Newsletter - July 14 , 2002

Pan Pacific’s President  Ichigo Umehara strives for two Cs

TravelWeeklyEast.com   -  He bills the 21st century as one where there has to be a balance of contradictions for the hotel industry – how do you see balance in attracting youth to an industry which lacks role models; running a hotel as a business entity yet keeping a community or “kampong” feel within the organisation; competing with hotels within your country yet cooperating in attracting interest from overseas.

TravelWeeklyEast’s N Gunalan seeks answers from Pan Pacific Hotels and Resorts president Ichigo Umehara.

Q: You’ve just returned from a Bangkok meeting on the Youth Career Development Programme (YCDP). How is this taking off?

Umehara: Pan Pacific launched YCDP in 1995 with our hotel in Bangkok together with the United Nations Children’s Fund (UNICEF). Today, the programme has expanded to other Pan Pacific hotels in Bangladesh, Manila, Jakarta and Guam.

Q: You must be very passionate about this?

Umehara: We in the hospitality industry have not spent enough energy in community activities. At the moment, especially after September 11, many hotels have reduced their spend on education. It’s the first to go. It also happened for us. Unfortunately, career development paths for youth in the industry are not very clear. It has become a secondary priority.

Q: Is that why the industry isn’t attracting the best among our youth?

Umehara: The management (staff) of the hotel industry do not have many role models for today’s youth. The gap between the top and bottom strata is huge. It discourages youth – who have to start right at the bottom – from joining the industry

Q: Hotels have not been doing that well anyway with the economic downturn and drop in travel.

Umehara: Business is changing – the hotel business should foremost be a business venture. In the past, hotels were seen as the hospitality industry.

There’s a lack of balance between pleasing the guest and pleasing the investor. Some hotels are good in providing service satisfaction but not business satisfaction.

In Singapore, if you invest half a million, you have to charge at least US$300-400 per night in general but the rate is US$100-150. If this is so, hotel investments should be limited. We can’t make justifications to the owners.

Q: I guess this is the case for other developed Asian cities too?

Umehara: For hotel investments, the returns are from hotel operations and appreciation of the property.

In most Asian cities – Singapore, Hong Kong, Tokyo – the markets are mature and real estate values have settled down. I’m doubtful investors want to invest in hotels in Singapore. For investors looking for value, it means their money would flow elsewhere.

Q: Like into China?

Umehara: In China, there is still room for capital appreciation.

Q: You have affiliate hotels in China. Are there plans for a Pan Pacific there?

Umehara: We are looking at expansion in Shanghai, Sydney, Taipei, Seoul, Los Angeles and Seattle. Shanghai is a very exciting city, full of dyna-mism. You felt that way about Singapore five to six years ago.

Q: Has Singapore lost that dynamism?

Umehara: It’s still very accessible. Regional accessibility is important for us... Singapore is different from Shanghai in that it doesn’t have a hinterland. And it lacks the cultural depth.

Q: How long do you see before Shanghai takes over from Hong Kong as the gateway to China?

Umehara: It’ll take five years for Shanghai to take over. Hong Kong used to be the centre of the galaxy but very soon Shanghai will take over. If I’m in Hong Kong, I’ll be concerned.

Q: How do you then think ASEAN cities can cope with China?

Umehara: If you look at the Marina Bay hotels here (in Singapore), we’re not just competing among ourselves but also coordinating ourselves when we go out to sell Singapore.

Shanghai and Hong Kong are gateways to China. Singapore should consider itself a gateway to South-east Asia.

Q: There are several other South-east Asian countries who would want to be seen as gateways.

Umehara: They should change their mindset. Definitely Singapore’s Changi Airport should compete with Malaysia’s KLIA. But they have to get together if they want to attract investments from other parts of the world. The 21st century is one where there has to be a balance of contradictions – between competition and coordination. We need to think how we can achieve the two Cs.

Q: How do you apply this balance of contradictions at your hotel? How do you balance satisfying your guests, owners and employees?

Umehara: We should send a clear message to ourselves. We are all playing different roles but we need to make it clear that we need to make the owner satisfied, especially in the long-term.

Q: How have you been satisfying the owners especially after September 11? Already with rates being low, the impact must have been greater after 911?

Umehara: After 911, business circumstances became totally different. We just told hotels to operate day-by-day. Then as things improved, we told them to consider the next 100 days.

We asked hotels to be conservative in their budgets. We've achieved that in the first three months of this year and our performance now is about the same as the same period a year ago. Now we can take a long-term view.

Q: What’s your long-term plan?

Umehara: We had to postpone our five-year strategic plan after 911. We have some development plans, marketing and people development plans. We want to create alliances with other hotel chains.

The benefit of smallness (Pan Pacific has 18 hotels) means you can make decisions quickly.

Q: What about your employees? Where do they fit in?

Umehara: Companies should function like kampongs (Malay term for village). Maybe I’m too idealistic. We don’t have the kampong spirit of helping one another.

If you can go home early and attend to a personal matter anytime, knowing that someone would take care of your job, they’ll be happy to work for that organisation.

Q: That reflects your management style?

Umehara: I would say my style is being natural – work must be fun and meaningful for life.

Source:  TravelWeeklyEast.com

Marriott International Profit Flat

(Reuters) - Hotel operator Marriott International Inc. on Thursday reported quarterly earnings essentially unchanged from a year before, hampered by a soft market in business travel but well above its forecast.

Washington-based Marriott reported second-quarter profit of $129 million, or 50 cents per share, compared with $130 million, or 50 cents a year earlier. Quarterly sales totaled $5.1 billion, up 5 percent from last year.

Marriott said its hotel room revenues, a widely watched barometer of industry health, fell 8 percent for the quarter as the company's rates dropped 6.6 percent.

In May, Marriott said it expected to meet its second-quarter earnings target of 41 cents to 43 cents per share on strong profit margins, but that room revenues were expected to come in at the lower end of a previously forecast 5 percent to 7 percent decline.

Shares of Marriott closed at $34.77 on Wednesday on the New York Stock Exchange. The stock fell 15.4 percent during the second quarter, underperforming the broad-based S&P 500 index .SPX>, which dropped 13.7 percent during the same period.

The company also reaffirmed its profit outlook for the rest of the year, forecasting third-quarter earnings per share between 41 cents and 43 cents and fourth-quarter profit reaching between 51 cents a share and 53 cents a share.

Marriott also said it still expects to add between 25,000 and 30,000 hotel rooms to its system in both 2002 and 2003. Hotel room revenues are expected to drop between 2 percent and 4 percent for the year.

Business for Marriott and other hotel companies dropped sharply last year during the post-Sept. 11, but was bouncing back steadily through the first quarter of this year. But the fledgling recovery stalled in April, with companies blaming continued weakness in demand from business travelers.

PKF City Survey 2002 Reveals That Nine Eleven Impact Hits Hotels In International Cities Hardest

The PKF City Survey 2002 reveals that 2001 was a game of four quarters rather than two halves with 9/11 hitting the major international cities hardest of all. The record-breaking millennium year for most of the hotels was always going to be a hard act to follow but many cities enjoyed a strong start to 2001. By midyear, the downturn was being felt by many but the impact of 9 September was the major reason for hotels losing ground in 2001.

PKF's hotel consultancy services' survey is sponsored by Schroder Salomon Smith Barney and covers 527 hotels in 49 cities in Europe, the Middle East and Africa representing 80% of the quality hotel supply in those cities. It reveals how the overall rankings have changed little but how hotels in Middle Eastern and African cities have lost ground through a combination of political and economic factors.

Paris continues to crown the European league with a rooms yield of 216.64 euros (a 1.7% increase on 2000). London clung onto second place with 177.03 euros despite dropping 17.0%, the biggest fall of all 30 European cities. Geneva beat Rome into third place this year with a 9.8% improvement in rooms yield to 157.48 euros.

The average drop in rooms yield for European hotels was 3.8% with 17 cities improving their rooms yield and 13 cities suffering a drop. Moscow's rise of 21.1% to 98.46 euros was the most dramatic whilst London, Athens, Istanbul and Warsaw experienced the worst falls.

The performance indicator hardest hit by the impact of 9/11 was room occupancy which fell in all but four European cities during the year and was down on average by 5.5% to 69.1%. No city exceeded 80% occupancy in 2001 compared with five cities in 2000. The top three cities for occupancy were Stockholm (77.2%), Amsterdam (76.8%) and Manchester (76.6%) but even these were down on 2000. Only three cities improved on occupancy over the year: Moscow (up by 19.0% to 57.5%); Edinburgh (up by 4.5%); and Oslo (up by 3.6%).

The overall pattern in Europe was that, while occupancy fell, it was compensated for by a rise in average room rate in 22 of the 30 European cities. Paris improved its room rate by 8.3% to 293.76 euros and Geneva and Milan achieved increases of 13.4% and 12.0% respectively. London maintained its position as second in the room rate league with 246.76 euros but this was a drop of 6.4% on the 2000 achievement.

This puts the year into perspective and underlines how positive the first three quarters of the year were for European hotels despite the havoc wreaked by the impact of 9/11 in the fourth quarter.

In the 19 Middle Eastern and African cities, both occupancy and average rate fell. Occupancy fell on average by 9.4% to 59.7% while average rate was down 9.2% to US$90.10 leaving all but three of the cities nursing a fall in rooms yield. Only Muscat (up 12.2% to US$45.86), Manama (up 5.4% to US$73.16), and Abu Dhabi (up 0.3% to US$60.56) improved their rooms yield compared with an average drop of 17.8%. All benefited from growing intra-regional travel.

Not surprisingly, two of the cities which suffered the worst rooms yield damage were Jerusalem (down 59.2%) and Tel Aviv (down 38.0%) as a result of a full year of intifada. Johannesburg and Cape Town also dropped by 40.8% and 32.1% (in US$ terms) respectively as a result of the heavy fall in the value of the rand.

Top of the MEA occupancy league were Abu Dhabi (70.3%), Dubai (70.2%) and Karachi (68.2%). The latter was one of only five cities to improve its occupancy rates over 2000 - perhaps as a result of the influx of media reporting on the war in Afghanistan at the end of the year.

Melvin Gold, Managing Director of hotel consultancy services at PKF, said: "In 2001, the truly international cities were hit the hardest by both the downturn in the US economy at the beginning of the year and 9/11 in the last quarter. In particular, London was hit by the triple whammy of the US recession, the foot-and-mouth crisis and 9/11 which knocked 17% off its rooms yield performance but it still held its place in the overall European rankings because of its traditionally high room rates.

"Manchester, as a less international city, managed to withstand the 9/11 impact and had a good year as it geared up for the Commonwealth Games, achieving a 3.3% rooms yield increase. It provides yet another example of how the hotel market is influenced by external events both positively and negatively."

Max Dolding, head of the Pan European Leisure & Hotels Team at Schroder Salomon Smith Barney, sounded a note of caution for potential stock market equity investors in the light of the findings of the City Survey: "We are cautious of hotel stock valuations, not least because of the reliance of gateway city locations on long-haul North American business travellers. Such travellers have not returned since 11 September because of both their reluctance to travel and tightened corporate budgets. Stock valuations have returned to pre-11 September levels but, to justify that confidence, the hotel companies have to make up for a lot of profits lost in the meantime. We are not confident that the gap can be filled as rapidly as stock market valuations have been implying."

Copies of PKF's City Survey 2002 are available priced £750 from Katy Belton, PKF marketing executive, hotels (email: hotels@uk.pkf.com).

Information about PKF
PKF United Kingdom - The principal place of business where the list of partners is open to inspection is 78 Hatton Garden, London EC1N 8JA. Authorised to carry on investment business by the Institute of Chartered Accountants in England & Wales. Web site www.pkf.co.uk. PKF Financial Planning Ltd - 78, Hatton Garden, London, EC1N 8JA. Regulated by the Personal Investment Authority for investment business. PKF Republic of Ireland - The principal place of business where the list of partners is open to inspection is 17 Percy Place, Dublin 4, Ireland. Authorised to carry on investment business by the Institute of Chartered Accountants in Ireland. PKF (Isle of Man) Limited - Analyst House, 20-26 Peel Road, Douglas, Isle of Man IM99 1AP Directors. J M Cryer FCA, P E Dearden ACA, D A R Drewett ACA, J H Nugent, J Scott FCA (Chairman), P A Seaward FCA (Managing). PKF (Guernsey) Ltd - The principal place of business where the list of Directors is open to inspection is Sarnia House, Le Truchot, St Peter Port, Guernsey GY1 4NA.

PKF International is an association of legally independent national firms

International Hotels ‘dish it up’

All international hotels on Australia’s Gold Coast have joined forces, for the first time, to create a new wining and dining promotion called ‘Dished up Food and Wine on the Coast with the Most’, never before seen in Australia.

Chairman of the Committee, Ernst Pfister, says the promotion exposes diners to experience the best cuisine on the Gold Coast with participants receiving the bonus of 26 bottles of premium wine valued at A$715 for just A$27.50.

“Collectively, the international hotels on the Gold Coast have a team of award winning chefs and this is the first time we have all worked together on a food and wine promotion designed to showcase the best Queensland has to offer,” said Mr Pfister.

Participating hotels include Sea World Nara Resort, Royal Pines Resort, Palazzo Versace, Conrad Jupiters, Gold Coast International, The Grand Mercure, Surfers Paradise Marriott Resort, Parkroyal, Sheraton Mirage Gold Coast, Hyatt Regency Sanctuary Cove, Courtyard Surfers Paradise Resort, Watermark Hotel and ANA Hotel with support from Sirromet Wines.

“Each restaurant has created special menus with Queensland produce which will be dished up with quality Queensland Wines.”

‘Dished up Food and Wine on the Coast with the Most’ offers a free bottle of Sirromet Wine with the purchase of a minimum of two main courses and the presentation of a voucher from the specially produced ‘Dished Up’ promotional booklets.

Starwood’s Miguel Ko: ‘The worst is over as tourism picks up’

The Australian   -  Starwood  Asia Pacific chief Miguel Ko doesn't come to Australia often. But when he does, he stays at the Sheraton.

His children prefer to stay at a Westin or W, which they think are trendier.

Starwood owns them all. The hotel and leisure company's brands include the Sheraton, Westin, St Regis, The Luxury Collection, Four Points by Sheraton and W Hotels.

"Few companies have four major upscale brands like Starwood," Mr Ko said. "Each brand must have its own personality. If you have a brand that suits everybody, it suits nobody."

Mr Ko became Asia Pacific president in November 2000, and is responsible for 27,000 rooms in 80 hotels across 17 countries in the Asia Pacific. He's based in the company's Singapore headquarters.

Previously, he was deputy chairman and CEO of Singapore-controlled CDL Hotels International, after starting his career in 1979 as an internal audit supervisor at ITT Sheraton Corporation.

In Sydney for a conference this week, Mr Ko said he believed the hotel market was close to bottoming out, if it hadn't already, and conditions would pick up from the middle of next year.

"We are expecting higher room rates from mid-2003 and beyond," he said.

In preparation, Starwood plans to open 21 hotels in the Asia-Pacific region over the next two years. Of the 11 to open this year, only one is in Australia -- the 110-room Four Points by Sheraton in Port Macquarie, which opens in May.

Senior vice-president and area managing director David Shackleton said hotels throughout Australia were trading lower than last year.

"Our occupancy is the same, in the high 60 (per cent), but our room rates are down by around 5 per cent," he said.

The rack rate for a standard room at the Sheraton on the Park is about $ 245.

Starwood was happy with the way the Westin hotel in the old Sydney GPO at 1 Martin Place was trading, Mr Shackleton said.

Singapore's Government Investment Corporation bought the hotel and shops for $ 160 million in May. Westin continues to operate the hotel.

"That hotel is the poster child for the Westin brand," Mr Shackleton said.

Likewise, the Southgate hotel in Melbourne was the leader for the Sheraton brand, Mr Ko said.

"We want the Sheraton to be like Southgate," he said. "It is one of the most upscale hotels in the region."

Senior vice-president of finance, acquisitions and development Thomas Monahan said Starwood would shift its focus, and expand through hotel management and acquisitions.

"We're after hotels that are earnings-enhancing," he said.

The company is working with Ariadne Australia to bid for a hotel development site in Brisbane's South Bank. The second round of presentations was held last week for the 2680sqm property, which is next to the Rydges Hotel.

Mr Monahan said Starwood wanted to put a Westin in Brisbane, although not at South Bank, as well as a Four Points by Sheraton.

Westins will open in the next few years in Kyoto, Shanghai, Kuala Lumpur, Ho Chi Minh City, Dhaka in Bangladesh and Green Island in Taiwan.

Starwood's only W Hotel outside the US is the W Sydney, a 104-room building on The Wharf in Woolloomooloo.

Mr Ko said it was a good hotel but had one problem: "It does not have enough rooms."

Study on Geotourism released

The Travel Industry Association of America (TIA) and National Geographic Traveler magazine released results of their first, large-scale national study of the current and potential consumer market for geotourism. The Geotourism Study examines the travel habits and attitudes of the 55 million Americans now classified as sustainable or `Geotourists,' as well as the nearly 100 million travelling Americans moving in that direction. The term geotourism is defined as tourism that sustains or enhances the geographical character of the place being visited _ its environment, culture, aesthetics, heritage, and the well-being of its residents. Sponsored by National Geographic Traveler and prepared by TIA, the study surveyed a representative sample of 8,000 US households.

``We undertook this study so that the travel and tourism industry could see what consumers really want, rather than just allowing businesses to dictate policy. In the end, it will be better business for travel and tourism and a better travel experience for the consumer,'' said Dawn Drew, vice- president and publisher of National Geographic Traveler. ``Geotourism is environmentally and culturally responsible and it seeks to preserve the distinctive attributes that make each destination a special place to visit,'' she said. The Geotourism Study identified eight traveller segments or `profiles' from the 154 million Americans who have taken at least one trip in the past three years. The top three segments:Geo-Savvys (16.3 million adult travellers), Urban Sophisticates (21.2 million) and the Good Citizens (17.6 million) represent over 55 million American travellers, or over one-third of the total traveller market.

``This study shows that a destination's unique characteristics are what primarily attract the consumers who take the most trips, spend the most money and produce the greatest volume of visitors overall,'' said Dr Suzanne Cook, senior-vice president of research for the Travel Industry Association of America. ``We've determined really for the first time that there is not only a consumer market for geotourism but that it's a very large market of some 55 million American travellers. And many more are likely to take that path in the future.'

' Geo-Savvys and Urban Sophisticates dominated by Baby Boomers show a distinct preference for culturally and socially-related travel. They both also share an intellectual curiosity as reflected in their well-above average tendencies to participate in a number of educationally and culturally-oriented activities in their local communities. And they both also share more highly developed social consciences, engaging in pro- environment behaviour at home and more actively supporting environmental and cultural organisations through donations of time and money than the other segments.

Geo-Savvys are distinguished by their above average interest in environmentally-oriented travel, while Urban Sophisticates are more oriented to large city destinations and the cultural opportunities they provide. Good Citizens are older, with about half of them 55 years of age. They also show strong involvement in a variety of community activities, as well as heightened levels of cultural and environmental awareness and sensitivity, but these tendencies are less obvious in their travel behaviour. Three other segments are viewed as good potential Geotourism markets, representing approximately 38% of all US adult travellers (58 million). 

These are the Traditionals (16.1 million adult travelers), the Wishful Thinkers (22.3 million) and the Apathetics (19.9 million). The Traditionals are older and not as inclined to travel as other segments. Wishful Thinkers are at the other end of the age spectrum, dominated by members of Generation X and Y, while Apathetics are more likely to be Boomers. Traditionals and Apathetics, are conservative in their travel choices, looking for predictability, and high levels of cleanliness, safety and security.

Wishful Thinkers want to travel more than they do now and be very busy and active when they do. They are looking to be entertained and to have fun when they travel. None seems particularly interested in culturally-oriented travel or cultural activities in their local areas. They also tend to be less environmentally-oriented, both when they travel and at home, although Wishful Thinkers do show some interest in outdoor-related travel. The last two segments are Outdoor Sportsmen (21 million) and the Self-Indulgents (19.9 million). These two groups are largely focussed in the Baby Boom generation, with a large percentage of adults under age 35 included. Outdoor Sportsmen, 61% of whom are men, like to travel, especially to the countryside, remote locales and into the wilderness.

They enjoy outdoor activities, especially hunting and fishing. They say they value a clean unpolluted environment, but are well-below average in their tendencies to support organisations and efforts to preserve and protect the environment. Outdoor Sportsmen are the least likely of all segments to seek upscale travel experiences and to engage in culturally-oriented activities either at home or while travelling. Self-Indulgents, on the other hand, are looking specifically for those upscale travel experiences. They see travel as a way to get away from the demands of home and work and want to have fun and be entertained. They are generally below average in their interest in culturally or environmentally-oriented travel and community-based activities. But what really distinguishes Self-Indulgents from other segments is their general lack of cultural and environmental awareness and sensitivity and, in some cases even, their negative cultural and environment attitudes.

New campaign to build business tourism to Australia 

AsiaTravelTips.com   Australia's business tourism sector is set to benefit from a new global advertising campaign launched today, Australian Tourist Commission (ATC) Managing Director Ken Boundy said. 

"The new $1 million campaign will promote Australia around the world as an ideal destination for business tourism events - from conventions to meetings to incentive trips," Mr Boundy said. 

"We want companies and organisations around the world to consider Australia, not just as a dream holiday destination, but as the location for their next business event. 

"This is the first global 'brand' campaign undertaken by the ATC for the business tourism sector and is based on a new strategy to build Australia's share of global tourism business.

The new campaign, officially launched by Minister for Small Business and Tourism, the Hon Joe Hockey in Sydney today, was funded by additional resources allocated by the Federal Government.

Mr Boundy said the campaign targets key decision makers in business and government organisations and features endorsements from companies who have previously held a business event in Australia. 

"Importantly a range of locations around Australia are feature in the newspaper campaign from the Sydney Opera House to the City of Melbourne to Uluru and all states featured in the television campaign," he said. 

"The campaign directs people to the ATC website www.meetings.australia.com which provides tailored information to companies interested in Australia." 

Mr Boundy said the business tourism sector was a high yield market, with international business visitors injecting around $2.2 billion to the Australian economy each year. 

"Australia is well placed to increase its share of the global tourism market," he said. "In fact, the country's share of international meetings expected to increase from 3.8 per cent in 1999 to 6.4 per cent in 2002.

"Research also indicates that international visitors are likely to return to Australia as leisure tourists - further creating economic benefits for the country. 

"Australia's hosting of the Sydney Olympic Games helped to boost the profile of our country as a business tourism destination. We need to continue to actively promote our credentials as a world class business tourism destination." 

Key facts on the campaign include: 

· $1 million campaign to include television and newspaper ads

· TV advertisement to include vox pops from Asian business leaders to be screened on CNBC

· Newspaper ads to feature in Financial Times, Business Week and The Economist

· Campaign to focus on Asia, UK, Europe and the US

· Companies to feature in newspaper ads include: Zurich, Honda, Schenker and Nan Shan Life Insurance.

Expedia US moves into corporate market

eTid.com  -  Expedia.com said last Wednesday it is planning to launch a dedicated corporate travel and technology services division by the end of the year.

A UK spokesperson said that there were no firm plans to launch a similar arm for the UK/Europe, but said that successful US initiatives are often rolled out across Expedia's portfolio.

The news comes following the company’s purchase of Metropolitan Travel, a Seattle-based corporate agency, which last year generated $150m in gross bookings. Metropolitan’s major clients include online retailer Amazon.com, department store Nordstrom and Starbucks Coffee.

Byron Bishop, senior VP of corporate travel for Expedia, who will lead the newly formed division, said: ‘This is an opportune time to enter the corporate travel market.

‘Small and large corporations alike are raising concerns about the rising cost of corporate travel. Meanwhile, their employees are opting for the convenience of online booking through agencies like Expedia…we will provide a single service and technology solution for what business have historically obtained from separate providers.’

Expedia’s move follows an announcement by rival Orbitz that it intended to deliver products for the corporate market.

Ian Schrager Hotels Expands Management Team To Achieve New Kind Of Luxury Service

Ian Schrager Hotels announced today that Sherry M. Harris has been appointed Senior Vice President for Human Resources, a new position in an expanded Human Resources Department that includes Sue Pollack, formerly of Four Seasons Hotels and Resorts, as Director of Training.
Ms. Harris will report directly to Ian Schrager, chairman and CEO of Ian Schrager Hotels.

Ian Schrager Hotels is redefining and reinventing luxury service for modern travelers in a modern way, much in the way that our innovative visuals and unique approach have redefined the entire hotel experience , Mr. Schrager said. Our goal, quite simply, is to meet and exceed our customers' expectations. This is a major focus of our company.
We are not changing what we offer, Mr. Schrager said. We are refining it and making it better. Sherry's background is a perfect fit for us and will add greatly to our management team as we move forward in this effort..
Ms. Harris has spent her career in human resources, most recently with GE Capital. Previously, she held positions at MGM Entertainment Co., Paramount Pictures Corp., Estee Lauder, and FEB Leber Katz.
Ms. Harris is a graduate of Drew University.

Ian Schrager Hotels owns and operates Hudson, Paramount, Morgans and Royalton in New York, Delano in Miami Beach, Mondrian in Los Angeles, Clift in San Francisco, and St. Martins Lane and Sanderson in London. Ian Schrager Hotels manages the Shore Club in Miami Beach.

The company is currently in the process of developing several more properties in New York City, Santa Barbara's Miramar, a hotel, apartment and urban entertainment complex in South America, and various properties throughout Europe.

Hotels With Fewer Frills May Be Lodging Industry's Darlings in 2003

(AScribe Newswire) -- As flashy, upscale hotel properties from the "Decade of Greed" in the 1980s slide into obsolescence, and post-Sept. 11 changes in hotel occupancy trends run their course, midscale hotels without food and beverage services--the rising darlings of the U.S. lodging industry since the more austere 1990s--will become more valuable per room than their full-service sister operations, predicts a study from Penn State and HVS International.

Midscale hotels with food and beverage services, such as Best Western and Ramada, are experiencing an unusual boost in activity post-Sept. 11 as affluent lodgers temporarily scale back from more upscale hotels, such as Embassy Suites and Residence Inn. However, as usage patterns creep back to normal, and their fortunes decline, these briefly popular midscale hotels will look less attractive to potential buyers by next year, says John W. O'Neill, assistant professor in Penn State's School of Hotel, Restaurant and Recreation Management.

"This will leave midscale hotels that don't offer food and beverage service--for instance, Comfort Inns & Suites and Holiday Inn Express--the riper picks for investment," O'Neill notes. "As a group, these properties are newer than their full-service counterparts, in part because they are less expensive to build. In fact, dropping food and beverage services is emerging as the 'ideal' hotel improvement in many lodging markets in a time when, by and large, the full-service hotels are suffering from functional decrepitude and designs that are increasingly out-of-date."

O'Neill and Annie R. Lloyd-Jones, senior vice president at the hotel consulting firm HVS International, predict sales prices of hotels based on a database that O'Neill developed on 245 hotel properties for which complete operating information is available--occupancy percentage, average daily room rate, net operating income, capitalization rate and room-revenue multiplier, as well as sale price, sale date, opening date and number of guest rooms. Their predictions for 2002 and 2003 and a description of the database appeared in a recent issue the Cornell Hotel and Restaurant Administration Quarterly. They are currently at work on an update to the study, also for CHRA Quarterly.

According to the projections, midscale hotels without food and beverage services will increase in average value per room from $ 52,303 to $ 55,174--or by 5.5 percent--from 2002 to 2003. At the same time, midscale hotels with food and beverage services will tumble in average value per room by an equal percentage, from $ 53,413 to $ 50,472.

"Investors often do not attribute much value to food and beverage outlets, particularly if those amenities are not seen as generating a profit, as is often the case," Lloyd-Jones says. "We find it ironic that hotels that are less expensive to build are seen as being more valuable than those that are more expensive to build."

The midscale-with-food and beverage segment is the only one for which the researchers predict a value decrease in 2003 compared to 2002. Thus, owners of midmarket properties who are considering selling may be well advised to sell in 2002, they say.

O'Neill and Lloyd-Jones' model indicates that the average U.S. hotel was worth 3.6 percent less at the end of 2001 than it was in 2000 ($ 71,313 per room at the end of 2001 versus $ 73,978 per room at the end of 2000). Based on forecasts developed prior to Sept. 11, the model indicates that in the absence of the attacks, the average hotel would have instead been worth 5 percent more at the end of 2001 than it was at the end of 2000 ($ 77,673 per room in 2001 versus $ 73,978 per room in 2000). That calculation shows a net loss in mean value of $ 6,360, or 8.6 percent, due to the events of Sept. 11.

Looking ahead to 2003, the model indicates that the average U.S. hotel will lose a net $ 11,050 in value per room by the end of 2003 as a result of Sept. 11, though most of that loss had already occurred in 2001.

"While hotels are expected to continue to lose ground compared to 'what would have been' through 2003, at this moment, it appears that 2001 is the only year in which U.S. hotel values would experience an overall year-to-year decrease," O'Neill says. "We expect valuation to increase by 1.3 percent in 2002, and our model predicts an overall value increase of 5.8 percent in 2003."

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