best every day at work 1. This managerial bankruptcy, for whom Enron is the poster child, must be radically changed and I would like to share with you my ideas on what some of the causes of problems are, and how I believe the situation can be turned around.

Part of the problem lies in the evolution of corporate culture and values. Over the past decade, as competition has become fierce globally, customers have become things to win and exploit. Customer service and loyalty is now the focus, to the exclusion of employees. Similarly, the drive for profits at any cost and the dependence on Wall Street analysts for making business decisions has driven us to the current state of corporate anorexia. We expect and are told continually to "do more with less." It is clear, however, that we have shifted too far. Employees who are told they are the company's greatest asset but see they are the most expendable suffer a crisis of trust and morale 2. When they successfully "do more with less" what suffers is their own development and growth - where they have no scorecard. It becomes more about survival than thriving.

The other part of the problem is that corporate organizations operate under two flawed assumptions:

Each person can learn to be competent in almost anything;

Each person's greatest room for growth lies in his or her areas of greatest weakness 1.

Therfore, in performance reviews and development discussions, we are generally told where we do well, and where we need to improve, and that is where we focus our development. The problem in doing that is that over time, you end up with a lot of mediocre people. Strengths are neglected, and much effort is exerted on trying to "fix" something that can never really be fixed. Extensive research by the Gallup organization shows in fact that each person has lasting and unique talents, and that their greatest room for growth lies in their area of greatest strength 1.

So, how can this situation be turned around?

First, I believe that people managers need help. Many companies are requiring managers to conduct development discussions with employees again. However, just requiring them to have a development discussion or plan in place for every employee and yearly reviews will not in itself improve the engagement and empowerment of employees. That is almost worse than the "every man for himself" era we have been in. Either managers' scorecards must be changed to reflect this new emphasis and some of their other responsibilities removed, or we need additional resources for coaching people in organizations.

Second, I believe that we should focus on people's strengths, not their weaknesses. By legislating outcomes instead of style molds, we can build organizations and corporations that spotlight each person's strengths and honors him for them. There are widely available assessments that identify these strengths and help managers coach people according to their strengths.

In conclusion, I believe a revolution rather than evolution is called for. Instead of more of the same, I believe that to achieve profit with honor, companies must begin to put employees first - even above customers! Organizations must facilitate the revolution of employee development via knowledgeable, caring leaders who focus on the unique capabilities of each person.

References:

1. "First, Break All the Rules," Buckingham, Marcus and Curt Coffman, Simon and Schuster, 1999.

2. "Reclaiming Higher Ground: Building Organizations that Inspire the Soul" Secretan, Lance, McGraw Hill Professional Publishing, 1998.