Newsletter - March 22, 2002

UP TO 27% REVPAR UPLIFT WHEN HOTEL OWNERS  PARTNER GLOBAL AND NATIONAL BRANDS

But hotel owners say ‘brands good, but not that good’ -  Brand operators have to work harder to close gap in perception over value of their brands

A new European report by KPMG, the professional services firm, has revealed a substantial gap in perception between owners and operators over how much RevPar uplift (revenue per available room) can be achieved when brand operators manage hotels, compared to the RevPar achieved by independent hotels.

Hotel owners believe that global brand operators achieve, on average, a RevPar uplift of 16%.  But brand operators said this uplift was 25% – a discrepancy of nearly 10%.

The difference is even greater when looking at national brands.  Owners believed national brand operators uplift RevPar by 11%, compared to operators who said this figure was 27%.

Hotel operators are having to work harder at their partnerships with owners, in order to convince owners of the benefits of working with global and national brands

Both owners and operators need to work together to create a successful and profitable alliance, which will maximise the return on investment that can be generated from rooms.  They need to make the most of the brand value of hotel operators, and target customers effectively through their distribution systems and brand loyalty schemes.

With competition getting fiercer, operators are under pressure to offer attractive deals to hotel owners.  At present, approximately 25% of European hotel stock is branded, compared to 70% in the US, so hotel operators are looking to Europe to grow their market share and boost revenues.

Nick Pattie, Director of Hospitality at KPMG, speaking at the Hotel Investment Forum in Berlin, said:  “Hotel owners are much more knowledgeable about hotel operations and are becoming increasingly sophisticated when selecting brand operators.  Owners are looking for greater flexibility and transparency from operators, and performance guarantees are becoming essential for contracts.  Greater emphasis is being placed on profitability as a key performance indicator, and the ability to control costs, such as capital expenditure.  In the long term, operators will probably have to be more flexible on lengths of contracts if they want to partner hotel owners.”

Owners and operators have identified a number of areas they need to address:

Effective brand management:  Both owners and operators need to exploit management and distribution systems to generate the maximum return on investment.  The backing of strong brands can also help owners secure funds from investors.  Operators want to ensure that brands have consistent standards across all hotels.

More flexibility in working relationships:  Owners would like shorter contracts to protect them from the risks associated with hotel brands changing hands, and different market conditions.  Operators, on the other hand, would like longer contracts to maintain and protect brand presence.  Owners would also like to see more agility and creativity in the design and refurbishment of hotels to reflect changing market demands.

Improved financial control and reporting methods:  Owners are keen to encourage shared decision-making over finances, have more influence over budgets, and a clearer understanding of the accountability of the general manager and his team.

Greater transparency:  Many hidden costs are perceived as being passed on to owners.  Owners would like to have more influence and understanding of how costs are allocated and charged back.

Sharing of Risk:  Owners, particularly of smaller hotels or those operating in volatile markets, would like operators to take an equity stake in hotels.  They believe this would encourage operators to focus on profit maximisation.

·         KPMG carried out the research for their hotel performance survey between December 2001 & February 2002. Novotel Hotels, and Radisson Edwardian

·         Interviews were held within the top end of the hotel market across six of the leading European markets: UK, Germany, France, Netherlands, Spain and Greece.

Participants included: Hilton International, Hospitality Europe, Meridien Hotels Ltd,

KPMG’s Travel Leisure and Tourism team is active throughout Europe and comprises a team of professionals who specialise in providing advisory services to large and mid-market clients in the Travel, Leisure and Tourism marketplace.  These services include financial management, IT, profit improvement, and strategic planning.

KPMG is the global professional services firm whose aim is to turn understanding of information, industries, and business trends into value.  With more than 100,000 people worldwide, KPMG provides assurance, tax and legal, financial advisory and consultancy services for more than 760 cities in 155 countries.

HOTEL CHAIN CONTINUES MOVE INTO NEW YORK CITY

Three months after opening its first hotel in New York City, Hampton Inns, a mid-price subsidiary of the Hilton Hotels Corporation, is adding four properties in the city, three in Manhattan and one in Queens. Like the earlier Hampton, all four hotels are to be built from the ground up, rather than converted from other hotel brands or other buildings.

Although Hampton has 1,180 hotels in 49 states (all except Hawaii) and in a sprinkling of foreign countries, it currently has none in Manhattan.

Like about 95 percent of all the hotels that bear the Hampton name, the hotels in New York City will be franchises. While the company would not disclose the cost of the individual projects, it said the five New York City hotels, including the Hampton that opened in Queens near Kennedy International Airport at the beginning of the year, had a total cost of about $130 million.

The first Hampton hotel in Manhattan is scheduled to be a 144-room property in Chelsea at 108 West 24th Street, between Avenue of the Americas and Seventh Avenue, which has a prospective opening date in October. A 65-room property at 320 Pearl Street, near the South Street Seaport, is expected to open in December. A 136-room hotel at 116 West 31st Street, near Herald Square, is to open in May 2003. The Chelsea and Herald Square buildings will be 19 stories. The 220-room hotel scheduled for Queens, which was designed by the architectural firm of Cherniahivsky & Associates of Philadelphia, is expected to open in 2004, at 102-10 East Ditmars Boulevard, across from La Guardia Airport. Its franchise owner, Field Hotel Associates of King of Prussia, Pa., also owns the 216-room Hampton Inn-Kennedy Airport.

All three Hamptons scheduled for Manhattan, designed by Gene Kaufman Architect, are being built by the Hersha Group, a family business in New Cumberland, Pa. Hersha owns and operates 27 hotels, including a 79-room Holiday Inn Express in Long Island City and a 120-room Doubletree Club at Kennedy Airport.

Rooms at Hamptons typically cost $66 to $99 a night nationwide, depending on location, according to Phil Cordell, senior vice president of Memphis-based Hampton. But rates at Hampton's properties in Manhattan are likely to be at least double that. Room prices at the Hampton hotels in Chelsea, Herald Square and on Pearl Street are projected to range from $160 to $225.

There are no projections yet for the hotel near La Guardia, but rates at the Hampton Inn at Kennedy Airport are about $129 on Monday through Thursday, $109 on Sunday and $114 on Friday or Saturday.

The reasons for the higher room rates in New York are familiar: the high cost of land and construction, as well as the many regulatory hurdles. "Compared to suburban locations, the same size hotel built in New York is at least three times more," said Neil H. Shah, Hersha's director of development.

Nevertheless, Mr. Shah was quick to add, "Once you're up and running in New York, you're in the best hotel market in the world."

That market has been struggling in recent months. In its latest survey of trends in the hotel industry, PKF Consulting found that occupancy in New York City fell 5.5 percent this January, to 62.5 percent, compared with a year earlier, and the average daily room price dropped 12.1 percent, to $181.50. Those figures are a far cry from 2000, when the city's occupancy rate was 84.6 percent and the average price was $237.

Nevertheless, with the economy beginning to inch upward, executives of Hampton, the Hersha Group and Field Hotel Associates express confidence that the cyclical hotel market will turn around before long.

"As an industry, we've gone through peaks and valleys," said Mr. Cordell of Hampton, "and I'm absolutely confident this cycle will head back up."

Mr. Shah sounds equally optimistic partly because of the economy; because of New York's many strengths; and because "it's not like bringing just any new hotel into town — Hampton's a `killer brand.' " In each of the last three years the chain has won the J. D. Power & Associates award for "highest guest satisfaction among midprice hotel chains with limited food service."

Hampton, which was founded in 1982, was acquired by Hilton in 1999 when it took over the Promus Corporation. This put the chain within Hilton's centralized reservations system and meant that a person seeking lodging at another Hilton property might be referred to Hampton if the first choice is sold out. Hampton participated in Hilton's HHonors Program, which awards airline miles and hotel points, redeemable for airline tickets, cruises, entertainment and merchandise.

"Hampton has always had a loyal group of customers," said Gary Isenberg, Field's executive vice president for hotel operations. "But being under the Hilton umbrella has made Hampton even stronger."

DESIGN HOTELS REDEFINE ‘LUXURY’

Sandra Hoffmann in Hamburg reports on the boom in hotels for the rich and hip.

Many hotels' concepts of luxury used to be flock wallpaper, heavy velvet drapes and chandeliers. But now hotel owners are discovering that travelers are prepared to pay for top-class design and more individual character.

The latest example of a design hotel is the Hotel Side in Hamburg, Germany, that opened in April.

The 178 rooms and suites grouped round a large glass atrium 24 metres high were designed by star architect Matteo Thun from Milan.

He describes his minimalist room as "classic-modern". White furniture and pale fabrics made of high-quality natural materials contrast with dark wooden floors to deliver an understated and functional effect.

But in the spa in the lower part of the five-star hotel, Thun has splashed out with some colour. The basement is decorated with sunny yellow, orange and green walls and sea-coloured glass mosaics.

"I wanted people to forget they were underground," said Thun.

US artist Robert Wilson devised the lighting concept for the atrium.

"A room is nothing without light," he said.

The computer- controlled lighting system aims to reflect the changes of mood throughout the day, depending on the weather and the time of year.

Claus Sendlinger, one of the founders of the Design Hotels Marketing Cooperative, set up in 1993, said he now receives one enquiry a week from people wanting to build a design hotel.

"But only those that really have something to offer will survive," he said.

Nearly 170 hotels in 32 countries are now members of the organisation, which has its German headquarters in Augsburg, Bavaria.

This means more than just hanging up a few modern paintings and placing some bright modern sofas in the reception lounge, he said.

"It is about creating a diversion from normal daily life in a hotel, giving it a special character with unexpected things," said Sendlinger.

A design hotel is not a fashionable hotel, it must have a holistic concept, he said.

"Then it will be able to survive over decades, because good architecture remains super for many years."

Nevertheless they will occasionally need a freshen up, like the Radisson SAS Royal Hotel in Copenhagen, which claims to be the first design hotel.

It has just spent 8.7 million US dollars refurbishing the luxury 22-storey building that was originally designed in 1960 by Danish architect Arne Jacobsen (1902-1971).

Windows throughout the rooms give guests the sensation of floating over the city. Lime green furniture fabrics, maple wood panelling and lights in turquoise and blue tones convey a sense of brightness.

Yet despite the complete renovation, they have remained true to Jacobsen's original design. All the rooms still contain the designer's famous swan easy chairs, Series 7 chairs, and the original lamps.

In homage to the original design, Room 606 has been maintained in its original form. The lobby has also remained largely unchanged.

Alongside the original Swan chairs from the 60s, are Jacobsen's somewhat larger Egg chairs that were specially designed to "wrap up" prominent guests to hide them from prying eyes.

Thirty years after Jacobsen's masterpiece, many more hotels in New York, London and Paris are now turning to top designers to lend them a special character.

Ian Schrager, the former nightclub owner from New York, has opened a number of design hotels. The first was Morgans in New York, followed by others in Los Angeles and Miami. Schrager has worked mostly with star French designer Philippe Starck.

They also developed Schrager's first hotel in Europe together, the St. Martin's Lane Hotel in London.

Also in London is the One Aldwych that opened in Summer 1998, defined by its owners as a new type of luxury hotel.

"Luxury hotels still have a rather classic-traditional concept of luxury. Particularly in London, this means chandeliers and heavy red velvet drapery," said Dagmar Krausse, of the One Aldwych press office.

But the luxury in One Aldwych is under-stated, and it has an extensive art collection "that the director bought personally", said Krausse.

Art, as well as decor, also takes centre stage in the two art'otels in Berlin and Dresden.

They are very individually designed, each dedicated to an important artist," said David Selle of the art'otel in central Berlin. Dresden is dedicated to A.R. Penck, Berlin to Georg Baselitz.

The concept works, said Selle. "People are prepared to pay for individuality."

Next spring art'otel will open a new hotel in Berlin dedicated to pop artist Andy Warhol. 

HOSPITALITY LEADER’S SUMMIT HIGHLIGHTS EUROPE’S HUGE GROWTH POTENTIAL

Although 2002 will be a challenging year for the tourism and hospitality industry, the outlook for growth in Europe - in terms of demand, job creation and subsequent investment in the industry - is extremely positive in the medium to longer term. This good news for the travel and tourism industry, investors and national economies, was the main message to emerge from the hospitality Leaders' Summit convened in Berlin today.

The Summit brought together more than 40 CEOs of the major lodging groups, between them representing over three million hotel rooms. This unique event was convened by the International Hotel & Restaurant Association (IH&RA), the World Travel & Tourism Council (WTTC) and the International Hospitality Investment Forum (IHIF). Discussions and debates, chaired by Sir Ian Prosser, Chairman of both Six Continents and WTTC, centred on the current and future prospects of the industry, security measures being taken post-11 September, and the need for recognition of tourism as a driver of economic growth in Europe.

It is clear from our discussions today that, despite the events of the last few months, the industry's outlook for the future is extremely positive, said Sir Ian.

According to Jean-Claude Baumgarten, president of WTTC, the terrorist attacks of 11 September and underlying recession will result in a decline of 7.4 per cent in total travel and tourism demand in 2001-02, and will cost the industry over 10 million jobs worldwide. But WTTC forecasts are bullish for the longer term.

In 2003 travel and tourism demand is projected to rebound sharply, with the result that, by first quarter 2004, the industry should have fully recovered from the impact of 11 September, growing by 6.5 per cent. Looking further ahead, travel and tourism demand is expected to grow by an average of 4.5 per cent a year between 2002 and 2012.

Paul Slattery, Director Dresdner Kleinwort Wasserstein, shared this optimism. He set the scene with forecasts showing that in Europe, even with a modest 1 per cent compound annual growth rate, almost half a million new hotel rooms would be needed to satisfy consumer demand over the next ten years. On these assumptions additional capital investment of some ¤4 billion would be required. However, this could only be achieved if the structure of the European hotel industry and access to capital were radically overhauled.

At the same time it is important not to forget the hard-learnt lessons of 11 September. According to Eric Pfeffer, President of IH&RA, safety and security had already been identified as one of the major forces driving change in the hospitality industry. The tragic events of 11 September dramatically heightened awareness of this key issue. Participants acknowledged that security measures were vital and that hotel companies had to remain vigilant and attentive in the current environment.

At the same time, governments who systematically tend to underestimate the role of travel and tourism, had been made dramatically aware of the industry's importance through the losses incurred over the past six months.

The time is now ripe for the industry as a whole to raise its profile both at the European and international level, said Pfeffer, highlighting the role of the IH&RA in ensuring this representation.

While it is difficult for a horizontal industry such as travel and tourism to speak with one voice, James Provan, Vice President of the European Parliament, said it was essential for all industry partners to pull together to achieve this objective.

For many participants it came as some surprise to learn that an industry accounting for 20 million jobs and 12 per cent of European Union GDP not only lacks representation commensurate with its economic importance, but also the means to influence industry-relevant policy matters.

Organisers of the Leaders' Summit look forward to continuing this type of dialogue - initiated by IH&RA in London in November 2000 - as one of the many ways of raising the industry's profile. 

CUBAN HOTELS INDUSTRY THRIVING WITH FOREIGN PARTNERS

The world is surfing Havana's tourist boom, as Bernd Kubisch reports from Havana.

Following the boom in Cuba's tourism industry in recent years, there is now a strong upswing underway with joint venture projects.

From now on, all new projects for large-sized hotels of the four- and five-star category for the socialist country's state-owned hotel chain will be realised only via capital investment and management agreements with foreign partners.

This has been confirmed by Emilio Falcon, president of the Cuba's hotel federation, who inists: "Every deal we make is a good one."

The fact that foreign involvement as a rule may not exceed 50 percent is no hindrance, Falcon says. He regrets the fact that so far German involvement in Cuba has been restricted to the management of vacation hotels.

According to the Tourism Ministry, at the start of 2001 there were 27 hotel companies involving foreign partners, combining for a commitment to build 15,600 rooms. So far, 3,700 rooms have been completed.

At the same time, 50 out of the 227 hotels meant for foreign visitors to Cuba are under foreign management, with this trend strongly on the rise. At the end of 2000, there were 36,000 hotel rooms in Cuba, while by the end of this year the figures is to reach 40,000 rooms.

Many foreign hotel partners are manager and shareholder at the same time, in some cases the stakes being just 20 or 30 percent.

"We have capital shares in some of our hotels," notes Carlos Villota, general manager of the Melia Cohiba Hotel in Havana. The Sol Melia company was the first foreign partner for Cuba, and in the meantime the Spanish group will soon be managing 23 hotels, three of which are under construction.

Villota said that the Melia Cohiba hotel is booked to 76 percent capacity, at a room price of USD 215.

A number of hotels have more than two partners. For example, the Cuban and Dutch flags fly atop the Golden Tulip Parque Central in downtown Havana.

The state hotel chain Cubanacan is a 50 percent owner, while the Dutch manage the hotel and investors from four countries, including Britain and Italy, hold the remaining stake.

"This is working excellently," said Falcon, who is resident manager of the hotel.

Other foreign hotel management groups who are satisfied with the situation include Super Clubs, LTI and Oeger. They have set up offices and are aggressively advertising their products.

By contrast, foreign capital partners, for example from Canada or Sweden, are less hungry for publicity.

Oeger Tour has shelved earlier plans to participate financially in a 1,000-bed complex on Cayo Coco.

"We are going to operate and manage the facility because that is cheaper," said company spokesman Ingo Thiel, while saying in this way Oeger's standards can be guaranteed.

LTI marketing chief, Monika Singer, says that her company is "very satisfied with the cooperation" with the Cubans.

Soon the LTI Varadero Beach Resort with 400 rooms is to be opened, followed next winter with the 317-room LTI Panorama Havana. This will bring to five the number of hotels under the group's management.

Meanwhile Jag Mehta, a consultant to Super Clubs, reports that "we are making good profits".

Last February, the all-inclusive hotel management company from Jamaica opened the Breezes Costa Verde hotel, with 480 rooms, in Holguin. Owners are Cubanacan and an Italian group.

"The interest of foreign partners has grown strongly," said Mario Sori, vice president of Cubanacan. "We would be very pleased about a joint venture with Germany."

Manuel Estefania, vice president of the Gran Caribe company, notes that "the Germans bring us the most tourists, but are still reserved about investing".

At the end of 2000, Gran Caribe had 41 hotels with 10,300 rooms, and the chain now has lined up four capital partners - two from Canada and one each from Italy and Sweden - for major new projects.

Meanwhile classic hotels like the Inglaterra and Plaza in Havana have been modernised and are being operated by Gran Caribe itself.

The ongoing boom in vacationers is expected to add further momentum to joint ventures.

The number of visitors from around the world rose from 1.603 million in 1999 to 1.774 million last year.

Of that, Germans accounted for 182,159 and 203,403, respectively. Cuba's tourism income is now running at about two billion dollars a year.

HOTEL VALUES FALL IN 2001

The value of hotel properties fell by an average 2.6% across Europe in 2001, compared with an increase of 7.8% in 2000, says consultancy HVS International.

Its European Hotel Valuation Index shows the largest gains in value were enjoyed by hotels in Moscow (16.9%), Milan (6.6%), Frankfurt (6.4%), Munich (5.1%) and Berlin (3.8%).

The largest falls in value were experienced by hotels in Istanbul (14.2%), London (13.3%) and Hamburg (9.1%).

For 2002, HVS International expects hotel values across Europe to see moderate growth of only 1.3%, with only five markets seeing values decline, mainly as a result of increased supply through new hotels being built. These markets are Barcelona, Copenhagen, Dublin, Madrid and Warsaw.

For 2003, HVS expects values to rise by 3.9%. The European Hotel Valuation Index 2002 was launched at the International Hotel Investment Conference being held this week in Berlin, Germany.

‘ULTIMATE SERVICE AWARD’ WINNERS ANNOUNCED

The winners of the CNN and American Express-promoted Ultimate Service Awards have been announced at the International Hotel Investment Forum in Berlin, Germany.

Hotels receiving the awards were as follows:

Africa: Sheraton, Addis Ababa, Ethiopia

Asia: Ritz Carlton, Kuala Lumpur, Malaysia

Australia/New Zealand/Pacific Isles: Four Points by Sheraton, Sydney, Australia

Caribbean/Central America (tied vote): Hotel Cariblue, Puerto Viejo, Costa Rica, and JW Marriott, Mexico City

Europe: Courtyard by Marriott, Kassel, Germany

Indian Sub-Continent/Indian Ocean: Kandalama Hotel, Dambulla, Sri Lanka

Middle East: Ritz Carlton, Sharm El Sheikh, Egypt

North America: Doubletree Park Place, Minneapolis, USA

South America: Hotel Sofitel, Bogota, Columbia

Votes were called for via a 30-second commercial on CNN, banner advertisements on CNN.com and through American Express, which targeted frequent hotel stayers via direct mail. More than 3,000 votes were cast for hotels that business and leisure travellers thought offered exceptional levels of service.

The awards were also supported by Taylor Nelson Sofres, which ran the online voting system, and Villery & Boch, which designed the crystal awards.;

Source:  Caterer & Hotelkeeper 

HOTEL MAN GETS WTTC ADVISOR ROLE

The World Travel & Tourism Council (WTTC) has appointed Insignia Hotels’ Jonathan Worsley as an advisor.

Worsley has held a key role helping US real estate giant Insignia establish a European presence. He confounded and organises the annual International Hotel Investment Forum, held in Berlin.
WTTC president Jean-Claude Baumgarten said: "Jonathan will be a great ambassador for the WTTC in helping to link the hotel sector with the travel and tourism related industries including airlines, travel agents, tour operators, manufacturers, financial services and rental car companies".

According to Worsley: "With the difficulties of 2001, it has become even more important to have an open dialogue with governments to ensure that the industry is represented at the highest levels". 

CHINA'S JIN JIANG INTN'L MANAGEMENT CORP SIGNS JV DEAL WITH ACCOR

Asia Pulse...  China's Jin Jiang International Management Corporation and Europe's Accor hotels have signed a joint venture agreement in preparation for an April launch of its new domestic sales and distribution network targeting the China market.

Accor Jin Jiang Hotel Distribution Co Ltd, which remains subject to final government approval, will commence with the opening of a Shanghai head office before the end of April.

It will represent three, four and five-star hotels managed by both groups and staff recruitment has begun with the number expected to reach 20 as demand increases.

Additional offices will be opened in Beijing and Guangzhou in the coming months covering the greater metropolitan area of all three major commercial centres, in addition to Xian, Chengdu and Xiamen.

Accor vice president of sales and marketing Rob Hornman said in a statement that the joint venture would utilise Accor's key account management system to identify accounts on behalf of the combined hotel network.