TUI China taking shape : eHotelier Newsletter

TravelWeeklyEast.Com The world's biggest travel company has confirmed with TravelWeekly it is moving into China – with goals that include selling package tours to South-east Asia.

German travel giant Preussag told TravelWeekly that it is in the planning stages of a venture with China Travel Services (CTS), which would see a new inbound and outbound company formed.

Preussag, recently renamed TUI AG, already has a network which covers over 90 percent of the European travel market, and 22 million customers annually. A spokesperson from Germany said the company is in the planning stages of setting up TUI China, and will be seeking a majority share in the new company.

"We are planning a cooperation with the Chinese tour operator China Travel Service (CTS)," said corporate communications spokesperson Carolin von Below.

With 10.5 million mainland Chinese projected to travel abroad by 2005, and inbound to China growing by eight percent a year, Below said TUI AG saw a strong market opportunity.

"By the planned cooperation with CTS, TUI wants to profit from this market development, and build up a common company with CTS in the near future.

"We see a chance together with CTS to commercialise package tours in South-east Asia. TUI has a lot of know-how to bring. The Chinese are looking for a strong partner who has distribution and tour operator competence, as well as excellent information technology," said Below.

TUI AG, whose business includes the the former Thomson Travel Group in the UK, is also understood to be setting up an outbound business from Russia.

This Global Hotel Network® Report takes a look at "Hotel Financing"

from the perspective of Paul Fitzpatrick, senior managing director of Insignia/ESG Hotel Partners (New York). He explains:

It's mid-year 2002, and in conversations at hospitality seminars or with developers and bankers in the offices of the industry's brokerage community, you will undoubtedly hear the dreaded words..."hotel financing." Better yet, you will hear people discussing how to fund new hotel development and construction. Invariably, most conversations will draw parallels between today's financing environment and that of a decade ago. But are they really similar? Today's marketplace is not ripe with a glut of over-leveraged hotels on the verge of handing over the deed or filing Chapter 11, nor are there any issues with the cost of capital today or serious concerns relative to oversupply. Rather, in 2002 we are coping with the aftermath of September 11, a slowly improving economic landscape and a Wall Street investment community coming up short on new innovative capital vehicles and finding itself addressing its own monumental credibility issues.

So what is a hotel owner/developer to do? First of all, let's agree that while a straight refinance or acquisition financing is challenging, trying to finance new hotel construction might be viewed as a fool's journey. With the precipitous drop in hotel revenues post-September 11 and the reality of slower growth numbers facing the industry for the immediate future, the task of supporting new hotel feasibility projections and demand assumptions when seeking a construction loan has become all the more challenging. The availability - and cost - of capital are not issues. A year ago, prime was 7 percent; today, it is 4.75 percent. LIBOR is 1.97 percent versus 3.68 percent at this time last year. On the longer maturities, however, there has been little or no downward rate movement. The 10-year treasuries today are 4.83 percent versus 5.13 percent last year, and the yield on the 30-year bond (granted, a rapidly fading vestige of by-gone times) is only 13 basis points lower now than last year - 5.46 percent versus 5.59 percent. So there is plenty of capital on the sidelines looking for investment opportunities and extremely attractive short-time rates. How can these two opportunities be harnessed, in a way that benefits the hotel developer?

Over the past 30 years, the timely introduction of creative and opportunistic finance vehicles has provided the extra octane to fuel the capital needs of the hospitality industry. Whether it was the tax-driven limited partnership structures, tapping the public equity markets with a REIT or introducing unimaginable amounts of market liquidity through the CMBS program, we have become accustomed to such capital market creativity. Lenders given the directive to provide debt for income-producing properties look first towards the Class 'A' office building, the multi-family garden apartment or a fully leased retail center. The surety of leases and the predictability of these markets will always rank higher than "an operating business" like a hotel. However, with so much capital on the sidelines and a new focus on hard assets versus a telecom or dot-com story, isn't that creative financing window once again presenting itself? Corporate scandals, the faltering credibility of Wall Street powerhouses and anemic returns in the traditional equity arenas should provide an attractive backdrop and rationale upon which today's hotel developer can capitalize.

Capital being managed by the country's leading private banks, money managers and other fiduciaries on behalf of individuals, pension accounts and non-profit entities represent an emerging potential source of funds for the hospitality industry. Obviously, many of these same sources provided much of the funding behind the major opportunity and venture funds that have been active over the past decade. However, a new phenomenon is now taking place. Yield hurdles have fallen, investment program industry segmentation is changing, and the fundamentals of the hospitality sector are looking more attractive.

Again, with a focus on capital for new hotel development, what does this emerging trend mean? On a one-off basis, developers and their brokers should be seeking out this private capital for bridge loans, mezzanine pieces and preferred equity to bring their financing up to 70 to 85 percent loan-to-value, on terms that make the financial projections achievable. As much as possible, they should seek open ended construction/mini-perm loans with local and regional banks, taking advantage of the current historically low short-term interest rates. These loans require full recourse, but they also provide the bank other business relationship opportunities and typically present the best platform relative to flexibility in introducing junior debt, whether secured or unsecured to the capital structure. Financing for sound, new hotel development is not impossible. The answer is to be creative and aggressive in seeking out capital. Identifying new private capital sources and taking advantage of the current attractive rates and lower yield hurdles in formulating a layered capital structure are key to making future operating projections seem achievable in light of the tougher underwriting loan standards.

On the macro stage, there are numerous sponsors formulating plans for "new" funds to provide mezzanine capital to the hospitality industry. These 2002 models will differ from the last generation of opportunity funds in three ways: yield expectations will be lower, holding periods more flexible and a higher percentage of the capital will be from private individuals as opposed to institutional dollars.

Will this new generation of funds become the octane to fuel hotel development? Keep your engines revved over the next several months, and we'll see.

The Global Hotel Network® Report is a regular feature of the weekly GlobalHotelNetwork.com e-Newsletter read by Top Tier decision makers in the global hospitality & travel industry. www.globalhotelnetwork.com/public/ghn.e_newsletter.html

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IMA.E - Exhibitors are not getting the most out of trade show attendance with only one-third of companies actively recruiting customers, according to a study conducted by US-based Duffey Communications.

President, Mr Lee Duffey, said the survey highlighted the fundamental need to have trained staff manning the booths.

He said: “The biggest conclusion drawn from our study is that there is a tremendous lost opportunity cost associated with trade shows in terms of time, money and business.

“Unquestionably, there is much room for improvement on the part of most trade show booth representatives. Above all, booths don’t sell products and services at a trade show. People do.”

The most common mistakes the survey highlighted were: 15 per cent of booth personnel were sitting down at the back of the booth; 13 per cent were talking with co-workers, ignoring booth visitors; four per cent were talking on a mobile phone and 20 per cent stood behind an obstruction such as a counter or table which created a barrier.

While 17 per cent stood at the front of the booth they did not acknowledge passersby. Only 31 per cent were engaged in conversation with booth visitors and a very low five per cent actively greeted booth visitors.

Mr Duffey said: “It underscores the fact that even booths with the most bells and whistles are not effective unless they have the proper on-the-ground support from a proactive sales force.”

Sales people need more training and instruction on how to encourage and prolong booth visitation.

“The placement of the booth should not dictate the effectiveness of a trade show.

“Those who determine the need to have a booth also need to create tangible goals for the sales force to reach throughout the show,” Mr Duffey said.

TravelWeeklyEast.com - In a move to eradicate illegitimate airline discounts that directly impact profits for many mainland carriers, the Civil Aviation Administration of China (CAAC) and other government departments in Beijing are joining forces to put an end to it all in a new campaign, according to a Xinhua news agency report.

Government officials hope a legitimate pricing system will be in place by end-September. This month, airlines and agents are required to review their sales practices. Between August and September 10, CAAC and the other government departments: the Public Security Department; the State Development Planning Commission; State Administration of Taxation of China and the State Administration of Industry and Commerce will take measures to review the practices of agencies and airlines themselves and penalise those who are not abiding by the rules.

Meanwhile, the China National Tourism Administration (CNTA) has issued a new policy to protect mainland travellers who are going abroad. According to a new CNTA policy outlined in "Management Measures for Chinese Travelling Abroad", agencies were given a list of dos and don’ts. China's travel agencies must also provide several new kinds of guarantees for its citizens travelling abroad, under new rules introduced on Monday.

Agencies must not rip off travellers and must provide reliable information about when it is unsafe to travel in certain countries. They are also required to inform customers of the destination country's culture, customs and laws.

The new policy, detailed in Management Measures for Chinese Travelling Abroad, says that agents' quotes must not be below cost price. They should not force customers to make purchases, change an itinerary without permission or reduce the items included in a travel package.

And travel agencies must sign a written contract with customers and sign another contract with the overseas travel agencies responsible for the Chinese travellers.

In addition, travel agencies must guarantee travellers' personal safety and property security. And if travellers get into trouble, they have the right to seek diplomatic protection.

To squash doubts about the accessibility of World Travel Market’s new home, ExCeL in London Docklands, the event’s organisers have embarked on the biggest planning initiative ever to ensure that visitors and exhibitors can travel easily, conveniently and quickly to the venue.

A dedicated World Travel Market Transport Group has been planning and preparing for the moment for the past year or so.

Discounted flights and hotels can be arranged via World Travel Market's website and public transport between ExCeL and central London can be booked in advance.

There is also a pre-bookable World Travel Market Visitor Travelcard, at special rates, which can be received in advance and used on all London public transport, tubes, trains and buses.

Plans include the location of World Travel Market information staff in distinctive red uniforms to direct visitors at key stations en route to ExCeL. There will also be six main service desks at the entrance to ExCeL to assist visitors with queries and bookings of flights, hotels, taxis and chauffeur services, visitor travelcards and discount vouchers for local shopping.

Reed Travel Services (RTS) is co-ordinating discounted flights throughout the world, working with British Airways, KLM, VLM, British European, Scotair and GO. It is also working with hotel specialists, Expotel for all hotel accommodation with preferential rates.

Hundreds of taxis from a number of taxi companies are being co-ordinated to ensure a steady flow from ExCeL. A taxi manager will be on hand to ensure the fast management and turn round of taxis and visitors will be encouraged, where possible, to share, for optimum value and convenience.

A free shuttle bus service will also be offered by ten Redwing Coaches between ExCel and Canning Town interchange with the Jubilee Line and the DLR.

Details of bookings for flights, hotels, visitor travelcards, taxis and chauffeur cars are on the World Travel Market website www.reedtravelexhibitions.com, click on the logo and then on Reed Travel Services.

TravelAsia.com - Leisure travellers are leading the recovery effort for the travel industry, according to an NFO Plog survey conducted in the US. The survey monitors the travel interests and habits of over 9,000 US households.

The study confirms that Americans did travel less and their travelling patterns were altered to some extent following September 2001. However, leisure travel reported fewer cancellations with most leisure travellers saying their plans had changed little. According to the study, eight percent of leisure travellers flew less than they normally would.

While air travel experienced the largest slump, car travel stands to reap the most benefits this year as leisure travellers opt for road trips to nearby destinations. Although 78 percent of the respondents predict their travel within the US will remain the same in 2002, only nine percent expect to fly more than in 2001, and 15 percent expect to drive more often.

However, international travel still represents the weakest area for leisure, with nine percent of travellers noting a drop in travel, and likely to decline

TravelAsia.com - Asia’s top convention city and the world’s fifth (rankings by the Union of International Associations) is eyeing emerging markets in Asia and Oceania. Singapore is casting its eye on China, South Korea, India, New Zealand and the rest of Southeast Asia to boost its business events pie. For China, India, Korea and Southeast Asia, the Singapore Exhibition and Convention Bureau (SECB) is cultivating the conventions, corporate meetings and incentive travel markets. Its strategy is to increase yield from these Asian markets within the next two years.

For traditional longhaul high-yield Mice markets like the US and Europe (particularly Britain, Germany and France), SECB is working towards more collaboration with existing key clients and securing new businesses through event organisers and corporations. The potential new markets in Europe are Eastern Europe and the Mediterranean.

A particular segment is the medical/pharmaceutical industry, which is fast becoming the golden child in conventions and meetings. The SECB has indicated that it’s the combination of the city’s excellent medical facilities and popularity as a convention destination which has resulted in over 350 medical-related conferences being staged, and over 175,000 delegates in attendance, between 1990 and 2001.

The past 18 months have seen Singapore win 23 bids from various industries with a success rate of 70 percent. Key events clinched include the ‘Seventh Global Conference of the International Federation on Ageing’ in 2004, which is expected to draw an attendance of 2,000, and the ‘18th World Conference on Family Medicine in 2007’ with 4,000 participants. Next year will also see the return of Swift International Banking Operations Seminar (SIBOS), bringing 5,000 financial and banking experts from across the globe.

This month, CommunicAsia 2002, from June 18 to 21, is in the limelight. Widely regarded as the largest and most authoritative communications and IT event in Asia, the tradeshow brought 1,440 companies together under the theme ‘The Future. Today’. Broadcast Asia 2002, held in conjunction with CommunicAsia, showcased the latest developments in the broadcast and multimedia industry.

This year, the SECB team plans to attend 32 trade missions and industry events in 24 countries. New initiatives include missions to China and Eastern Europe. Targeted campaigns which the board has already launched are ‘Incentive Isle Singapore’ and ‘Meet in Singapore’. New this year is the ‘Meet in Singapore’ privilege card (a discount card) which Mice organisers can apply and distribute free to delegates attending an event in Singapore. This is touted as the passport to entertainment, dining, tourist attractions and shopping options.

Fresh from its recent exit from PATA Travel Mart (PTM), Reed Travel Exhibitions has revealed it is looking at setting up a new travel event in Asia – with a likely focus on non-leisure travel in the North and South Asia markets.

In a letter of thanks to the trade for supporting PTM, Andrew Lee, RTE's director - sales & marketing Asia, wrote, "My team and I are mapping out new ideas to develop relevant platforms for you in the travel trade to benefit from. You will be hearing from me very soon..."

Lee confirmed with TravelWeekly that an announcement on a new event would come in one to two months’ time.

"It's a little untimely that the exit of PTM leaves a gap in Asia, which is a very important market. Asia is a bit too important to be ignored," said Lee.

Organiser of shows including WTM in London, ATM in Dubai and AIME in Melbourne, RTE had recently aquired La Cumbrie in the US, which next year would focus on domestic and regional travel, he said.

"It depends on what sort of event. It does not necessarily have to be a leisure event, and what's stopping us from thinking outside the box and benefitting the trade?" Markets such as North Asia, especially China and Korea, as well as South Asia were not saturated, he said.

The Malaysian Association of Hotels elected a new executive committee at its annual general meeting held here last Friday.

Mohd Ilyas Zainol Abidin, group generla manager of Del Palma Hotel, is the new president for the term 2002-2004.

He replace Argus Salim, general manger of the Pelangi Beach Resort in Langkawi, who did not stand for re-election.

Many of Asia's capitals are among the the most expensive cities in which to live - although Zimbabwe's capital Harare is fast catching up.

In the latest Worldwide Cost of Living survey from the Economist Intelligence Unit (EIU), Harare has risen from the 120th most expensive city to number four in the latest rankings.

EIU attributes the rise to the Zimbabwean dollar being pegged to the US dollar despite 100 percent inflation.

Asian cities, however, continue to lead the list. Tokyo, Osaka and Hong Kong hold the top three places.

Less expensive are Hanoi (85) , Kuala Lumpur (101), Jakarta (104) , Bangkok (109), Manila (126) and Mumbai (127).

Oslo is the most expensive European city at number five, while Zurich and London rank joint eighth.

New York retains its position as the world's seventh most expensive city. Chicago (10th) and Los Angeles and San Francisco (joint 11th) have moved up the rankings slightly.

In Australia, major cities have climbed the list. Sydney went up 17 places to 55th most expensive city and Melbourne surged 20 places to 61st. Perth and Brisbane tied for 78th place.

EIU's bi-annual survey compares prices and products from more than 130 cities around the world

TravelAsia.com - In the 2001 annual research survey by the Hong Kong Exhibition and Convention Organisers’ and Suppliers’ Association (HKECOSA), Hongkong’s trade fair industry has shown improved performance in every important measure last year, cementing ‘its leading regional position’. Of particular importance to the SAR’s future is the robust growth in the participation figures from China. Some 82,397 mainland buyers attended Hongkong events in 2001, up 68 percent from the previous year.

Streamlined visa procedures for visitors from mainland China into Hongkong have helped push up the numbers at shows and trade events – both as visitors as well as exhibitors. The number of Chinese companies using Hongkong as the showcase for their products was up over 50 percent year-on-year in 2001, totalling 3,061. Since 1997, the number has gone up some 182 percent.

The trade fair industry contributed about HK$1.35 billion (US$173 million) to the country’s national coffers last year, up 3.5 percent on 2000. Business from mainland China accounted for $138 million, up 41 percent compared to 2000. HKECOSA estimates that for every $1 spent on exhibitions, $4.20 is put back into the economy via hotels and restaurants and/or air tickets.

More than 55 million Americans are "geotourists" and another 100 million are moving in that direction, according to a recent TIA study. Rather than a new, widespread love of the outdoors, however, the large numbers are indicative of a broadening of the term's meaning.

The study of 8,000 households, sponsored by National Geographic Traveler magazine, defines geotourism as travel that sustains or enhances the geographic character of the visited location, including its environment, culture, aesthetics, heritage, and the well being of its residents. The single- largest group—"urban sophisticates"—prefer culture-oriented travel, particularly in and around large cities.

Guiding Light

The prevalence of in-room interactive hotel guides isn't as widespread as you may think

With the increasing reliance on in-room technology, more hotels are offering interactive hotel guides in their guestrooms. And the number is likely to keep rising as televisions, entertainment options, and other guestroom systems are revamped or replaced.

According to the 2001 Lodging Survey, there was a slight rise in usage from 1998 (19.1 percent) to 2001 (22 percent). However, solutions companies offering such portals via an automatic property homepage hook-up or through the television set are becoming more sophisticated, user-friendly, and cost effective for hotels. In the next three years, a greater rise in the use of interactive hotel guides is expected.

The amount of rooms a property has is a clear factor in whether or not it features interactive hotel guides in its guestrooms. The percentages rise steadily as the room numbers increase from 8 percent (properties with 20 to 39 rooms) to 43 percent (hotels with 250 rooms or more).

Similarly, segment type is an indicator. Twelve percent of budget, 14 percent of economy, 20 percent of mid-priced, 33 percent of upscale, and 37 percent of luxury hotels responded as having interactive in-room guides.

Not surprisingly, properties that cater to business travelers are most likely to feature interactive hotel guides, as they are also most likely to have the systems already in place to house such technology. Convention centers (40 percent) are eight times more likely to have interactive guides than B&Bs and small inns (5 percent).

Location seems to have the least effect on percentage rates. Overall, the prevalence ranges from 18 percent (highway hotels) to 29 percent (airport hotels).

Newsletter - July 9, 2002