Volume 8 Issue 6 hotelanalyst · As far as business travel is concerned, December’s American...
Transcript of Volume 8 Issue 6 hotelanalyst · As far as business travel is concerned, December’s American...
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The sale of the Mint hotels portfolio was so successful that it raised sellers’ expectations and caused other transactions to drift along, according to Desmond Taljaard, COO at Starwood Capital Europe.
The full price for the deal, an estimated £610m
at the end of 2011, caused banks to think they
could get full value for other portfolios, added
Taljaard, speaking at the Ernst & Young Real Estate
Workshop 2013.
The session, a hotel specific break-out from
the main conference that focused on general
real estate, hosted at London’s InterContinental
on Park Lane, examined the outlook for hotel
transactions and financing.
Taljaard said financing was taking longer. He
cited the locked box mechanism, which attempts
to give an equity value to a deal before completion
by working off an historical balance sheet, as a
particular problem in slowing deals.
But he argued that the transaction market was
close to an inflexion point. “Assets are starved
of capital to reposition and banks can’t do it,”
he said.
Deals were in part taking longer as standards of
due diligence are now set where they should be.
“Deals done in 2006 to 2008 were done without
due diligence,” said Taljaard.
Adrian Turner, managing director of Crownway
Capital Europe, said: “You always know you’re at
the top of the real estate cycle when banks get big
into hotels.”
Turner contrasted Europe with the US with the
latter seeing confidence coming back. “REITs are
buying for increased yield. It is starting to change
pricing in the US.”
•Orient-Expressadopts associate model p4
•PremierInnlooksforonline advantage p6
•StarwoodCapitalsells out of French luxury p11
•Wyndhamtestsmixed hotel and apartment model p14
•Howrelevantisrevpar in measuring performance? p22
•Hoteliersneedto embrace technological change p26
Mint lifts expectationsParts of Europe were still scary, said Turner.
Ireland still had an intravenous drip in place from
the European Central Bank. But the country has
taken huge pain already: “If the rest of the world
took on in the same way , the crisis would be
over,” said Turner.
Taljaard said that his firm had taken part in
the Maybourne refinancing which had been
led by a US mortgage REIT. “The talk about
insurance companies filling [the debt finance]
void has not happened,” said Taljaard, adding
that for insurance companies to come in to the
market it was necessary to synthetically solve the
requirements they had in terms of the nature and
shape of returns.
Bob Silk, relationship director at Barclays
Corporate, admitted that banks generally
wanted a “bullet proof codpiece”. The big fear
for buyers was “catching a falling knife” but Silk
was confident we are near the bottom: “I’m fairly
convinced that in five years we will look back and
think ‘I can’t believe it was so cheap’.”
Silk added that he expects to be busy this year
and was already discussing “four big deals”.
Domestic UK lenders had worked out that they
need to lend more money, he said. There won’t
be a return to the “lunacy” of 2005 to 2007 but
lending “will slowly but surely ease up”.
Derek Gammage, head of hotels EMEA for
CBRE, was sceptical that Asian buyers would
feature heavily in the near future. “The premise of
Asian buyers is that they are going to buy cheap,”
he said but there were better opportunities nearer
home. More likely buyers were Americans who
had access to cheaper debt.
More deals were likely to be done as “the stars
were now aligned”: interest rate swaps had burnt
Volume 8 Issue 6
continued on page 3
Contents
News Review 4-15
Orient adds associates – UK upturn
– Choice on hunt – Branded Accor
– Positive Premier Inn – Record for
SLH – IHG for Asia – innovative
Christie – Akkeron deal – French
luxury sale – Qataris’ Berlin swoop
– Rezidor writedowns – Wyndham’s
mixed use – Qhotels refinance
Sector Stats 16-18
Olympic effects – Soccer scores
Analysis 20-26
Development fundamentals – Revpar
relevance – Challenge of change
The Insider 28
Forte searches profits – Branding
challenge – Tough market tips
www.hotelanalyst.co.ukVolume 8 Issue 6
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Deputy Editor Chris Bowne [email protected]
Marketing Sarah Sangstere [email protected]
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Design Lynda Sangstere [email protected]
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Europe turns the corner?Commentaryby AndrewSangster
A travel trends survey for ITB Berlin, carried out
by IPK International, suggests a net increase in
activity for 2013.
Of the Europeans surveyed, 28% said they
would travel more in 2013, while 21% expected
to travel less. Russian outbound tourism is
expected to rise by 9%, with the figures for UK
and Germany 5% and 3% respectively.
The report also notes that while negative country
conditions may reduce domestic and outflowing
travel, it does not reduce tourist arrivals.
Italy, for example, saw outbound trips fall 5%
but benefited from greater arrivals from eastern
Europe. City breaks were up 14% and short trips
of one to three nights grew 10%, while beach
holidays fell in popularity.
“The report’s findings illustrate the wide-
ranging impact of economic developments on
European tourism forecasts,” said Martin Buck of
Messe Berlin.
“Changing travel patterns mean that European
countries will have to adapt to a much greater
variety of demand. All the same, the outlook for
next year is mostly positive.”
As far as business travel is concerned,
December’s American Express business travel
barometer provided some grounds for optimism.
The survey found that 63% of European businesses
maintained their business travel budgets for 2012,
and 73% intend to do the same for 2013.
The year just finished saw 23% of businesses
increase their travel budget, and just 14% reduce
it – a positive result when comparing with 21%
cutting down in 2011, and 40% reducing spend
in 2010.
The barometer, which pulls in views from more
than 500 corporates across Europe, noted an
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hotelanalystincreasing focus on centralised purchasing, with
59% of respondents using a travel management
company to help them keep track of spending.
Hotel spend is a growing area for companies to
focus on, and 54% now monitor spending in this
category. Cost control will remain a major focus
for companies into 2013. Mobile information
is increasingly valued by business travellers,
for travel alerts, mobile check-ins and making
reservation changes.
In the UK market, agency VisitBritain is
predicting a 3% growth in visitor numbers in
2013, while OTA Travelzoo has surveyed UK
consumers to discover a majority expect to spend
more on their holidays in 2013.
Provincial hoteliers in the UK had their best
month for more than a year, according to recent
statistics gathered by TRI for their Hotstats, with
room rates and profits improving overall.
Research agency PhocusWright predicts that
the European market will continue to grow
weakly in 2013, similarly to the 2.5% growth
experienced in 2012. One trend that will continue,
however, is consumers’ flight to online, where
the OTAs continue to dominate. PhocusWright
expects this year to show a 13% growth in OTA
business while brand websites will see an overall
growth of just 8%.
What this all amounts to is more good news for
the start of 2013, at least in terms of expectations.
How fully realised these will be depends a
great deal on some of downside risks failing
to materialise.
In Europe, the big threat remains a possible
collapse in the Eurozone. Little has changed
in the economic fundamentals and even the
biggest Pollyannas are not expecting a rebound to
significant growth.
So why the optimism? In part, it is a function
of things having been so bad for so long - we
are now five years into the downturn - that the
absence of bad news is taken as evidence of
good news. And there is a sense that things have
stopped deteriorating.
In the US, the fiscal cliff has, for the time being,
been avoided and the Chinese economy, which
had started to look wobbly, is again increasing its
growth rate.
This rosier global outlook, coupled with the fact
that the Eurozone has failed to implode as the
pessimists forecast, has led to a burst of optimism.
Much economic activity is driven by sentiment
more than fundamentals.
The sentiment right now looks more positive
than it has for years. Just don’t look too closely at
what is underpinning it.
As 2012 closed, a raft of surveys gavethehotelsectorhopethatkeyEuropeanmarketsarenowmovingoff the bottom of the cycle. A numberofkeyindicatorssuggestthat, in some countries at least, 2013 will be a more positive year than the one just gone.
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Europe turns the corner?News
off; debt was stretched and therefore motivated;
equity was realistic; and banks had taken the
impairment.
Gammage said that banks were selling packages
of debt and there would be pure hospitality debt
trading. “Consensual solutions of three years ago
are not so consensual today,” he added.
HA Perspective: Are we finally at the point where
deals start in earnest? The short answer is no.
But it seems highly likely that there will be more
movement than we have seen for some time.
At the outset of this crisis, Hotel Analyst divided
the problem loans held by banks into three
categories: basket cases, such as GuestInvest,
which needed the plug pulling immediately;
fundamentally sound businesses that had some
issues with the capital structure, such as Mint;
and profoundly indebted companies that needed
serious adjustments to their capital stack, of which
De Vere Hotels was a case.
In this context it made sense for the receivers
to go in immediately at GuestInvest, which they
did, and for the most robust companies to trade,
which was the case for Mint.
While the debt holders got out with their cash
back in the Mint deal it was, and is, unlikely to be
the case in many other deals.
Robert Cook, CEO at De Vere, was also
speaking at the Ernst & Young event. He said that
his bankers Lloyds had been generous to him in
terms of capex but “we are playing catch-up for
the last three years”.
Hugh Taylor, chief executive at Michels & Taylor,
said that in general it was hard to look at a capex
programme that offered a return. If you were able
to reposition and work in an extended or different
market then there is an opportunity that makes
good business sense.
In this context, lenders who are in effective
control of assets need to ask themselves whether
they are the right people to oversee such a
repositioning. Even if existing management can be
incentivised to provide “cover”, debt is still taking
on equity like risks.
Given that the margins for lending on plain
vanilla deals are at historic highs (despite what the
lenders might try to tell you) it makes more sense
to take a write-down on the bad deals to free up
the balance sheet to lend on deals that are much
less risky.
It is a quirk of human nature that losses are felt
far more than gains. Now looks the time for banks
to steel themselves for tough decisions.
continued from page 1
After months of wrangling between the two
main shareholders, a GBP150m rights issue was
fully funded, and a GBP547m loan syndicated to
provide fresh debt for the next five years.
The hotel company, which manages luxury
hotels Claridges, the Connaught and the
Berkeley in central London, is now set fair under
new ownership.
However, clouds on the horizon include an
outstanding threat from minority shareholder
Paddy McKillen to further challenge recent
share buying transactions. While a media focus
on tax avoidance activities at the Ritz, owned
by shareholders the Barclay brothers, could
continue to cast an unwelcome gaze on the
group’s finances.
The last round of legal challenges between the
embattled co-owners was decided in September.
McKillen lost his claim that the Barclay brothers
had acted improperly in securing their controlling
shareholding, and in the way they had taken
control of the GBP660m loan against the hotel
group. He has publicly vowed to fight further.
December started with a call on existing
shareholders to fund a rights issue of GBP150m,
as part of a refinancing proposal advanced
by majority shareholders the Barclays. Their
funds were never in doubt; and despite media
speculation that minority shareholder Paddy
McKillen might struggle to deliver his part of the
cash call, his portion of the funds was delivered,
enabling him to maintain his 36% stake.
In November, McKillen had proposed an
alternative refinancing that would have done away
with the need to fund the rights issue, replacing
the total outstanding debt with fresh funds at a
better rate, from a Qatari source.
However, the Barclays, who control the board,
turned down the proposition, preferring the rights
issue that some commentators suggested was
designed to catch McKillen out.
The GBP547m loan was arranged by Blackstone
Real Estate Debt Strategies, and will repay a
GBP660m bridging loan from Barclays Bank. The
total was committed by a number of banks and
other institutions, including Bank of America
Merrill Lynch, Royal Bank of Canada, Wells Fargo
Bank, RBC and Starwood Capital.
“We are delighted to have completed a complex
refinancing in challenging market conditions before
year end,” said Stephen Alden, Maybourne CEO.
“Our own team, the board, our advisors and the
lending group have worked extremely hard - and
in close collaboration - to achieve this excellent
result. It places us in an ideal position to realize our
capital investment strategy and thus to maintain our
leadership among the world’s finest hotels.”
Bank of America is understood to have advanced
around GBP200m of the total. The loan is the first
time the bank has lent to the UK property sector
since 2006, indicating that it now feels the market
has stabilised.
According to the Irish Times, McKillen still
has EUR300m of personal debt and companies
controlled by him owe a further EUR1.3bn. But
he has committed to repay EUR400m in the next
12 months.
McKillen has also underlined his commitment to
the London luxury hotels he worked to improve,
telling the Irish Independent in December: “I’ve
no interest in selling out in the short term. The
proposed deal I have is for another 15 years. I
intend to stay involved with them for a long time.
There’s still a lot to be done.”
The Barclay brothers, meanwhile, were also
under the media spotlight in December as a
BBC investigative programme revealed their Ritz
hotel in London has paid no corporate taxes for
the last 17 years, despite being profitable. The
companies through which the hotel is managed
have used legal measures to avoid UK company
tax, something that other international brands
including Amazon and Starbucks have recently
been criticised for doing.
HA Perspective: January saw this saga take
another twist with McKillen launching a defamation
suit against representatives of the Barclays,
including Powerscourt Group and Maybourne
Finance, according to Irish press reports.
How far this phase goes remains to be seen but
what seems clear is that McKillen is determined to
fight for as long as he can.
What is also clear is the appetite for luxury
hotels in gateway cities like London. Despite
recent fears about over supply, the UK remains as
attractive as ever to hotel investors. Even if there
is a deterioration in trading in the short-term, it
is doubtful that this appetite for the best quality
assets will be diminished.
Maybourne refinancing truceDecember saw the completion of the refinancing of the Maybourne hotel group.
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News
That is the positive outlook for domestic
markets, delivered in new year property predictions
from the UK offices of Jones Lang LaSalle Hotels.
The consultants say London will maintain its
status as a leading world market. While revpar
will dip, they do not expect the post-Olympic
hangover some have predicted. Elsewhere, while
the market will remain flat at a macro level,
there remain opportunities within each locality as
pricing reacts to reality. New product is continuing
to be delivered, forcing older, more tired hotels to
be permanently dropped from the stock.
“Overall, no one’s getting carried away, but
there’s reasonable grounds for optimism,”
summarised JLLH’s Jon Hubbard. London will
retain its position as an attractive investment
location, despite losing some ground on its
Olympic performance during 2012. “It’s a
long term wealth preservation play, and that
won’t change.”
While others have suggested London revpar
could dip by as much as 7% during 2013, Hubbard
is less negative: “I’m not sure it’s going to be at
that level, but there will be some softening.” He
sees the market remaining robust, with continuing
strong occupancy.
Overall UK investment transaction volumes in
the UK market look likely to amount to around
GBP1.8bn for the year, held back by delays in
completing major deals. “There are a few needle
mover transactions that are pending,” said
Hubbard, notably the Marriott portfolio, which
is widely expected to complete its sale during the
first quarter of 2013.
With UK GDP growth pencilled in at just 1% for
the upcoming 12 months, “we’ve another tough
year in the regions,” said Hubbard. “It’s probably
UKoutlookturnspositiveTheUKhotelmarketwillcontinueto thrive in the capital, while the regions should prepare themselves for a 2014 upturn.
The company has signed its first associate, the
Hotel du Palais in Biarritz, France.
Orient-Express will be seeking out other suitable
associate hotels to add to its portfolio, looking for
high quality independents that will plug gaps in its
current “collection”.
The move gives luxury European hotel managers
another alternative to signing up with marketing
groups such as Leading Hotels of the World. And
it follows on from a similar move by Marriott with
its growing Autograph collection, which draws
together independents under an umbrella brand
giving the properties access to the global giant’s
distribution and marketing muscle.
Last autumn saw Marriott sign hotels in Lisbon,
Portugal, Rouen and Lille in France to the programme
which now has close to 40 hotels globally.
For an associate, there is the benefit of being
tapped into the Orient-Express marketing
infrastructure, with marketing, sales and PR
support across 17 markets, and the global
reservations system. Associate hotels appear
within the company’s website, directly alongside
the company’s own properties. The new partners
can also join the company’s Bellini Club preferred
agent programme.
“The associate hotels programme is an
opportunity to enhance our portfolio of iconic
travel experiences by partnering with independently
owned and/or managed luxury hotels,” said David
Williams, chief marketing officer, Orient-Express.
“In return for providing access to our highly
valued international sales force and strategic
marketing channels, this initiative enables us
to curate new destinations for our guests to
discover. Our boutique collection is uniquely
positioned to work with like-minded hoteliers
who wish to preserve their established individual
brand reputation, but who share the vision of the
Orient-Express umbrella brand, offering an equal
standard of authentic experience, revenue return
and service as our owned properties.”
Tapping into the Orient-Express marketing
presence, not least on the internet, also provides
substantial global exposure for associates. “Hôtel
du Palais has been a landmark in Biarritz for 120
years, and we were looking for an opportunity to
increase our distribution without sacrificing our
iconic brand identity,” said Jean-Louis Leimbacher,
general manager of Hôtel du Palais. “In Orient-
Express we have found a partner with the mindset
of an owner-operator that really understands
how to preserve our individual personality and at
the same time grow our revenue with intelligent
marketing and distribution channels.”
Orient-Express management is insisting that
associates will be joining by invitation only. Each
associate hotel will need to have a strongly
established, iconic reputation, and be a market
leader within their local market. They will be
independently assessed for their high standards,
and have to be a complementary fit to the
existing Orient-Express portfolio of 45 hotels and
experiences, across 22 countries.
HA Perspective: The brand landscape for hotels
is becoming ever more confused. Quite what an
associate hotel is compared to a core brand hotel
is a nuance that is often lost on experienced hotel
professionals let alone members of the general public.
For example, this correspondent remembers
speaking to an adviser to a hotel owner seeking
to take on the Waldorf-Astoria brand who had
been given a long list of brand standards. This
adviser fumed at the fact that several hotels in
the same city had been given Waldorf Astoria
Collection status while falling short of many of
these brand standards. The significance of the
word “Collection” had been missed.
What OEH is selling is this same confusion. The
promise to the hotel associates is that the public
will believe that the hotel is indeed a proper Orient
Express hotel. The risk, though, is that in the
process OEH dilutes its brand by allowing others
to operate hotels where it has no direct control
and standards are not met. And like the adviser
seeking a Waldorf-Astoria, there is a risk of people
fuming at the discrepancy.
At the top end of the luxury segment, which
is where OEH likes to position itself, service is
everything and this is the very thing that is hardest
to police. For economy, perhaps even midmarket
hotels, the physical product plays a much bigger
role and leaves a little more room for a brand
owner to be hands off.
Through direct ownership, OEH has a model
where individual property profitability matters
more than brand distribution. An increasingly rare
approach in today’s asset light world. The new
approach cuts right across its previous philosophy
as OEH brings in more cash from its associate
model by signing as many hotels as possible.
Whether the fees from signing-up associates is
worth it to OEH remains to be seen. It will certainly
make it harder for OEH to argue that its properties
are somehow unique and different from all other
luxury hotels. Perhaps Taj should apply to join.
Orient-ExpressaddsassociatesHotelgroupOrient-Expresshaslaunched a new associate business model, designed to increase the spread of hotels available to guests under its brand umbrella.
continued on page 5
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News
Choice on portfolio hunt
Having delivered a record year, there are no
bumps visible in the road ahead, said president
Steve Joyce.
“We executed effectively against our strategic
plans to drive reservations to choicehotels.com,
to grow our market share, to enhance our equity
brands’ performance to better meet the needs of
our guests, to grow and expand into upscale and
urban markets, to increase share of conversion
opportunities to grow distribution brands, and also
to expand internationally,” said Joyce.
Domestic revpar was up 6.2% on the year, with
473 new hotel contracts signed, a 42% increase
on 2011. Ebitda was up 10% to USD203.7m, For
2013, the company expects revpar to advance
between 4.5 and 5.5%.
Choice has moved aggressively to execute major
deals adding portfolio scale. In the US, it grabbed
a portfolio of 46 Jameson Inns; while in the UK,
a deal with independent hotel group Akkeron
converting 611 rooms to Choice brands is the start
of something bigger.
Joyce said the Akkeron deal would grow in scale:
“This agreement is expected to initially result in nine
Akkeron Hotels operating on Choice Hotels franchise
agreements in the UK, representing an almost 25%
increase in our UK hotel portfolio. With 34 properties
in the Akkeron system, we expect to be able to
convert many more as well. This agreement forms
a critical part of Choice Hotel’s growth strategy, to
offer financial support to boost development in key
international markets such as Europe.”
“We continue to be among the top converters
in the industry,” said Joyce. “Our brands, especially
Quality Inn and Econo Lodge continue to attract
strong interest from mid-scale and economy hotel
owners. This is due to them recognizing the value
that we add to their properties through our great
central reservation system and easy to use cloud
based property management system, as well
our complemented franchise services, including
opening an ongoing property support, training
and other programmes designed to maximize their
return on investment.”
The financial attraction of such deals for landlords
was outlined by CFO Dave White. “I would say that
it’s a little more modest than we’ve offered over the
past 12 months, but it does involve a royalty rate
discount and some level of rebate of initial fees. We
can do in the first two years anywhere from 100 to
200 basis points off of the effective royalty rate. On
the Jameson transaction, if you look at that revenue
stream, we are looking at that to be about $2.5
million a year of royalties in the first year.”
Joyce said 2012 delivered 300 conversions, and
30 new builds, and the coming year would provide
a similar mix, albeit at greater overall numbers.
“We view 2012 as a watershed year for us, a lot
of records for the company, a very positive trends
moving into 2013. We think we are working on
the right things to grow this company in a way
that’s appropriate but also exciting.”
HA Perspective: Choice has maintained system
growth during the recession by cutting fees
and swooping on the off casts of rivals such
InterContinental’s Holiday Inn.
The company has engaged in its own brand
housekeeping but has kept many of the properties
within its system by switching into other brands.
So, for example, 40% of the hotels debranded as
Comfort have stayed within the Choice system.
Choice has also benefited from the US
government small business loan initiative SBA and
from the EB-5 visa programme that allows non-
US citizens into the country provided they make a
certainly level of investment.
The company expects conversions to be the
main way it grows this year and probably next. It
anticipates that a renewed transaction market will
help create conversion opportunities.
During the conference call, CEO Joyce made a
point of highlighting the Akkeron deal as reported
above. But compared to the Jameson deal which
added 46 hotels in the US, Akkeron was small beer.
Obtaining scale in international markets is
Choice’s big challenge as it pursues overseas
growth. It is not easy to see what will stop the
domestic opportunities dominating in the years
ahead as they have done historically.
ChoiceHotelsislookingforwardto grabbing more conversion opportunities, to grow its brands both in the US and in Europe.
not enough to drive any top line growth.”
The consultants have called 2013 a “year of
reckoning” when banks must finally accept that
a bounce back in trading and investment interest
will not re-inflate eroded capital values, and save
their loans.
As a result, JLLH says hoteliers need to position
themselves for recovery, considering careful capital
expenditure and improving systems to ensure more
efficient marketing and channel management that
can ultimately reduce the level of commissions
paid to third party customer providers.
But within individual markets, Hubbard still
expects to see winners and losers, and with those
who have an eye on the horizon, improving market
conditions for 2014 and beyond make now a good
time to consider judicious investment. “There are
encouraging signs, and if you can buy into the
market at the right prices, it’s a good time to buy.”
The continuing supply of new, good quality
product into regional markets, with expansion from
chains such as Premier Inn, means that tired, under-
invested product also needs to leave the market.
Says the JLLH report: “There are large numbers
of hotels that simply need to be taken out of the
supply in many locations in the UK provinces,
preferably by demolition but in a limited number
of cases by refurbishment. In some locations
out-dated, under-invested hotels are dragging
down the market and restricting the ability for
developers to build viable new hotels to satisfy the
demand of the growing brands.”
Major brands are acting where they see a lack of
local representation, and they will demand new, or
well refurbished, stock; while their existing marketing
machines and loyalty programmes will help deliver
a baseline of customer demand, whatever the local
market supply level appears to show.
“It’s churn, and you’ve got to recognise that,”
said Hubbard. “It’s all about getting the product
right.” And an improved product mix will only
come about as lenders and landlords come to
realise the true value of the less attractive product
in the market. “Have the various stakeholders
appreciated the right market level?” he asked.
HA Perspective: The under demolished segment
of the UK hotel industry is often talked about but
it is hardly ever actually demolished. Hotels seem
to have an amazing longevity, lingering on despite
all forecasts of their demise.
With tired and under invested hotels refusing to
visit the equivalent of a Swiss clinic to put them out
of their misery, it remains a challenge for the bigger
hotel brands to distinguish themselves, particularly in
the full service midscale and upscale segments.
The brands might be calling for better quality
properties but they are unlikely to see much in
the way of new supply if existing demand is being
sated - albeit not very satisfactorily - with what
is already in the market. The pattern of tired and
under invested hotels being reincarnated each
cycle under new flags seems set to continue.
continued from page 4
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News
Revenues are also improving off the back of a
slew of recent openings in London, where room
rates are almost double those in the UK regions.
Speaking as he presented a positive trading
update for the group, chief executive Andy
Harrison said that there were plenty more
tricks in the company’s repertoire, as it seeks to
deliver an outperformance of 1% revpar growth
against competitors.
Dynamic pricing, which had promised a 1-2%
revpar improvement with a dual price option for
customers, is now in place across much of the
budget hotel chain. “We are still in the process
of rolling it out through our London estate,” said
Harrison. “We have two tier pricing in place in
London, but it’s not as highly automated as it is in
the UK regions.”
“Dynamic pricing really is a journey,” he added.
“The systems work on history, and the more
history that we build, the better we become at
forecasting. At the same time, we are making the
systems more sophisticated, so I still feel there’s
significant benefit from dynamic pricing.”
But, said Harrison, the real prize was from
greater digital intelligence. “The wider context
is the fairly dramatic shift of the business online.
We’ve now got really quite substantial amounts
of data available to us, for example we have web
conversion rates by region, which we can correlate
with local dynamic pricing decisions. We’ve got
web scraping of competitor pricing.
“So over time, we can connect up the data
to allow us to make better pricing decisions.
We are continuing to develop our customer
segmentation based on data-driven insights on
customer behaviour. So I think it’s important to
think of dynamic pricing within the context of this
movement to an online digital business, and we
are in the early stages of that.”
The most recent quarter (the 13 weeks to
29th November) saw revpar up 0.7% overall,
helped by a greater weight of London rooms
which now represent around 20% of sales,
compared with just over 17% a year ago. London
revpar was down 0.9% and occupancy was
fairly flat, while in the regions revpar was down
0.2%, with occupancy down 1.4% and average
room rate up 1.6%.
“We’re absolutely delighted with our London
performance,” said Harrison. “We’ve been able
to add 22% capacity with hardly a movement on
occupancy, and really not a massive movement
on rate.”
PremierInnpowersonWhitbreadexpectssmarteronlinemarketingtocontinuetogiveitsPremierInnbudgethotelsasalesedge over the coming months. And therecentroll-outofitsdynamicpricing model is just the start of aprocessoftakingthebusinessfurther online.
New brand managers, or chief operating officers,
were installed from January, with direct responsibility
for each of Accor’s main hotel brands.
The change will affect half of Accor’s total
estate, located in western and central Europe
and covers more than 210,000 rooms in almost
2,000 hotels. The marketing and management of
eight brands will be arranged individually, with the
promise of getting closer to both consumers and
hotel partners.
The aim is to improve the relevance of brands
to customers, improving brand strength and
coherence. For the almost 400 franchise owners,
there is the promise of a closer dialogue with
Accor teams, and the sharing of best practice to
help improve business performance.
“This organization structure will enable us
to develop first-rate specialists in each market
segment and rely on teams that are entirely focused
on their brands and have perfect knowledge of
both their customers and their competitors”, said
Yann Caillère, president and COO of worldwide
operations. “It is also essential to strengthen
our relations with our partners and at the same
time it will offer new development opportunities
to our employees.”
The new brand managers are all internal
appointees. Christophe Alaux, to date Accor’s
country manager in France, becomes COO of the
Mercure and MGallery brands. Jean-Paul Phillipon,
who since 2007 has been responsible for southern
Europe, has been appointed COO for Novotel and
Suites Novotel.
Christophe Vanswieten, who has managed
several country markets for Accor, becomes COO of
the upscale Pullman brand. And Peter Verhoeven,
who has been country manager for Germany since
2009, will become COO for the Ibis brands – Ibis,
Ibis styles and Ibis budget – across Europe.
Each of the brand managers will be provided
with a brand support team, comprising marketing,
human resources and covering management
control and technical standards. The brand
management will be further divided by regions,
covering Northern Europe, Southern Europe,
Central Europe and France, each of which will
have a regional senior vice president.
The company has also introduced a new focus
on employment equality, the Women at Accor
Generation (WAAG). Chaired by the group’s
chief financial Sophie Stabile, the initiative aims
to provide greater access for women employees,
to management positions and help the company
reach its gender equality initiatives.
“There are more female graduates than male
graduates, and yet women are under-represented
in corporate managerial positions,” said Stabile.
“We know that mixed teams are more innovative
and more efficient. WAAG aims to give women
confidence in their potential, to embolden
them, and to accompany them as they take
this approach.”
HA Perspective: This organisational move by
Accor makes sense given the strategic direction
being taken to focus on brands. But it is hard to
see what significant net benefit will be had.
Accor, like the other global majors, has a
substantial portfolio of brands and the challenge
for management is about keeping clear lines
of distinction between each of them as much
as providing a clear focus to enable growth
at each one.
While Accor’s brand portfolio is among the
least confused in that there is comparatively little
overlap, the lines do get blurry at the edges,
particularly for the conversion brands such as
Mercure and Ibis Styles.
Accor claims it is the first hotel company to
take this approach and it believes that its brands
will be “stronger and more coherent” as a result.
The challenge is making sure this strengthening
of the individual brands does not undermine the
strength and coherence of the group as a whole.
AccortakesbrandedrouteAccor has announced plans to place a greater focus on its brands, with a reorganisation of its European business along brand lines.
continued on page 7
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News
Room rates in London average just under £80,
while in the regions the average is just over £40.
And thanks to a spate of recent openings in the
capital, the London region of the Premier Inn
estate represents 11% of the portfolio, up from
10% a year ago. The company remains on target
to add a total 4,500 new rooms to its portfolio
across the UK in 2012.
Analysts suggested that the weakness of rival
Travelodge must help the business. Harrison
responded: “Travelodge have got some really
quite fundamental financial issues that they are
trying to work through. We are seeing the gap
between our product and their product growing,
really because they haven’t been spending much
money on maintaining it. But it’s also worth just
emphasising that Whitbread is delivering record
guest scores.”
The group’s Costa coffee business appears
to also be benefitting in the UK from a
customer backlash against rival Starbucks,
which was recently lambasted for avoiding UK
corporate taxes.
Harrison said the company remained on target
to deliver to full-year expectations. “What we’ve
said for quite some while is that we would plan for
Premier Inn to outperform the market in terms of
revpar by a percentage point or two, based on the
strength of our brand, distribution, the customer
experience, what we offer the customer. Clearly
we’ve outperformed the midscale and economy
segments much more than that, and we are clearly
benefitting from Travelodge’s financial problems.
Having said that, I think we can probably assume it
is going to take them quite some time to improve
their business.”
“But over the medium term, we’re working
on the assumption that we’ll outperform the
market by a percentage point or two of revpar.”
Harrison promised a further update on the group’s
development milestones, with the forthcoming
end of year results.
HA Perspective: The slump in the London revpar
performance is perhaps surprising in a year when
the Olympics and the Diamond Jubilee were
expected to deliver sales dividends, particularly for
the tourist-friendly economy segment.
But the reality of such events is that the
displacement effect of people putting off
travel as a result of the events impacts more
than the additional travel under taken because
of the events.
Even so, the double digit (11.2% on STR
Global figures) decline in the wider midscale
and economy segments in the 13 weeks to 29th
November in London was surprising. Premier Inn
clearly came off much better than its rivals, no
doubt significantly helped by its new dynamic
pricing regime.
continued from page 6
That’s the verdict of Jones Lang LaSalle Hotels
in their latest London hotel development focus.
London’s previous ability to absorb more supply,
while maintaining occupancy at around 80% will be
tested in the face of few growth drivers for demand.
Supply is continuing to grow, with 4% adding
to room stock this year, and 3% more scheduled
to come on stream in 2014. During 2013, 31 new
hotels are expected to open, adding 4,600 rooms.
“The London hotel market has shown impressive
resilience in recent years with occupancy stable
at around 80%,” said JLLH managing director
Graham Craggs.
“Both domestic and international hotel operators
have been expanding their presence in this core
market, causing supply to increase substantially.
“In our analysis, however, we had found no clear
evidence that a strong supply increase in the city
has had a materially negative impact on the trading
performance of existing hotels. This was even the
case in the City of London and Southwark, where
supply growth has been the highest.”
“With room night demand growth likely to be
limited over the next year, we believe that this
further growth in hotel supply could result in
more challenging market conditions for hoteliers
in the short term. With hotel demand slowing in
2013 due to the absence of major events such
as the Olympics and a sluggish UK and European
economy, we believe that additional supply will
increase the likelihood of a potential flattening or
even a decline in revpar.”
Much of the development activity in the capital
over previous years has been in the budget and
four star sector, which accounted for 71% of
rooms delivered between 2005 and 2012.
Travelodge added more than 4,500 rooms
during that time, with Premier Inn – which has
subsequently targeted London for growth –
adding just over 2,500. Carlson Rezidor also
added more than 2,000 Park Inn and Radisson Blu
rooms across the London area.
At the high end, Melia has recently opened its
first ME in London, and IHG has added a second
InterContinental, in Westminster.
One major shift in recent years has been the
emergence of hotels in the City, the capital’s
financial district. Previously off limits to all but
office developments, the area now boasts growing
retail and residential uses, as well as an influx of
2,900 hotel rooms.
“Revpar in Greater London has seen a strong
growth from 2005 and 2011, posting a cumulative
annual average growth rate of 7.3%, however; this
was primarily driven by a strong rise in room rates
whereas occupancy only increased marginally over
the period,” notes the report. “At the same time,
visitor arrivals, bed nights and airport arrivals (all
London airports) have only shown nominal growth
against a backdrop of greater annual percentage
increase in supply.”
The next two years will see hotels with
unrefurbished facilities suffering most, as properties
compare badly with newly opened stock, say JLLH.
“We have already witnessed this in some areas,
for example in the luxury segment in the area of
Westminster where newly opened/re-opened hotels
have demonstrated strong performance relative to
existing unrefurbished product.”
HA Perspective: Simply looking at supply
numbers without drilling down to the detail of
location and segment can give a distorted view
of a market. London has a shortage of economy
segment hotel rooms so a big increase in supply
should not have the adverse impact that say a rush
of luxury rooms might have.
And here is a puzzle. London has had a rush of
luxury hotel rooms coming online. Leaving aside the
nonsense of big events, what will drive demand at
the top end are business travellers. And here London
may yet again outperform expectations.
US businesses have again got the travel bug and
London is widely used as the entry point to Europe
which, for all the talk of emerging markets,
remains the dominant trading partner of the US.
Whether this is enough to counteract the
ongoing weakness in Europe’s economy remains
to be seen.
London wobblesLondon’shotelmarketisthreatenedwithapost-Olympichangover,asroom supply through the next two yearsislikelytodamageoccupancyand revpar in the short term.
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While London’s attraction as a safe haven for
funds means hotels in the British capital remain
strongly in demand – with prices staying high as
a result – the provinces and regions rarely see an
overseas investor.
Constrained availability of bank lending meant
investment activity was down in 2012, with overall
volumes in the UK reduced by 20% over the
previous year, at just GBP1.8bn.
But prices in London are staying strong, buoyed
by demand from a wide range of international
investors. And despite the challenges of funding,
the UK market remains Europe’s most active and
liquid hotel investment market.
International interest means just 53% of London
four and five star hotels are in domestic ownership.
Asian investors account for 18% of the stock,
while Europeans hold 12% and Middle Eastern
investors 7%. Splitting out owner type, almost half
of the London higher end market is owned by hotel
operators, while high net worth individuals hold
19% and property companies 18%.
“In the regional UK, we have witnessed a
wholly different picture as hoteliers continue to
suffer under weak economic growth, rising costs
and fragile corporate demand,” says the report.
“Receivership sales have increased across the
regional UK and a number of hotels that have
been taken into administration are currently being
offered for sale. It is very likely that some of these
properties will sell at big discounts to the original
investment levels.”
Outside London, the UK provincial market is
dominated by domestic owners, who hold 79% of
the four and five star bed stock, say JLLH. Global
investors hold just 9% while other European
investors own merely 6% and Asian investors 4%.
Reviewing the type of owner, around one third
of the stock is owned by hotel operators, with
investment funds and private equity holding 21%,
and institutional investors 16%. This latter figure
includes banks, some of whom have become
involuntary hotel owners due to business collapse,
and JLLH expects sales during 2013 as they divest
themselves of these properties.
Looking forward, JLLH says there is no reason
why London will not remain one of the top
performing hotel markets in Europe. For a
range of reasons, not always directly to do with
performance but more about capital preservation,
the market will continue to attract attention. And
despite the pre-Olympic rush to open new hotels,
a development pipeline continues to deliver. Says
the report: “If all planned hotel developments are
realised, hotel supply in London will increase by
4% and 3% in 2013 and 2014 respectively.”
There will be a short term decline, however,
in absolute performance as revenues in 2013 fail
to match those from the Olympic hosting year of
2012. No major events are planned, though it is
expected that tourist visitor numbers into London
will continue to rise:
“Occupancy is likely to weaken somewhat
although hoteliers will be keen to maintain ADR
levels as much as possible. The outlook for hotel
performance from 2014 is likely to be more
promising with hotels expected to benefit from an
improvement in economic conditions and further
strengthening in foreign travel, in particular from
developing and emerging economies such as
China and Brazil.”
And it’s not all bad news for provincial markets
in the UK, so long as pricing is realistic. Says
the research paper: “The regional UK will offer
UKmarketintwodistincthalvesThe contrasting fortunes of hotel properties in the British capital, and its hinterland, are laid bare inJonesLangLaSalleHotels’latestHotelIntelligencereportsontheUKmarkets.
The group also managed to add 56,000 members
to its loyalty club, representing a 56% increase
on the year before with an 18% improvement
in membership activations, and 38% growth in
club revenue. SLH now numbers 190,000 club
members, who are delivering 22% of bookings.
During the year, SLH added 63 new hotels and
now represents a portfolio of 529 hotels. Additions
included 13 hotels in the Americas, 17 in Asia
Pacific and 33 in EMEA. New destinations coming
under the SLH umbrella include the Galapagos,
Japan and Nicaragua.
“It’s extraordinary that after over 20 years in
the business we’re still managing to exceed the
work we’ve done the year before, especially when
you consider the current economic climate,” said
Paul Kerr, CEO of SLH. “The secret to our success
is choice. With over 520 hotels in more than 70
countries, and multiple means of booking, we give
the customer the freedom to choose how, where,
when and why.”
“Our club is also a big part of the reason we
have so much to celebrate – this year our club
has accounted for 22% of our bookings, which is
significant compared to last year.” For the current
year, SLH has targeted growth of 50% in club
members advancing to the top of its three tiers
of membership. “This may seem like a lofty goal,”
said Kerr, “but with such a great product we’re
confident it’s achievable.”
SLH also released figures providing an insight
into the growing importance of online visibility
across multiple platforms. The group website,
which lists member hotels by country, received
close to four million visits during 2012, a 19%
increase on the previous year. Reservations booked
through the site rose 26% while the site increased
its share of bookings by 15% against 2011.
Tablet and smartphone statistics also echo the
experience of others in the industry. SLH saw iPad
visits rise 167% to nearly 500,000 while iPhone
visits climbed 132%.
HA Perspective: How has SLH managed to do
so well? One way is to present the numbers in a
favourable light - the net additions to the network
are just three. Even with this reality check, the
revenue growth is still impressive given the
current climate.
But the total revenues are still small compared
to the likes of InterContinental where annual
system revenues are USD20bn plus. Given these
much smaller revenues than the global majors,
SLH should be being squeezed as it lacks the
resources to pump into marketing and advertising.
Somehow, though, SLH is connecting to owners
and guests, giving sufficient value to both groups
without the big spending of the majors. It is only
when the majors start to squeeze groups like SLH
that they will be able to claim that their brand
infrastructure gives them a competitive edge.
Right now, the likes of SLH appear to be making
the running.
SLHbreaksrecordsHotelmarketinggroupSmallLuxuryHotelsoftheWorldhasdeclared 2012 its best year to date. Initstwentyfirstyear,theaffiliateorganisation delivered a 10% increase inroomnightsbooked,to341,000.The added volume translated into USD119m of revenues, a 9% increase on the previous year.
continued on page 9
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IHG now has 83% of its global pipeline in Asia,
and the company is looking to its upscale brands
to accelerate the business in the region.
Simon Scoot, vice president of global brand
marketing for the InterContinental brand, is moving
to Bangkok from the company’s UK office. He will
be joined by Phil Broad, who has been appointed
vice president for food and beverage, across Asia,
Middle East and Africa (AMEA). Food and beverage
is a more integral part of the IHG offering in the
region, compared with other mature markets,
accounting for up to 40% of revenue.
Both will report to the regional CEO Jan
Smits. “Managing a historic, global brand out
of Asia will enable us to continue elevating the
InterContinental brand globally, but in a way that
is also best suited to the growth opportunities in
this region,” said Smits.
“This is not just a first for us, but for the industry
and I am confident that Simon’s expertise in luxury
travel, operations and brand management will give
us a fresh winning edge in the upscale segment.
I am equally excited to have Phil on board and
am looking forward to the changes he will make
in how we develop and conceptualise brand-
defining F&B experiences across our region.”
Broad joins IHG having run his own business
in the UK, and advised numerous brands. Most
recently he has been managing director of
Jumeirah Restaurants, the food and beverage
operation of the Jumeirah group.
Currently, IHG’s portfolio across AMEA extends
to 227 hotels, with a further 115 in the pipeline. In
Greater China, the company has 181 hotels with a
further 160 to come. IHG’s Indigo brand will launch
shortly in the region, joining InterContinental,
Crowne Plaza, Holiday Inn, Holiday Inn Express
and Staybridge. The company is also signing
partners for its dedicated Hualuxe brand in China,
following the brand launch earlier in 2012.
HA Perspective: The difference between Asia and
hotels in either Europe or North America is summed
up neatly in the statistic that up to 40% of revenues
in Asian hotels come from food and beverage.
In the West, f&b is seen more as a cost centre
than a profit centre, as something hotels have to
offer to stay in business. The status of f&b has
been in decline for many years thanks in particular
to its lower margins when compared to the
beds business.
The Asian approach, which has f&b as the
cornerstone to a hotel’s success, requires a different
mindset from hotel managers. It is tweaking areas
like this in operations which will determine the
success or otherwise of particular brands. Much
less important is creating Asia specific brands.
IHGunderlinesAsiafocusInterContinentalhasmade two new senior appointments to its Asia team, underlining the growing focus of the group’s activities in the region.
possibilities especially for more opportunistic
investors that are willing to accept a higher risk.
There is also a sound interest in hotel assets in
comparatively stable locations with year-round
leisure demand, a healthy commercial base and
high barriers to entry, such as Oxford, Cambridge,
Bath and Edinburgh. Whilst regional UK faces
continued short-term operating challenges, the
potential trading recovery as the economy picks
up and corporate and conference demand returns
is attracting strong investor interest for correctly
priced assets.”
HA Perspective: There is a sharp contrast in tone
between what JLLH is saying on this side of the
Atlantic and on the other. In the US, it is talking
about the re-emergence of commercial mortgage
backed securities as a source of hotel financing
and private equity stepping forward as the big
buyers this year.
In the US, JLLH is anticipates that the “great
deleveraging” will start this year with the
USD19bn worth of existing hotel CMBS being
repaid at a faster pace.
Hotel CMBS never really took off in Europe
during the boom and there is little sign of it now.
Unfortunately more conventional debt seems as
hard as ever to come across and has been fingered
by JLLH as a cause of the lack of transactions. This
dearth of debt means 2013 is not likely to see that
many more deals than 2012 even if receiverships
wend their way to market.
The consultants, who handle a substantial
volume of hotel and leisure property sales in the
UK hotel market, say an innovative approach is
key to managing businesses successfully in a tight
market. Those hotels that keep doing the same as
before could well find business falling away. Banks
will step in to take control of such businesses, the
report predicts.
Realistic pricing and renewed investor enthusiasm
helped lift transaction activity during 2012, and this
is set to continue. Buyers will be able to purchase
operationally sound businesses, Christie + Co
predict, as overleveraging forces them to be sold.
Investors and opportunity funds are already taking
a closer look at the market, “as evidenced by their
willingness to pay for sector intelligence,” says the
report. While debt will become easier to find, it will
remain relatively expensive.
The report suggests hotel values in the UK
market are now highly attractive. “Investors and
lenders are finally starting to wake up to the fact
that hotel values are at, or at least close to, the
bottom of the curve.” Banks are prepared to lend
judiciously into the sector, and are now more likely
to consider refinancing debt secured against hotels.
A number of large portfolio sales are promised
to complete during early 2013, adding to the
buoyancy in the hotel investment marketplace.
Christie recorded an 18.4% rise in their
transactions during 2012, with notable deals
including the sale of three De Vere hotels, the
marketing of a portfolio of Travelodges, and the
disposal of the last of the Von Essen portfolio.
HA Perspective: One of the most interesting
tables in Christie + Co’s Business Outlook is the
one detailing the movement in average prices for
hotels. This index does not make pretty reading.
For the last five years its shows decline (in 2010
there was 0.1% growth but this barely counts).
The worst declines were in 2008 and 2009
with drops of 18.4% and 19.5% respectively.
The last couple of years, 2011 and 2012, have
been better but still show declines of 5.1% and
3.1% respectively.
Transaction volumes rose last year but off a low
base level. The same modest rise can probably be
anticipated this year, despite claims that prices are
now being set at realistic levels.
While buyers no longer fear catching a falling
knife, there is still no major catalyst to make them
rush out to buy. We may indeed have hit the floor
as Christie claim but it is not a motivation to buy
if the outlook remains one of bumping along
the bottom.
Innovationthekey,saysChristieInnovationsinproductandmarketingduring2013willhelp set winning hotels apart, while those who fail to adapt could become high profile casualties. That’s the warning from agent Christie + Co in their latestBusinessOutlookreport.
continued from page 8
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In mid and upscale hotels, the Latin American
portfolio led with a 5.0% rise in revenues as room
rates eased up. Europe delivered a healthy 1.3%
rise, with Asia trailing at 1.0%.
But Accor’s large exposure to the budget end
of the constrained European markets showed
through in the figures for its economy hotels.
Europe remained in positive territory with a
0.8% rise in revenues, albeit against far better
comparables elsewhere; Latin America was
up 7.4% while Asia Pacific performance was
4.1% improved.
Southern Europe, however, continues to
decline. Fourth quarter economy sector like for like
revpar in Spain fell 11.8%, and in the period since
the year end has fallen a further 12.4%. While the
latter figure covers a seasonally quieter period, it
is notable that the next weakest European market
during the current period was the Netherlands,
with a 4.9% decline.
However, the red ink being spilt in Spain has
not put Accor off its declared targets for the year,
which will deliver an ebit of between EUR510m
and EUR530m. A roll out of a refreshed Ibis
family of brands has seen the company continue
to invest in its economy sector portfolio. Strong
growth continues, with a focus on emerging
markets in Asia and Latin America, while disposals
continue to move the company towards a more
asset light structure.
HA Perspective: Pain in Spain has been such
a cliche that it hurts to type it out. But it is an
ongoing reality.
The International Monetary Fund in January
forecast GDP growth this year at a negative 1.5%.
This is fractionally worse than the 1.4% slump it
expects was the case in 2012.
Thanks to the Arab Spring, the Costas have
performed remarkably well. This has left the
cities showing the weakest numbers with even
the economy hotel segment, which given its
comparatively undeveloped state many expected
to be the most resilient, exposed.
Most worrying is that the performance declines
are continuing to accelerate. While Northern
Europe does at last seem to have bottomed out, the
South looks like it has significantly further to fall.
Spanish troubles fail to deflect AccorAccor’s European hotels continued to deliver positive performances through the last quarter, despite weaknessintheSpanishmarket.All segments saw growth, with an overallincreaseinlikeforlikerevparof 2.5% in the quarter. Management and franchise fees grew strongly, as the ongoing transformation in Accor’s ownership model start to feed through into results.
The conversions will see Ramada branded
hotels in Bury St Edmunds, Colchester, Kings
Lynn and Peterborough, and a Forestdale hotel
in Bristol, change over to the Quality brand. And
the Ramada Stevenage, along with Forestdales
in Darlington, Ringwood and Winchester will
become Clarion hotels.
While terms have not been revealed, Akkeron’s
Nick Greaves said of the agreement: “It’s a very
long term commitment from both sides.” The
arrangement is expected to grow, as Akkeron
continues with a rapid expansion in the UK market.
“It was clear from us that we wanted to position
the hotels better,” said Greaves. “We’ve spent a
good two years looking at a number of brands.”
“We are delighted to have entered into this
relationship with Akkeron,” said Duncan Berry,
the UK CEO for Choice Hotels Europe. “Akkeron
is a strong hotel operator and an ideal company
for Choice to work with and grow its presence
in the UK. The agreement initially will focus on
rebranding nine hotels with the opportunity
to discuss rebranding further Akkeron hotels
in the future.”
Akkeron was founded in 2008 by former
Citigroup head of lodging and real estate
investment James Brent with the takeover of
Folio Hotels. In late 2010 it paid more than
GBP40m to acquire Forestdale Hotels, and
bought Birmingham-based Butterfly Hotels out of
administration in 2011.
Currently the company has a turnover of around
GBP62m from a portfolio of 34 three and four star
hotels across the UK. To date it has operated six as
Ramada, two as Best Western and the separately
branded Forestdale portfolio numbering 18 hotels,
mainly in southern England. The remainder run as
independents, while Akkeron also lists hotels in
Birmingham, Coventry and Chester as associates.
The company’s target is to build a portfolio of 150
hotels across the UK, across a mix of tenures.
Akkeron managing director Matthew Welbourn
added: “Our relationship with Choice is about
developing a long term strategy of increasing UK
market share for both companies. It is clear that
Choice is prepared to invest in the UK market in
terms of brand and distribution. Alongside the
change in brand comes a significant investment
into the nine hotels to reposition those businesses
along with the conversion to the Clarion Collection
and Quality brands.”
While Choice has around 6,200 hotels
franchised, its dominant market is the US. In
Europe, the company has less than 500 franchised
hotels under its soft four to five star Clarion
brand; three star Quality and two to three star
Comfort Inn. For owners and operators, Choice
offers strong marketing and distribution, and
its proprietary property management system.
The company’s loyalty programme also has 16.5
million members globally.
“This agreement underscores the fact that
Europe is a key focus of growth for Choice, and
in order to substantially increase the size of the
portfolio we have made significant investments
in technology in the European marketplace,” said
Mark Pearce, senior vice president, Choice Hotels
International.
“This includes introducing choiceADVANTAGE,
our cloud-based hotel property management
system in the UK and Europe, which provides
our franchisees with a fully integrated solution
to manage guest interaction from the moment a
reservation is made through check-out and even
after the stay.”
ChoicelinkswithAkkeronChoiceHotelshastakenamajorstepforwardintheUKmarket,signingadealwithAkkeronhotelsthat will grow the presence of its brands by almost 25% immediately. TheagreementwillseeAkkeronrebrand nine hotels around the country, adding 611 rooms under Choice’s Quality and Clarion brands with the promise that the joint venturewilllooktoconvertmore in the future.
continued on page 11
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News
HA Perspective: It is much more interesting what
is not said about this deal than what has been
said. When contacted by Hotel Analyst, Akkeron
wanted to remain tight-lipped about the details.
In the lead up to the collapse of the Real Hotel
Company in 2009, Choice lost first its master
franchisee for Western Europe and then its master
franchisee for the UK. This deal then, looked at
over the past five years, is a case of two steps back
and one step forward.
And even then, how much of a step forward
is it? Akkeron supremo James Brent, even though
his head is currently diverted by Plymouth Argyle
soccer club, will look to realise his investment at
some point. Does he believe best value can be
realised with the assets encumbered with Choice
flags or has he inserted a break clause?
He is certainly likely to have applied the thumb
screws to Choice when it comes to fees. While
Choice offers brand standards, a distribution
system and loyalty scheme, it does not have the
same level of system delivery as market leaders in
the UK such as Accor, InterContinental, Marriott
or Hilton can offer. And this would have come into
play during negotiations.
It will be a tough game for Choice to advance
in the UK and the rest of Europe. The master
franchise concept has delivered in Scandinavia
where it is the region’s largest hotelier with
170 properties. But it failed in the UK and
Western Europe.
The new approach of signing-up hotels directly
looks like a sounder method of building the
business but it is long, laborious and expensive.
The European branded hotel marketplace is
hugely fragmented and a knock-out competition
is long overdue. Choice has to grow significantly
more if it wants to stay in the competition.
continued from page 10
The disposal is a further step in Starwood’s
unpicking of its 2005 purchase of the Societe du
Louvre portfolio, which brought with it Europe’s
second largest hotel group, Louvre.
The Martinez in Cannes, Palais de la
Mediterranee in Nice and Paris properties the
Hotel du Louvre and Concorde Lafayette were sold
as a single package to Qatar Holding. According
to French newspaper Les Echos, the winning
bidders beat Accor, who pitched in partnership
with property company Unibail-Rodamco.
Concurrently with the sale, Starwood
announced the first openings for its new, boutique
hotel brands Baccarat and 1Hotel. Five openings
have been promised within the next 24 months, in
Morocco, Florida and New York.
Hyatt has announced it will convert the 1,700
room Louvre purchase to its brands from April,
and give each a makeover. The Martinez will
become a Grand Hyatt, while the Concorde
Lafayette and Nice properties convert to Hyatt
Regency. The Louvre hotel will remain under its
own name for the immediate future, before being
refurbished and relaunched under the company’s
Andaz banner.
The deal will more than double Hyatt’s presence
in France at a stroke. Peter Norman, senior vice
president, real estate and development, EAME
for Hyatt, said: “There is significant demand for
our brands in Europe, and we are delighted to
expand our representation in these high-barrier-
to-entry markets with a single transaction. These
destinations have consistently high demand –
which gives us a fantastic opportunity to increase
awareness of all Hyatt has to offer.”
“Completing the sale of a majority of our luxury
hotel assets marks an important milestone in the
ongoing monetization of the Groupe Du Louvre
portfolio,” said Barry Sternlicht, Chairman and
CEO of Starwood Capital Group. The company is
retaining the core of Louvre, which today operates
more than 1,090 hotels across brands Première
Classe, Campanile, Kyriad and Golden Tulip.
“We have sold more than USD3bn in assets
since closing, and will continue to maximize the
value of our remaining assets to generate attractive
returns for our investor partners. In the coming
years, we expect to continue our expansion and
renovation of our Louvre Hotels Group portfolio
and to support the growth of Baccarat into new
geographies, with a focus on Asia, expanding its
presence in the hotel and residential arena.”
Flagship for the Baccarat brand will be the
Baccarat Hotel & Residences on 53rd Street, New
York. The 50-storey block will have 114 rooms,
and a further 61 residences ranging in size from
one to five bedrooms. Sales of the residences
will begin this March, with a 2014 completion
planned. The second Baccarat will be opening
in Rabat, Morocco while further locations are
promised in the Middle East and Asia, including
Dubai and Marrakesh.
1Hotels, which sets out its stall as “the first
ground-up luxury eco-design and living hotel
concept”, will launch with a Central Park hotel
in New York and South Beach, Florida hotel and
residences opening in early 2014; the latter will
have 417 hotel rooms, and 167 residences with
one to four bedrooms, and is being created
with a major refit of an existing 1970s building.
These will be followed by a second New York
hotel, at Brooklyn Bridge, opening a year later.
The first international location for 1Hotel will
be in Marrakesh.
“What was once just an idea will soon be a
reality,” said Sternlicht. “With two revolutionary
hotel brands entering the marketplace and five
hotel openings in the next two years, we are
confident that Baccarat and 1Hotels will place
Starwood Capital Group at the very forefront of
the dynamic hospitality industry.”
Starwood originally planned to sell a portfolio of
nine of the Louvre luxury hotels to Middle Eastern
buyer JJW Hotels & Resorts. But the deal fell apart
in 2009 amid claim and counter claim relating
to funding of the USD2.1bn deal. Since then,
the hotels have been marketed on an individual
basis, with earlier sales from the Louvre portfolio
including the Lutetia, which Israeli investor Alrov
paid EUR150m for in 2010; the Hotel de Crillon,
sold for EUR250m to Saudi investors; and the
Concorde Montparnasse, which was bought by
hotelier Didier Ferre in 2011 for EUR87m.
HA Perspective: Starwood Capital’s acquisition
of Societe du Louvre and the champagne maker
Groupe Taittinger for EUR2.1bn back in 2005
looks to be at last paying off. The hold period
is no doubt longer than preferred and this will
impact the returns but compared to some of the
transactions struck in the years following it looks
a smart deal.
What the deal also highlights is the contradiction
between being an opportunistic real estate
player and an investor in a brand and operating
company. As Starwood Capital seeks to build up
its own luxury brands, it appears ironic that it is
simultaneously selling out some of the most iconic
hotels in Europe, handing rival Hyatt an important
leg-up in its own ambitions.
Starwood Capital moves on luxury hotelsStarwood Capital has sold four landmarkFrenchhotelsinadealworth an estimated EUR700m. The hotels,boughtbyQatarHoldingthrough its vehicle Constellation Hotels,aretoberefurbishedandconvertedtoHyattbrands.
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continued on page 13
Every one of the group’s owned hotels is
potentially up for sale at the right price, senior
executives confirmed, as they announced a solid
set of 2012 figures that matched the lower end
of predictions.
Worldwide revpar was up 4.1% in the fourth
quarter, giving a full year figure of 5%. Net income
for the year increased to USD562m, compared
with USD489m for 2011. Fritz van Paasschen, who
admitted he had opened the year with the promise
that 2012 had the potential to surprise on the
upside, had seen a more moderate year with a result
that “was at the low end of our baseline range”.
Speaking of the potential to accelerate property
sales, Starwood’s CFO Vasant Prabhu commented:
“We do believe that we are entering a window of
opportunity here, where there is more liquidity in
the asset market. There is certainly more money
coming in that is willing to offer debt in terms of
structured deals in the US. The biggest buyers we
think will remain the public Reits. And there is a
significant amount of money from the ME and
Asia and, for certain assets, from Latin America.”
“So we are certainly keen to step up the pace of
asset sales. We will be in the market very actively,
all the indications are that it will be a more robust
asset sale market this year, than it was last year.
Our goal is to move as fast as we can down the
track to finishing our asset sale programme.”
Chief executive Fritz van Paasschen said the
company had sold 10 properties through last year,
yielding USD580m. The company had taken a
“rifle shot” approach to sales, identifying buyers
for specific single assets. “I would say that the one
distinction even today with a pick-up in asset sales
- and what was at play before the crisis - is we
still haven’t seen the really frothy multiple property
volumes picking up.”
Everything was potentially up for sale, even
owned properties delivering the best returns in the
portfolio. “If we see demand for particular assets
in markets, we would be sellers. Our goal is to be
an asset light company, and to that end, there
isn’t a property on our list that we would deem
as unsellable.” Van Paasschen said that while
Starwood senior management did not currently
see the spinning off of a Reit as an attractive way
to clear the portfolio, “never say never” and the
idea remained under review.
Van Paasschen made much of a new loyalty
programme link with Delta airlines, announced at
the beginning of February. The Crossover Rewards
tie-up allows customers to transfer benefits from
flying into hotels, and will commence in March.
“In one bold stroke, we’ve made both loyalty
programmes more attractive,” he said. “Getting
more business from existing loyal customers is a
high return marketing spend.”
Several economic factors had put the brakes
on the potential upside during 2012, he said.
Uncertainty in China, due to the administration
change, was now past, as were worries about the
settling of the US fiscal cliff. In the US, occupancies
remain at high levels, and the market is performing
solidly. “Europe remained at a stalemate during
2012, and we’re not expecting much difference
in 2013.” For 2013, van Paasschen said his team
were predicting 5-7% revpar growth. “One month
into the year, the early signs point to the upside,
but it’s early days.”
There was disappointment, too in another key
emerging market: “Latin America is behaving more
like a collection of countries than a region. Mexico
is rebounding; Chile is strong. But Argentina and
Uruguay are down. Excluding those two countries,
the region would have been up 8.5%.”
The year saw Starwood reduce its debt by
USD900m, and issue fresh debt with bonds priced
at 3.125%, “what we believe to be the lowest
rate ever by a U.S. lodging company for publicly
traded 10-year notes.”
A conservative approach would hold a good
cash balance going forward. There might be the
potential for an acquisition, if something suitable
appeared, or for increasing dividends, said Prabhu.
“We have no plans to pay down any more debt.
We will continue to generate cash, as we continue
our transition to asset light over the next three years.”
StarwoodlookstoincreaseassetsalesStarwood is planning to increase its asset sales programme, in the face of increasing investor interest, andaneasingdebtmarket.
The deal saw Al Faisal buy the Grand Hyatt
and Maritim hotels in the German city, through
its hospitality subsidiary Al Rayyan Tourism &
Investment (ARTIC), for an undisclosed sum.
The buys adds to a growing portfolio that last
year bought the Radisson Blu Aqua in Chicago,
and aims to gather further assets “in prime cities
around the world”.
The seller was SEB Asset Management, the
property investment arm of the Swedish bank
which had been holding the hotels in its open-
ended SEB Immoinvest fund.
The Grand Hyatt is a modern, 342 room hotel
designed by Spanish architect Jose Rafael Moneo,
centrally located opposite the city’s philharmonic
concert hall. The Maritim, which opened in 2005
in a 1930s art deco style, is larger still with 505
rooms and a MICE capacity of 5,500.
“We are delighted with the acquisition of
the Grand Hyatt Hotel and the Maritim Hotel in
Berlin,” said sheikh Faisal Bin Qassim Al Thani,
chairman of Al Faisal Holding. “These two iconic
hotels with their unique architectural qualities
and prime, city centre locations reflect our clear
investment focus on high quality assets and bring
us a step closer to our target. We will continue to
build our portfolio locally and internationally and
I look forward to further expansion all around the
world over the coming years.”
ARTIC currently has a portfolio of 25 hotels
complete or under construction, including many
with major brands including Hilton and Marriott
over the door. Its opened estate includes four
hotels in Qatar, three in Egypt, the W hotel in
London and Radisson Blu Aqua in Chicago. The
pipeline includes six more Qatari hotels and three
in Algeria.
News of the deal came hard on the heels of
the announcement of the EUR700m sale of the
French Louvre luxury hotel portfolio, to a Qatari
investment group.
HA Perspective: Middle Eastern money likes
hotels. The security and kudos of a luxury hotel
in a gateway city usually counts for more than
the modest returns such an investment is likely
to generate.
There has been some interest in more modest
hotel investments, such as Travelodge, but it is
hard to see these investors going too far from their
existing stomping grounds.
The really transformational capital looks most
likely to come from the US, with opportunity
funds and REITs looking to seize bargains in more
unloved segments.
Qataris swoop on Berlin duoQatariinvestorAlFaisalHoldinghas purchased two Berlin hotels, in the latest example of Qatari capital coming into European hotel real estate.
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continued from page 12
Following the success of last year’s trip to
China, the Starwood senior team is next planning
a month’s stay in Dubai – after New York, the
city with the most Starwood hotels. Such trips
provided valuable feedback from other cultures,
and positively colour the way Starwood does
business, said van Paasschen.
HA Perspective: Starwood talks up the growth
potential of the hotel industry but it still returned
more cash to shareholders than it invested in
growing its business. It is a strange contradiction.
During the year, the company generated
USD800m in operating cash flow before capex;
USD460m from apartment sales at Bal Harbour;
and over USD500m from asset sales. A total of
over USD1.76bn.
But just USD370m was redeployed into the
business, either as capex or as investment to grow
the pipeline. USD900m of debt was paid down
and USD560m was handed back to shareholders.
Of course, Starwood is not alone in this and
invests as much (or as little) as its rivals. The
question that now arises with economic recovery
now gathering pace is how much more of its own
capital will Starwood be prepared to deploy?
It is undoubtedly correct that Starwood should
be focusing on building its brand and operating
business which means it should not be expected
to significantly step up its investment in real estate
(in fact, the reverse). But now is surely the time
to use its balance sheet muscle to acquire more
brand or operating companies and if not, what
message does it send to its hotel owners that it
believes the best use of its money is to hand it
back to shareholders.
The fallout from lease exit deals agreed during
the last few months was evident in Rezidor’s 2012
results, which saw the company declare a loss.
But alongside the EUR9.4m of termination costs
were further write-downs, related to further lease
exits that appear to be in the pipeline. And there
was more red ink, with write-downs of deferred
tax assets relating to hotel contracts in the UK.
The termination costs related to the conversion
of two lease agreements to franchise agreements
in Sweden, and the exit from seven leases in
France, announced previously. Together these
should add around 0.5% to the ebitda margin
going forward.
Write-downs are analysed on a quarterly
basis, relating to specific contracts, and can be
written up as well as down, noted chief financial
officer Knut Kleiven. “Why did they come to
so much in this quarter? It’s not to say that the
outlook has turned worse, but we have probably
taken a little bit more conservative assessment
of the situation.”
“This helps us to create a platform for further
exits of loss making contracts,” added Kleiven.
Pressed about what such properties might be,
he responded:“We cannot be very specific on
that, we will only announce those when we have
closed a deal with someone. What I can say is that
I would be very disappointed if, at the end of the
year, we haven’t at least announced something in
that direction.”
Among those “conservative” items was a
provision for future losses on one contract in
Germany : “We had the same thing earlier in the
year, for the same contract”, said Kleiven. There
was also a write-down of assets where the cash
flow expectation on leases looks as though it may
fall short – notably on hotels in Benelux and the
UK. “This is something we do, to prepare ourselves
for exits from unprofitable hotels.”
“Would we expect more of this to come? Well,
we should expect that this should be less of an
issue going forward.”
There was also news of progress with Rezidor’s
Park Inn brand. “Park Inn in the past has
underperformed, we have put a lot of effort on
that brand, and see now the traction. We also see
the recognition of the brand increasing, said chief
executive Wolfgang Neumann.
“Park Inn continues to be the most improved
brand in the mid market sector,” according to
independent research. “We can capture additional
market share. This is particularly important in the
UK but also in Germany. There the progress is
above our expectations, and we’re now getting to
track where we would expect these hotels to do
in the market.” Neumann admitted that a modest
amount of rate was being sacrificed, to ensure
growth in market share.
Kleiven explained the details behind a soft
makeover of the brand, which is being rolled
out with Amsterdam the first renewed property.
“We are relaunching Park Inn under the next
gen concept, targeting Park Inn more towards
the expectation of generation X and generation
Y, focusing particularly in key countries as mid-
market is a domestic play and you need to drive
critical mass in key countries forward.”
The write-downs obscured a positive year
of performance, said Neumann. “Despite a
continued fragile global macroeconomic climate,
Rezidor’s like for like revpar continued to show a
positive development with a healthy growth of
4% in the fourth quarter of 2012. For the full year,
revpar grew by 5%, fuelled by a strong growth in
Eastern Europe and the Middle East and Africa.”
Revpar had seen consistent growth in all
quarters “That is certainly better than we expected
at the outset of the year.” The Nordics saw an
improvement in the last quarter of the year.
“The revpar improvement together with the
continued weakening of the euro, resulted in a
revenue increase of 7% in Q4 2012 including a
strong growth of 18% in fee revenue from our
managed and franchised business. Cash flow from
operations, adjusted for the termination costs,
improved by MEUR 12.”
Our commitment to profitable asset-light
growth continues. All of the 4,000 room openings
and 7,100 room signings in 2012 were either
managed or franchised contracts.
HA Perspective: New CEO Wolfgang Neumann
has wasted no time in stamping his mark on
this business. There was some surprise with his
appointment as CDO Puneet Chhatwal had been
tipped for the role given that he had been the
right hand man of previous CEO Kurt Ritter.
But Ritter left a big legacy and a completely
fresh face was necessary to set a course that
would not be seen as Ritter in absentia.
Neumann has taken the opportunity of his
honeymoon period to declare all the bad news,
writing down the difficult leases to leave a business
focused on fee income and a few profitable leases.
(Although these exits would have been in train for
some time, even ahead of Neumann’s arrival as
COO let alone CEO).
His challenge is going to be maintaining the
extraordinary momentum the business had in
emerging markets growth, particularly in Russia and
Africa. One area that might deliver results is Park Inn.
The rebranding of Radisson SAS to Radisson
Blu was so successful that it was adopted by the
mothership Carlson in the US. If a similar feat can
be achieved with Park Inn, Neumann will be well
on his way to creating his own legacy.
Rezidor clears out the cobwebsRezidor is planning further steps to exit unprofitable leases in Europe, asitpreparesarefreshofitsParkInnbrandacrossthecontinent.
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News
A small but growing number of new developments
are featuring a combination of hotel rooms with
apartments for sale, the company revealed during its
fourth quarter results presentation.
Announcing strong results that have enabled
the company to upgrade its 2013 expectations,
chief executive Stephen Holmes commented:
“While the view in the rearview mirror is great,
the view out the windshield is even better.”
Revenues increased 9% in the fourth quarter
to USD1.1bn, as the company delivered a 30%
increase in earnings per share through the year.
The hotels division delivered a 19% revenue uplift
in the fourth quarter, helped by systemwide revpar
increasing 4%, and higher fees. The encouraging
performance led management to modestly
upgrade their 2013 revenue predictions, with the
full year expected to deliver USD4.925 - 5.100 bn.
Holmes told analysts: “The timeshare hotel
mixed-use concept is one that we’ve been trying
to get off the ground for a while. We now have
gotten it launched, and I think you’ll will see more
of this going forward.”
Holmes said there are several properties,
initially in the US, that the company is taking its
mixed use model to. “At Wyndham Vacation
Ownership, our timeshare business, we launched
our movement to an asset-light model with our
WAAM program. Since its inception in 2009,
we modified the program and continue to find
creative ways to transition from capital-intensive
product development. The latest example of that
transformation is the recent acquisition of the
Alex Hotel on 45th Street in New York City by
Guggenheim Partners. We will manage the hotel
while we prepare to convert it to timeshare. As
we are ready for the inventory, it will be delivered
to us, and we will pay for it at that time. We are
looking to expand this relationship to possibly
have a partner purchase some of the existing
unfinished inventory, which is on our balance
sheet, which will then be finished and returned to
us as needed.”
“Another great example of a creative application
of our WAAM model is our recent deal with HPT
for Hotel 71 in Chicago. This 350 room hotel will
undergo a renovation and will be converted into
a Wyndham Grand. A portion of the hotel will be
converted to timeshare and leased to WVO for
timeshare use. Similar to the project in New York,
this deal will give us an entry into an urban market
for tour generation and sales. As we have seen
in San Francisco, Seattle, New Orleans and other
cities, urban locations are highly desired by our
timeshare customers.”
He added: “We recently obtained full ownership
of the 600-room Wyndham Grand Rio Mar Resort
in Puerto Rico, a resort we have managed since
2007. The purchase price was approximately
USD100,000 per key for this ocean-front, upscale
resort. We will leverage our mixed-use model by
converting roughly one third of the existing hotel
rooms into vacation ownership units.”
“So I think that, yes, you’re going to see us do,
hopefully, creative things that can drive both the
size of the Wyndham brand in the US and around
the world but also, get us into opportunities
where we might be able to unlock markets than
we previously have not been able to get into for
both timeshare and for the hotel business. But
we’ll continue to build some of our own product.
As I said, we are thinking about possibly bringing
a partner in to take some of our inventory off our
balance sheet. It’s unfinished. Finish it up and in
the next few years, deliver it back to us.”
The hotel business continues to perform well. An
aggressive push into conversions has added new
WyndhammixesitupWyndhamismixinguptimesharewith hotels, in a bid to improve the company’s performance.
continued on page 15
Staffandmarketingspendup
A third are planning to hire additional team
members, while more than half will increase
marketing spend.
The results of the survey by TravelClick, gather
together the views of more than 600 professionals
in the sector from around the globe. “This data
showing an increase in hiring paints a strong and
vivid picture for 2013,” said Jason Ewell, executive
vice president, business intelligence at TravelClick.
“The fact that hotels are expanding their
marketing budgets tells us that growth through
marketing efforts will be a strong tactic for 2013.”
Of the respondents, 31% expect to be hiring
additional staff this year. The focus on improving
customer service is evident from the fact that
59% of the new hires will be for front desk staff;
a further 37% will be sales manager positions,
while marketing managers will account for
16% of new posts and revenue managers 15%.
There is also a positive outlook on the marketing
front, with plans to increase spending on promotion.
Just under 59% of respondents expect to increase
their marketing budget spend during 2013, with
84% of those planning to grow their investment
by up to 10%. A further 13% expect to increase
marketing spend by 11-20% during the year.
The survey also asked about capital investment,
and discovered that two thirds of respondents
are planning capital improvements in their hotels
during this year.
TravelClick has also recently surveyed the group
booking market in the US, noting that demand
has improved following a temporary weakness
towards the end of 2012. Looking ahead through
2013, its figures show committed occupancy is
up 3.9% compared with a year ago, with ADR up
4.6% and revpar up 12.8%.
“Based on our data, it appears that decline
in group was temporary,” said Tim Hart of
TravelClick. “However, we expect that some
hoteliers may be incentivising group bookings by
keeping average daily rate relatively flat. As we
head into the New Year, there are opportunities
for hoteliers to increase both ADR and occupancy
in this critical segment.”
Forward commitments in the leisure sector
stand 8.9% up on the year previously, while
business travel bookings are ahead by 9.4%
compared with the situation in early 2012. In
both sectors, TravelClick says rates are ahead with
business travel rates up 6.7% and leisure room
rates ahead by 4.8%.
HA Perspective: This is a genuine piece of
good news, although it does appear to be heavily
influenced by the rebound in North America rather
than any green shoots in Europe.
There is currently a huge divide in sentiment
between North America and Europe. Hoteliers in
North America are more optimistic than they have
been since 2007. By contrast, Europe remains
mired in gloom.
With this renewed vim in the US and ongoing
vigour in Asia, Europe risks being left on the
sidelines of activity. And there seem to be no
catalysts for changing this outlook on the horizon.
Hotelmanagersarelookingtoincreasespendingonstaffingandmarketingin2013,accordingto a new poll of industry opinion.
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News
stock, notably in the USA. Said Holmes: “We have
also recently completed several notable transaction
with hotel REITs and ownership companies that
bring conversion of properties into our brands. An
added benefit is that we will be managing some
of these properties, expanding our presence in this
arena. Deals with HPT, FelCor and Colony bring
hotels into our Wyndham Hotels and Resort brand,
as well as Hawthorne Suites by Wyndham and the
Baymont Inn & Suites. In addition, adding Wyndham
branded hotels in Boston, Houston, New Orleans,
Philadelphia, San Diego and other great markets
make these relationships an important source of
targeted geographically attractive growth.”
The company finished the year with 7,340 hotels
representing 627,400 rooms. This signed pipeline
will add a further 110,700 rooms of which 59% are
already under construction. However, Wyndham
remains wedded to the US market, with just 59%
of the pipeline destined for international markets.
However, chief financial officer Tom Conforti
warned the effect of rapid growth would be
negative on performance figures. “As we grow
internationally, specifically in countries such as
China, there will be a dilutive impact on global
revpar. We opened 66,000 new rooms in 2012,
our highest level in ten years, and terminations
were down 5%, resulting in a 2% net increase in
system size.”
Putting more detail on the outlook, Conforti
added: “We expect another strong year. At the
guidance midpoint, we expect revenue growth of
approximately 9% and adjusted EBITDA growth
of approximately 10%. Regarding hotel drivers,
we expect revpar growth of 4% to 6% and room
growth of 2% to 4%.
HA Perspective: Wyndham’s numbers
pleased Wall Street, beating profit and revenue
expectations, and the share price was up 5% or so
on the day of the results.
The excitement around Wyndham though is
more about the revival, or at least prospects for
the revival, of its timeshare business. Hotels are
less than a quarter of Wyndham’s EBITDA. The
timeshare exchange business is 30% and timeshare
sales is 46%. It is not surprising then that timeshare
is what has stock market investors excited.
That is not to say that the hotel business is
insignificant or unattractive. Wyndham describes
itself as being uniquely positioned because of its
high free cash flow and diversified revenue streams.
With over 600,000 rooms it remains a global
giant. But it is heavily skewed towards the US and
towards the long suffering budget and economy
segments in that country.
Given that the synergies with timeshare
are primarily in the upscale arena, the value
of retaining its economy and budget portfolio
looks questionable.
There is a big restructuring task ahead in the
US in these segments and it might be that this
is best carried out in the hands of private equity.
With Motel 6 and La Quinta already under its belt,
perhaps Blackstone could be persuaded to take on
another challenge.
continued from page 14
The deal with Irish Bank Resolution Corporation
will see the original group holding company,
QHotels Group Ltd, placed into administration and
replaced with a new holding vehicle, to be named
QHotels Holdings Ltd.
In return, the hotelier gets a three year agreement
to stabilise its finances. A statement from the
company talks of the new deal “enabling the
QHotels group to continue its successful programme
of business development and investment”.
The company has promised that the change
will make no practical difference to suppliers,
staff or customers and business continues as
normal. Managing director Michael Purtill and
finance director Ian Goulding remain. But there
is a new arrival at the top, with outsider Tim
Scoble appointed chairman of the new holding
company. Scoble, an accountant by profession,
was until last year chief executive of Guoman
Hotels Management.
Back in April, 2012 the company put four of
its more leisure-oriented hotels up for sale, in
the expectation of raising between GBP55m and
GBP60m. Christie & Co were instructed to dispose
of Aldwark Manor Hotel, near York, Park Royal
Hotel in Stretton, near Warrington, the 100 room
Bridgewood Manor Hotel in Chatham, Kent, and
Stratford Manor Hotel in Stratford on Avon.
Hotel Analyst understands that all but one of
these have been withdrawn from sale, as part
of the refinancing agreement. Just Bridgewood
Manor remains officially on the market.
QHotels was formed in 2003 as Quintessential,
and since then has grown to encompass 21 four
star hotels across the UK. The major growth in the
chain was a 2006 deal which saw the company
take over Kent-based Marston Hotels, adding 12
locations in a GBP180m deal and propelling the
company to its present size. The group lacks a
London location in its portfolio, which it owns and
manages directly.
Among recent investments was a GBP1.7m
spend on IT facilities in 2011 which included
the provision of broadband internet throughout
the portfolio. This ensures guests have unlimited
internet access, and also provides corporates
renting conference space with the facility of ultra
fast connectivity, with dedicated bandwidth and
speeds of up to 90Mbps.
The company is majority owned by private
equity investor Alchemy Partners, along with
founder Michael Purtil, who previously owned
Paramount Hotels.
HA Perspective: IBRC, has been forged out of
the ashes of Anglo Irish and the Irish Nationwide
Building Society, is clearly taking a punt that it can
recover the most value by hanging on to these
assets and trading them out.
Industry gossip suggests that as much as £300m
was offered for the senior debt in this deal, leaving
IBRC suffering a 20% haircut (this is a guestimate
based on rumours). Given that Ireland’s National
Asset Management Agency has taken on nearly
all its loans with discounts above 50%, it does not
appear an unreasonable offer.
During the 1990s, many senior lenders exited the
market at deep discounts and enabled a multitude
of opportunity funds to clean up. This time around
there appears to be determination not to let this
happen again. But there is risk that value is going
to be destroyed by hanging on too long.
There is a question as to whether this portfolio
of provincial hotels can trade back to health given
the difficult economy. The 1990s recession was
followed by a burst of above trend growth for a
couple of years. The road ahead today looks set
for several more years of below trend growth
at best.
New owners of the portfolio are probably
better placed to restructure the business in the
radical way that looks necessary. Hanging on,
presumably by throwing some significant incentive
to management, looks a gamble.
QHotelsrefinancinggambleBritishhotelierQHotelshasagreeda refinancing that will enable it to continue to trade and invest in the group’s portfolio of hotels in the provinces.
The month of December 2012
The 12 months to December 2012
©This is copyright material. Strictly no photocopying or scanning – including sharing within your organisationwww.hotelanalyst.co.ukVolume 8 Issue 616
Sector stats
Rooms Department Headlines Business Mix – Rooms Business Mix – Rate£ Departmental Revenues Departmental Revenues Mix % IBFC
Average Room Tours/ Tours/ Total Total Month Region Occupancy Room Rate Revpar Commercial Conference Groups Leisure Other Commercial Conference Groups Leisure Other Rooms Catering Other Revpar Rooms Catering Other Revpar IBFC % IBFCpar
Current year December 2012 London 74.6% £125.42 £93.54 42.9% 4.4% 12.4% 27.4% 12.8% £146.00 £136.27 £80.17 £127.17 £92.94 £2,998 £1,257 £164 £4,418 67.8% 28.4% 3.7% 100.0% 48.0% £2,120
December 2012 Provincial 59.2% £66.55 £39.39 42.5% 11.2% 6.5% 31.5% 8.3% £70.09 £68.89 £51.55 £68.02 £51.70 £1,239 £1,388 £285 £2,912 42.6% 47.7% 9.8% 100.0% 27.0% £786
December 2012 All 64.7% £90.70 £58.65 42.7% 8.4% 9.0% 29.8% 10.2% £101.42 £83.30 £67.84 £90.34 £73.06 £1,857 £1,342 £242 £3,442 54.0% 39.0% 7.0% 100.0% 36.5% £1,255
Month Region Points % % Points Points Points Points Points % % % % % % % % % Points Points Points Points Points %
Year on year change December 2012 London 1.0 -2.2% -0.8% (4.2) (0.1) 0.9 2.2 1.2 -0.6% -0.5% -1.2% -0.5% -4.9% -2.0% 2.1% -5.2% -1.0% (0.7) 0.9 (0.2) – 0.7 0.4%
December 2012 Provincial 1.9 1.0% 4.3% (0.6) 0.2 (0.3) 1.5 (0.8) 0.4% -0.1% 0.4% 0.6% 5.8% 4.2% 3.3% -0.5% 3.3% 0.4 0.0 (0.4) – 0.6 5.7%
December 2012 All 1.5 -1.4% 1.0% (2.1) 0.2 0.1 1.8 0.0 -2.2% -1.2% 0.2% 0.1% 1.0% 0.5% 2.9% -1.6% 1.3% (0.4) 0.6 (0.2) – 0.4 2.4%
Average Room Tours/ Tours/ Total Total Month Region Occupancy Room Rate Revpar Commercial Conference Groups Leisure Other Commercial Conference Groups Leisure Other Rooms Catering Other Revpar Rooms Catering Other Revpar IBFC % IBFCpar
Last year December 2011 London 73.6% £128.22 £94.31 47.1% 4.4% 11.6% 25.2% 11.7% £146.84 £136.92 £81.14 £127.75 £97.68 £3,058 £1,230 £173 £4,462 68.5% 27.6% 3.9% 100.0% 47.3% £2,110
December 2011 Provincial 57.3% £65.89 £37.77 43.1% 11.0% 6.8% 30.0% 9.1% £69.80 £69.00 £51.36 £67.60 £48.88 £1,189 £1,343 £286 £2,819 42.2% 47.7% 10.2% 100.0% 26.4% £744
December 2011 All 63.2% £91.97 £58.08 44.8% 8.2% 8.8% 28.0% 10.2% £103.70 £84.27 £67.70 £90.27 £72.33 £1,848 £1,303 £246 £3,398 54.4% 38.4% 7.3% 100.0% 36.1% £1,226
Rooms Department Headlines Business Mix – Rooms Business Mix – Rate£ Departmental Revenues Departmental Revenues Mix % IBFC
Average Room Tours/ Tours/ Total Total Month Region Occupancy Room Rate Revpar Commercial Conference Groups Leisure Other Commercial Conference Groups Leisure Other Rooms Catering Other Revpar Rooms Catering Other Revpar IBFC % IBFCpar
Current year YTD London 81.1% £138.50 £112.37 47.4% 6.7% 11.8% 23.0% 11.1% £152.97 £162.76 £104.25 £135.11 £103.90 £41,252 £13,034 £2,282 £56,568 72.9% 23.0% 4.0% 100.0% 48.8% £27,633
YTD Provincial 70.3% £69.72 £49.05 45.9% 11.1% 8.5% 27.3% 7.1% £72.28 £79.59 £52.72 £70.17 £56.33 £17,934 £12,571 £3,680 £34,184 52.5% 36.8% 10.8% 100.0% 28.4% £9,712
YTD All 74.1% £96.25 £71.36 46.5% 9.4% 9.8% 25.6% 8.6% £104.00 £102.52 £76.73 £92.60 £79.85 £26,130 £12,734 £3,189 £42,052 62.1% 30.3% 7.6% 100.0% 38.1% £16,012
Month Region Points % % Points Points Points Points Points % % % % % % % % % Points Points Points Points Points %
Year on year change YTD London (0.2) 3.7% 3.4% (0.6) 0.8 (1.7) 1.1 0.4 1.5% 6.0% 15.9% 2.0% 2.2% 3.7% 4.2% 10.1% 4.1% (0.3) 0.0 0.2 – 0.5 5.2%
YTD Provincial 0.6 0.5% 1.4% (1.4) (0.1) (0.5) 1.1 1.0 0.6% 1.2% 2.9% 0.2% -1.8% 1.5% 0.5% 0.4% 1.0% 0.3 (0.2) (0.1) – (0.8) -1.8%
YTD All 0.3 2.0% 2.4% (1.1) 0.3 (1.0) 1.1 0.7 1.2% 5.1% 9.5% 1.0% -1.0% 2.6% 1.8% 2.8% 2.4% 0.1 (0.2) 0.0 – (0.1) 2.2%
Average Room Tours/ Tours/ Total Total Month Region Occupancy Room Rate Revpar Commercial Conference Groups Leisure Other Commercial Conference Groups Leisure Other Rooms Catering Other Revpar Rooms Catering Other Revpar IBFC % IBFCpar
Last year YTD London 81.4% £133.51 £108.66 48.0% 5.9% 13.5% 21.9% 10.7% £150.77 £153.60 £89.97 £132.43 £101.68 £39,782 £12,507 £2,073 £54,362 73.2% 23.0% 3.8% 100.0% 48.3% £26,263
YTD Provincial 69.7% £69.39 £48.38 47.4% 11.2% 9.1% 26.2% 6.1% £71.82 £78.68 £51.22 £70.00 £57.37 £17,664 £12,504 £3,664 £33,832 52.2% 37.0% 10.8% 100.0% 29.2% £9,890
YTD All 73.8% £94.35 £69.67 47.6% 9.1% 10.8% 24.5% 7.9% £102.79 £97.55 £70.11 £91.67 £80.65 £25,459 £12,505 £3,103 £41,068 62.0% 30.4% 7.6% 100.0% 38.1% £15,661
Olympic effect helps London
The started well for hoteliers in the capital, with
the first five months of the year delivering well. The
country’s Diamond Jubilee celebrations knocked
June to a 9.3% profit decline, followed by a 3.1%
decrease in July, ahead of the Olympics. Then,
following the festivities, the post-event hangover
began in November with profits down 5.6%.
However, the wins through the busy Olympic
period offset the weaker months overall, leaving
London hotels with a 4.9% increase in profit per
room over the year, lifting the figure to GBP75.27.
“Despite the last few years being one of the
toughest trading periods in recent history, hotels in
London have recorded yet another year of profit
growth on the back of increases in 2010 (+13.9%)
and 2011 (+4.7%). For London hoteliers it has been
a breathless charge through 2012 and it now seems
like a lifetime ago that the industry was discussing
how bad the Olympic Games may be for business.
How different our perspective is now, as, taking
nothing away from the ability of London’s hotel
managers, the Olympics are the saviour of the year
and we will take only positive memories away from
2012,” said Jonathan Langston, managing director
of TRI Hospitality Consulting.
The year finished in positive territory, with
HotelsinLondonwouldprobablyhaveachievedayear-on-yearprofitincrease without the incoming Olympics, but in the event the spectacle helped improve profits in August by 90%. This offset an unpredictable few months around the event, when demand remained uncertain.
©This is copyright material. Strictly no photocopying or scanning – including sharing within your organisation www.hotelanalyst.co.uk Volume 8 Issue 6 17
Sector stats
Rooms Department Headlines Business Mix – Rooms Business Mix – Rate£ Departmental Revenues Departmental Revenues Mix % IBFC
Average Room Tours/ Tours/ Total Total Month Region Occupancy Room Rate Revpar Commercial Conference Groups Leisure Other Commercial Conference Groups Leisure Other Rooms Catering Other Revpar Rooms Catering Other Revpar IBFC % IBFCpar
Current year December 2012 London 74.6% £125.42 £93.54 42.9% 4.4% 12.4% 27.4% 12.8% £146.00 £136.27 £80.17 £127.17 £92.94 £2,998 £1,257 £164 £4,418 67.8% 28.4% 3.7% 100.0% 48.0% £2,120
December 2012 Provincial 59.2% £66.55 £39.39 42.5% 11.2% 6.5% 31.5% 8.3% £70.09 £68.89 £51.55 £68.02 £51.70 £1,239 £1,388 £285 £2,912 42.6% 47.7% 9.8% 100.0% 27.0% £786
December 2012 All 64.7% £90.70 £58.65 42.7% 8.4% 9.0% 29.8% 10.2% £101.42 £83.30 £67.84 £90.34 £73.06 £1,857 £1,342 £242 £3,442 54.0% 39.0% 7.0% 100.0% 36.5% £1,255
Month Region Points % % Points Points Points Points Points % % % % % % % % % Points Points Points Points Points %
Year on year change December 2012 London 1.0 -2.2% -0.8% (4.2) (0.1) 0.9 2.2 1.2 -0.6% -0.5% -1.2% -0.5% -4.9% -2.0% 2.1% -5.2% -1.0% (0.7) 0.9 (0.2) – 0.7 0.4%
December 2012 Provincial 1.9 1.0% 4.3% (0.6) 0.2 (0.3) 1.5 (0.8) 0.4% -0.1% 0.4% 0.6% 5.8% 4.2% 3.3% -0.5% 3.3% 0.4 0.0 (0.4) – 0.6 5.7%
December 2012 All 1.5 -1.4% 1.0% (2.1) 0.2 0.1 1.8 0.0 -2.2% -1.2% 0.2% 0.1% 1.0% 0.5% 2.9% -1.6% 1.3% (0.4) 0.6 (0.2) – 0.4 2.4%
Average Room Tours/ Tours/ Total Total Month Region Occupancy Room Rate Revpar Commercial Conference Groups Leisure Other Commercial Conference Groups Leisure Other Rooms Catering Other Revpar Rooms Catering Other Revpar IBFC % IBFCpar
Last year December 2011 London 73.6% £128.22 £94.31 47.1% 4.4% 11.6% 25.2% 11.7% £146.84 £136.92 £81.14 £127.75 £97.68 £3,058 £1,230 £173 £4,462 68.5% 27.6% 3.9% 100.0% 47.3% £2,110
December 2011 Provincial 57.3% £65.89 £37.77 43.1% 11.0% 6.8% 30.0% 9.1% £69.80 £69.00 £51.36 £67.60 £48.88 £1,189 £1,343 £286 £2,819 42.2% 47.7% 10.2% 100.0% 26.4% £744
December 2011 All 63.2% £91.97 £58.08 44.8% 8.2% 8.8% 28.0% 10.2% £103.70 £84.27 £67.70 £90.27 £72.33 £1,848 £1,303 £246 £3,398 54.4% 38.4% 7.3% 100.0% 36.1% £1,226
Rooms Department Headlines Business Mix – Rooms Business Mix – Rate£ Departmental Revenues Departmental Revenues Mix % IBFC
Average Room Tours/ Tours/ Total Total Month Region Occupancy Room Rate Revpar Commercial Conference Groups Leisure Other Commercial Conference Groups Leisure Other Rooms Catering Other Revpar Rooms Catering Other Revpar IBFC % IBFCpar
Current year YTD London 81.1% £138.50 £112.37 47.4% 6.7% 11.8% 23.0% 11.1% £152.97 £162.76 £104.25 £135.11 £103.90 £41,252 £13,034 £2,282 £56,568 72.9% 23.0% 4.0% 100.0% 48.8% £27,633
YTD Provincial 70.3% £69.72 £49.05 45.9% 11.1% 8.5% 27.3% 7.1% £72.28 £79.59 £52.72 £70.17 £56.33 £17,934 £12,571 £3,680 £34,184 52.5% 36.8% 10.8% 100.0% 28.4% £9,712
YTD All 74.1% £96.25 £71.36 46.5% 9.4% 9.8% 25.6% 8.6% £104.00 £102.52 £76.73 £92.60 £79.85 £26,130 £12,734 £3,189 £42,052 62.1% 30.3% 7.6% 100.0% 38.1% £16,012
Month Region Points % % Points Points Points Points Points % % % % % % % % % Points Points Points Points Points %
Year on year change YTD London (0.2) 3.7% 3.4% (0.6) 0.8 (1.7) 1.1 0.4 1.5% 6.0% 15.9% 2.0% 2.2% 3.7% 4.2% 10.1% 4.1% (0.3) 0.0 0.2 – 0.5 5.2%
YTD Provincial 0.6 0.5% 1.4% (1.4) (0.1) (0.5) 1.1 1.0 0.6% 1.2% 2.9% 0.2% -1.8% 1.5% 0.5% 0.4% 1.0% 0.3 (0.2) (0.1) – (0.8) -1.8%
YTD All 0.3 2.0% 2.4% (1.1) 0.3 (1.0) 1.1 0.7 1.2% 5.1% 9.5% 1.0% -1.0% 2.6% 1.8% 2.8% 2.4% 0.1 (0.2) 0.0 – (0.1) 2.2%
Average Room Tours/ Tours/ Total Total Month Region Occupancy Room Rate Revpar Commercial Conference Groups Leisure Other Commercial Conference Groups Leisure Other Rooms Catering Other Revpar Rooms Catering Other Revpar IBFC % IBFCpar
Last year YTD London 81.4% £133.51 £108.66 48.0% 5.9% 13.5% 21.9% 10.7% £150.77 £153.60 £89.97 £132.43 £101.68 £39,782 £12,507 £2,073 £54,362 73.2% 23.0% 3.8% 100.0% 48.3% £26,263
YTD Provincial 69.7% £69.39 £48.38 47.4% 11.2% 9.1% 26.2% 6.1% £71.82 £78.68 £51.22 £70.00 £57.37 £17,664 £12,504 £3,664 £33,832 52.2% 37.0% 10.8% 100.0% 29.2% £9,890
YTD All 73.8% £94.35 £69.67 47.6% 9.1% 10.8% 24.5% 7.9% £102.79 £97.55 £70.11 £91.67 £80.65 £25,459 £12,505 £3,103 £41,068 62.0% 30.4% 7.6% 100.0% 38.1% £15,661
December profits up 1.6%. This was against a
revpar drop of 0.8%, as room rates fell 2.2%; with
the improvement possible only due to a 5.4%
increase in ancillary revenues including food and
beverage sales.
In the provinces, 2012 was a fifth year of profit
decline, as an improvement in revenues was offset
by rising operating costs. Revpar grew 1.4%,
compared with 1.5% in 2011, the third year in a
row that revpar has shown a modest improvement.
But the uplift was wiped out by a 0.2% increase
in payroll costs as the minimum wage rose 1.8%;
the wage bill typically accounts for 32.4% of
total revenue. As a result, profits declined 1.9%,
slightly less bad than the 3.2% registered in 2011.
Other costs were also increasing, with travel agent
commissions creeping up 6.8% on a per room let
basis, now representing 7.3% of rooms revenue.
“Whilst our RevPAR-focussed competitors will
be telling you that hoteliers in the provinces have
enjoyed yet another year of growth, the truth is
that the overall provincial profit picture remains
negative. After five years of decline, the keep calm
and carry on mentality is wearing a bit thin, and
it is clear that the impact of the fundamental shift
in the operating structure of provincial hotels will
continue be played out as the market anticipates
further casualties in 2013,” said Langston.
Either side of the line on the graph, Liverpool
was a winner with a 3.7% increase in profit per
room; and hotels in Basingstoke benefitted from
the Farnborough air show in July, which led to an
overall 6.4% increase in profit per room, and a
41.3% year on year increase in profit. Losers in
the battle of the provincial cities were Newcastle,
where profits per room fell 10.4%, Nottingham at
12.7%, Bath, Manchester and Leeds.
©This is copyright material. Strictly no photocopying or scanning – including sharing within your organisationwww.hotelanalyst.co.ukVolume 8 Issue 618
Sector stats
DublinandWarsaw2012’swinners
Tourism figures in Warsaw held up well through
the summer, though the last quarter saw a 14.9%
decline in profit per room as demand plummeted.
Elsewhere, it was Dublin that delivered
outstanding profit growth, with a solid increase in
European chain hotels – performance report
Source: TRI Hospitality Consulting
visitors to the city, throughout the year. Hoteliers
in the city achieved a 15.1% increase in revpar
through the year, with occupancy up 5.4% and
average room rate rising by 7.3% to EUR132.79.
Dublin’s story has been one of consistent
improvement from the bad days of 2009. The
2012 revpar was up 30% on the 2010 figure,
based on occupancy up close to 15% to 80.8%
in 2012. Profit per available room has risen over
three years to EUR58.21, a 48.3% increase.
“The impact of the economic downturn on
commercial development in Ireland has prevented
significant further additions to bedroom
supply, which has remained relatively stable at
approximately 19,000 bedrooms since 2010. The
static supply and increases in demand, created
by a boost in tourism as a result of the 9% VAT
rate on the hospitality and tourism sectors, have
The month of December 2012 Twelve months to December 2012
Occ % ARR RevPAR Payroll % GOP PAR Occ % ARR RevPAR Payroll % GOP PAR
66.9 149.46 99.94 37.9 43.89 Amsterdam 78.9 175.18 138.14 29.8 77.72
25.9 126.58 32.78 75.5 -19.23 Athens 48.6 155.27 75.45 53.5 8.04
68.3 100.69 68.76 38.6 33.50 Berlin 76.6 111.67 85.56 27.8 47.37
72.2 128.05 92.42 33.7 64.29 Dublin 80.8 132.79 107.35 34.8 58.21
75.6 177.02 133.73 25.9 95.44 London 81.8 196.00 160.40 23.1 109.34
53.9 104.54 56.31 49.9 11.30 Madrid 65.6 119.91 78.67 40.6 30.88
60.8 163.99 99.64 25.6 72.38 Moscow 71.8 158.48 113.78 26.3 77.62
64.0 79.78 51.07 25.7 28.39 Prague 68.4 83.37 57.03 25.2 33.97
73.8 146.09 107.83 33.0 57.07 Vienna 72.1 139.79 100.73 38.3 42.22
63.4 79.58 50.48 31.7 26.07 Warsaw 74.3 108.19 80.37 23.9 55.66
The month of December 2011 Twelve months to December 2011
Occ% ARR RevPAR Payroll % GOP PAR Occ % ARR RevPAR Payroll % GOP PAR
63.5 151.28 96.05 37.9 42.26 Amsterdam 77.9 176.52 137.52 29.9 79.44
30.4 139.23 42.26 67.5 -17.27 Athens 55.8 166.49 92.85 48.7 22.80
65.7 99.08 65.13 28.6 34.06 Berlin 74.7 105.08 78.43 27.4 41.73
62.6 123.13 77.03 35.8 54.11 Dublin 75.4 123.73 93.29 37.4 47.46
75.1 178.96 134.36 25.4 94.34 London 81.4 188.53 153.47 23.4 102.77
57.0 113.05 64.42 42.6 21.39 Madrid 67.0 121.25 81.28 39.7 34.74
61.4 157.52 96.72 24.2 71.78 Moscow 67.9 156.07 106.02 26.4 70.21
62.4 75.25 46.93 25.3 23.93 Prague 68.0 77.98 53.04 25.9 29.54
74.9 145.05 108.58 32.1 65.84 Vienna 70.7 135.40 95.70 39.2 40.43
55.8 94.14 52.53 28.4 33.14 Warsaw 72.5 93.07 67.50 25.5 45.36
Movement for the month of December Movement for the twelve months to December
Occ Change ARR Change RevPAR Change Payroll Change GOP PAR Change Occ Change ARR Change RevPAR Change Payroll Change GOP PAR Change
3.4 -1.2% 4.0% 0.0 3.9% Amsterdam 1.0 -0.8% 0.5% 0.1 -2.2%
-4.5 -9.1% -22.4% -8.0 -11.3% Athens -7.2 -6.7% -18.7% -4.8 -64.7%
2.6 1.6% 5.6% -10.0 -1.6% Berlin 2.0 6.3% 9.1% -0.4 13.5%
9.6 4.0% 20.0% 2.1 18.8% Dublin 5.4 7.3% 15.1% 2.6 22.7%
0.5 -1.1% -0.5% -0.6 1.2% London 0.4 4.0% 4.5% 0.3 6.4%
-3.1 -7.5% -12.6% -7.3 -47.2% Madrid -1.4 -1.1% -3.2% -0.9 -11.1%
-0.6 4.1% 3.0% -1.5 0.8% Moscow 3.9 1.5% 7.3% 0.1 10.6%
1.6 6.0% 8.8% -0.5 18.6% Prague 0.4 6.9% 7.5% 0.7 15.0%
-1.1 0.7% -0.7% -0.9 -13.3% Vienna 1.4 3.2% 5.3% 0.9 4.4%
7.6 -15.5% -3.9% -3.4 -21.3% Warsaw 1.8 16.2% 19.1% 1.6 22.7%
contributed to Dublin’s strong performance
growth in 2012,” said David Bailey, deputy
managing director at TRI Hospitality Consulting.
Elsewhere in Europe, London registered another
year of profit increase, assisted by the city hosting
the Olympics and Paralympics. Four and five star
hotels in the city improved profit per available
room by 6.4%, helped by a strong August.
The Greek capital Athens saw contrasting
fortunes, with year on year profit per available
room down to a low of EUR8.04 as the sector was
hit by a series of problems, including the American
and Australian governments warning travellers
not to visit the country. In addition, the hard-
pressed Greeks also cut their holiday plans, hitting
domestic business in Athens. The Greek capital
saw occupancy fall 7.2% over the year, with a low
of just 25.9% in December.
The European soccer championships helpedhotelsinWarsawdeliverabumper year of profits, offsetting weakwinterbusinessdemandtoregister a 22.7% increase in profits overtheyear.Thankstodemandfrom visiting teams and fans, hotels inthePolishcapitalwereabletocharge an average EUR253.55 room rate, up 161.3% in June.
The International Hotel Investment Forum (IHIF) brings the hotel industry together in a first-class location to deliver the very best educational programmes, outstanding networking opportunities and the most senior level professionals from all areas of the industry. It has firmly established it’s reputation as the leading and most important meeting place in the world for the industry.
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Analysis
HoteldevelopmentaliveandwellLuton Airport, the 157-bed ME London on the
Strand operated by Melia; the 36-bed Wellesley
Hotel on Knightsbridge, which is operated by
Bespoke Hotels.
In 2012 Travelodge opened a new hotel in
Bethnal Green, London. This will be followed by
a further 11 new UK hotels in 2013 in locations
including Aylesbury, Cambridge, Liverpool,
London (3), Manchester and Kings Lynn.
Also in 2012 Premier Inn also opened a new
hotel in Glastonbury. However, a further 10 new
openings are scheduled in the first quarter of
2013, including new hotels in Bicester, Ipswich,
Lincoln, Shrewsbury and Weymouth.
New hotel development is occurring and the signs are that it is actually pickinguppace.
New products are also making their London
debuts, such as the Citizen M Hotel and the Z
Hotel in Soho with others planned elsewhere in the
UK. Outside of London there is also life with new
Indigo Hotels opening in Edinburgh, Birmingham,
Glasgow, Newcastle and Liverpool, with others
in the pipeline. Tune Hotels and Motel One both
opened new hotels in Edinburgh while a 202-bed
‘eco’ Orchard Hotel opened at the University
of Nottingham.
Colliers has recently received extremely strong
interest in a multi-hotel development in central
Edinburgh and new hotels planned in Birmingham,
Reading, east London, and Southampton. Expect
work to start soon on new hotels at Edinburgh
Airport and Bristol Airport too.
All of this during a ‘double-dip’ recession, a
credit squeeze and a eurozone crisis – surely there
can be few sectors that have fared as well in recent
years. In addition to the above there are also the
one-offs, such as St. George’s Park in Burton,
which is the home of the new National Football
Centre and a project with which we have been
closely involved over the last two and a half years.
A new combined core brand comprising a Hilton
and Hampton Hotel has just opened its doors in a
soft opening which will see this property quickly
become a new benchmark for quality mixed brand
hotel buildings.
So, new hotel development is occurring and the
signs are that it is actually picking up pace. One
piece of advice though, make sure you get the
fundamentals right and don’t cut corners.
Justin Lanzkron – Associate Director,
Colliers International
Colliers’ Justin Lanzkron says new hotels are being built
If a site is a poor location or market, or if the
developer over paid for the site then this will
lead to trouble. Similarly, a half-baked business
plan or no coherent feasibility study will lead to
disaster. Many other developers and investors fail
to understand that the hotel business is actually
two businesses – a real estate business and an
operating business. It is necessary to get both right
in order to be successful.
A well-bought property will not work without
a strong operator. Similarly the best operator in
the world will not be able to rescue a project if
developer over paid for the real estate transaction
or if it was poorly financed.
It was, perhaps, the private equity model and
the way in which they calculate their returns that
drove the urgency to overload hotels (and other
real estate classes) with excessive amounts of
debt. The banks contributed to this by forgetting
that they were lenders and involving themselves
in all areas of the capital stack – often on the
same deal.
The excessive over-emphasis on the time value of
money, financial engineering and the theoretically
higher returns available to highly leveraged equity,
led to many financing structures that would simply
not survive even a mild downturn.
Fundamentals were ignored and the logic
of location and market were swept aside in the
search for ‘modelled’ returns. This led to a belief
that a 5.0% return in the provinces was as good as
a 5.0% return in central London. Unprecedented
levels of deals were done and an increased
separation of the real estate decision from the
operating model occurred.
Banksarelendingtonewdevelopments,and investors are showing interest again.
Things unravelled very quickly, a slump in
operating profits collapsed the whole capital
stack, values plummeted and the fair weather
participants fled. The hangover was a bad
one. Fortunately, just like any hangover, things
do gradually improve, and there is new hotel
development occurring in the UK right now.
Banks are lending to new developments, and
investors are showing interest again. The projects
that we see happening are the solid sensible
projects that should always find funding, the ‘no-
brainers’ and the steady well-founded projects
that tick all of the boxes.
Examples of the new wave of development in
2012 included the 256-room InterContinental
Hotel , London – Westminster at St James’s Park,
the re-opening of the Café Royale in Regent Street,
London, the 630-bed Premier Inn London Gatwick
Airport, the 188-bed Hampton by Hilton London
Inrecentyearsyoumighthavebeengiven the impression that new hotel development is a thing of the past. Themarketviewappearstobethatwith no debt and little investor appetite, these factors conspired to all but stop new hotel development. This has been viewed as the accepted new norm.
The days of freely available debt for new
development often including multiple hotel
projects and in some case without planning are
long gone. From a superficial stand point it would
appear that new hotel development has for the
time being run its course.
However, the reality is somewhat different. It
is true that the hotel development ‘reality’, as we
came to know it during a few over-heated years,
is gone but hotels are being built and developers
are starting to show strong interest in the sector
again. We are now in a new reality – or to be more
accurate, a return to the old reality that we had all
known and been comfortable with for many years
before the ‘bubble’.
The new reality is actually the old reality re-
invented. In the current market it is all about
development based on sound fundamentals. A
successful new hotel development today needs
very much the same thing as it has always
needed: a well-located site at a sensible price, a
knowledgeable investor with a robust business
plan, an experienced hotel developer, a strong and
capable operator that is right for the product to be
developed, a sensible level of debt, a realistic and
planned exit strategy.
It is amazing how little has actually changed. Fail
on one or more of these fundamentals, however,
and the problems soon mount up and the cycle
will get you every time.
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Hoteldevelopmentaliveandwell
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The development of the Web as a consumer
research and booking tool greatly increased the
amount of information available to guests.
Guests can now compare features and prices
for themselves on Online Travel Agency (OTA)
websites such as Expedia, Travelocity and Priceline.
com, and can find in-depth product information,
photos and often even videos on hotel chains and
hotel property websites. However such sources
suffer from a credibility problem.
How can the customer be sure that the marketing
focused information presented on such sites, which
was after all designed to sell, was trustworthy?
Social media – sites where users could interact
and exchange information with other users –
helped address this issue. On social networks
such as Facebook, customer can actively solicit the
opinion of their expanded, almost global, network
of friends as to where they should stay. On social
sharing sites such as YouTube and Flickr they can see
candid photos and videos of real guest experiences.
But it is user generated reviews, on dedicated
review sites such as TripAdvisor or Yelp, or as
Hotel Review & Social Media Monitoring Tool Benchmark 2012
The growth of social media sites where users can interact and exchange information on hotels with other users has had a dramatic impact on hotel distribution and customer decision making. It has become critical for hotel companies to review these sites and manage the reputation of their brand.
This report produced by Peter O’Connor, editor-at-large of Hotel Analyst Distribution and Technology and Professor of Information Systems at Essec Business School France, looks at the social media revolution, the impact this has had on the hospitality industry and reviews the social media management tools on the market.
This report is for:
• Anyone who needs to be up to speed on the key players and major trends in the market for social media management software in hotels.
• Hotel marketing professionals who need to select and review software platforms to manage the social media of a hotel brand.
• Analysts looking at hotel brand information on social media sites.
supplemental content on Online Travel Agency
websites such as Expedia or Booking.com that
is currently having the most dramatic effect on
hotel distribution.
On these sites customers guests can see both
quantitative and qualitative peer evaluations of
practically each and every property practically at
a glance, providing them with an unparalleled
and highly credible insight into the quality of
each product.
User generated reviews have shown to be highly
credible and to have a high degree of influence
on the customer’s decision making process. Thus
managing its reputation on both online review
sites – and on the wider social media space – has
become a critical issue for hotels.
A wide variety of these tools exist to help
manage this process, ranging in scope from free
tools that monitor a single social media to highly
comprehensive tools that cast their monitoring
net over most of the web, using sentiment
analysis to estimate consumer reaction to recent
brand initiatives.
But while these generalist tools are useful, few
actively monitor travel specific user review site or OTA
sites that feature user reviews – content that is critically
important for hotels as it influences the customer at
the point of purchase. Hotel industry specific tools do
exist, but these tend to be highly variable in terms of
features, system coverage and even price!
This report examines the broad range of online
reputation management systems available for use
by hotels. Having explained the significance of
the management process for hotels, and detailed
where reviews of hotel products can be found,
an overview of how best to manage your social
media presence is given.
A comprehensive list of the core, essential,
desirable and advanced features of online
reputation management systems is examined,
and the hotel specific systems available in today’s
marketplace are benchmarked.
Lastly indications are given as to pricing models,
and contact details for each of the systems
evaluated is provided.
Price: £1500 + VAT
Hotel Review & Social Media Monitoring Tool Benchmark 2012
Hotel Review & Social Media Monitoring Tool Benchmark 2012 is available now
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IntroductionThere is a whole generation of hotel executives,
advisors from across the investment community as
well as consultants and agents who hold it to be
an article of faith that RevPAR is the critical metric
for hotel performance. Accordingly, we need to
be sure that the calculation and use of RevPAR
is effective.
In this note we will review the concept of
RevPAR, identify some of the problems in its
calculation and use and make suggestions to
improve the potency of the concept.
TheconceptofRevPAREveryone knows that RevPAR is the rooms revenue
generated by each hotel room. It is the measure of
the efficiency of historic hotel rooms demand. It is
the measure of the effectiveness of the relationship
between rooms supply and rooms demand. To be
effective, RevPAR requires robust and consistent
definitions of room nights available, room nights
sold, room occupancy and rooms turnover. The
problem is that there is no consensus on any of
these, although it is encouraging that the current
edition of the Uniform System of Accounts for
the Lodging Industry (USALI), published under
the auspices of the American Hotel and Lodging
Association, has tightened its definitions a little.
It now defines room nights available as, “the
difference between the total number of rooms
in the hotel and rooms that are not available
for transient rental, including seasonally closed
rooms (where the entire hotel is closed for 30
or more consecutive days), rooms designated
for permanent house use, and extended closed
rooms.” It falls short of accepting that the
investment in the hotel has been made in the
physical number of bedrooms in the hotel. Thus,
excluding rooms from the calculation of room
nights available for whatever purpose does not
RevPAR:usesandabusesdiminish the investment in the hotel, but it does
diminish the return on investment that the hotel
can achieve.
The USALI defines the rooms occupancy ratio as,
“calculated by dividing the rooms occupied by the
rooms available...excluding complimentary rooms”.
If the physical number of rooms in the hotel have
been reduced for whatever managerial purpose
then the room occupancy statistic is inflated.
Rooms turnover is the measure of total rooms
demand value and is the turnover generated
from renting rooms, net of sales tax. For hotel
companies there is a host of common practices
for the allocation of hotel turnover to rooms
each of which produce different levels of
rooms turnover and each of which is calculated
without transparency.
This problem is a consequence of hotels being
conceived and managed as vertically integrated
businesses in which hotel companies do not
disclose the basis of internal transfer pricing or the
criteria on which hotel packages are disaggregated.
The issue is material. In Europe alone, 1.6 million
chain rooms, 79% of all chain rooms, are in hotels
heavy with non-rooms facilities, that is, around
half of hotel turnover can be generated in the
non-rooms businesses. The congruent demand
for these hotels is packaged conference demand
and packaged leisure demand. Bed and breakfast,
dinner bed and breakfast, short break packages
and all inclusive packages are commonplace in
these hotels. Often packaged hotel demand is
offered at tactical discounted rates to boost short-
term demand volume, but there is no transparency
about which items are discounted and there is
no transparency about how the packages are
disaggregated. In our experience, and typical of
vertically integrated businesses, a high allocation
is made to the higher operating margin business.
In the case of the hotel, the rooms business, which
invariably achieves operating margins of more
than 50%, also benefits from the high allocation
from packages. Consequently, the low margin
non-rooms businesses, which invariably achieve
operating margins no better than low double
digits and sometimes negative margins receive
only a low allocation from packaged demand. It
is the way of vertically integrated businesses that
they contain some components that are winners
and some that are losers in reported performance.
In hotels, the rooms business wins and the non-
rooms businesses lose.
Similar practices occur in economies with a
lower sales tax on rooms than on the non-rooms
businesses to limit the total sales tax burden. In
brief, we are left with the conclusion that the
allocation of hotel turnover to rooms is a matter
of opinion designed to boost reported RevPAR.
It is not available for those outside of any hotel
company to know the basis on which hotel
packages are disaggregated or the consistency
with which internal transfer pricing is applied. In
our long experience we have yet to come across
an instance in which reported rooms turnover has
been depressed to boost non-rooms turnover.
But that is not all. There are other foggy issues
about the calculation of rooms turnover. The
accounting for loyalty programme points used to
buy room nights is one. There is no transparency
about the working of the programmes and
virtually no visibility about the net cash rooms
turnover earned by hotels when rooms are
booked with loyalty points. Further, franchise
and management contracts in which fees paid
to the franchisor or operator may be calculated
as a proportion of rooms turnover, may also be
inconsistent from one brand to another and even
within brands.
Another significant issue is the accounting for
rooms turnover bought from online and offline
travel agencies. It is not uncommon for room
rate to be charged cum agent commission,
which boosts RevPAR only for commission to the
agencies to be charged as a cost further down the
profit & loss account. To its credit, TRI Hospitality
Consulting, in its HotStats calculations has
trumpeted GOP PAR, Gross Operating Profit per
Available Room as a means to capture more of the
additional costs of buying rooms turnover.
In hotels, and in particular, hotel chains, the
calculation of RevPAR and its components is
more complex and diverse than many of its
users acknowledge. The low visibility of the
disaggregation of hotel packages, of the allocation
to rooms turnover from the use of loyalty points
to rent bedrooms and of the reported rooms
turnover from travel agencies has the effect of
boosting reported RevPAR at the expense of the
rarely reported non-rooms performance. It also
means that investment and other industry analysts
can make no reasonable assumptions about the
criteria for reported rooms turnover and reported
RevPAR of hotel companies or more generally of
the supply and demand performance of the hotels.
ReportedRevPARintheUKProvincesOne example of a significant problem that reported
RevPAR has not identified and not resolved has
been the progressive decline in UK Provincial
hotel performance over the past decade, at
least. Two trends have been sustained. First, non-
rooms demand has been the main problem. The
Is revpar a reliable metric for hotel performance, ask Paul Slattery and Ian Gamse of Otus & Co
Analysis
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continued on page 24
progressive growth in high street restaurant and
pub brands has taken much of the local demand
from Provincial hotel restaurants and bars. The
growth in health club chains has taken health
club membership from Provincial hotels, reduced
hotel health clubs to an amenity for hotel room
customers and reduced hotel health clubs to a
cost centre rather than a profit centre.
Similarly, hotel based conference and meetings
demand in Provincial hotels has endured long-term
decline. Service businesses, the biggest bookers of
hotel based conferences and meetings in Provincial
hotels, have grown and developed their own
national office infrastructure with meeting rooms.
Progressively, companies have been holding their
conferences and meetings on their own premises.
Over the years, packaged conference demand
into hotels has been replaced by transient rooms
demand leaving the hotels with underperforming
conference facilities as well as underperforming
restaurants, bars and health clubs.
The second trend that has been sustained is the
growth in UK Provincial rooms supply despite on-
going collapse in non-rooms demand. Over the
years, the demand developments have impacted
most severely on extended feature, full feature
and classic feature hotels, the non-rooms heavy
categories. Since 2000 hotel chains have added
35,000 of these rooms in the UK Provinces, a
CAGR of 2%, however over the last five years,
during the period of economic trauma, chains
have accelerated the rate of supply growth to an
annual average of 3% adding 19,000 of these
categories of room. It is not only the supply of non-
rooms heavy categories that has grown. Over the
past five years, non-rooms light hotels, the limited
feature and rooms only categories, predominantly
at the economy and budget levels in the Provinces
have added 21,000 rooms as well.
One question is why has there been such a
growth in chain supply when there has been
a palpable decline in hotel performance in the
Provinces. An available answer is that the focus
on reported RevPAR has not only ignored the
decline in non-rooms business, but also, from our
experience and analysis, the reported RevPAR,
although sluggish and on a downward trend has
been inflated at the expense of already declining
non-rooms turnover.
Throughout the period, the increasing rate
of addition to non-rooms heavy chain supply
has been supported by feasibility studies, which
must have illustrated that reported RevPAR would
recover and grow sufficiently for investment in
new non-rooms heavy hotels to be made. Even
more problematic is that hotel owners, lenders
and hotel chains have been seduced by such
feasibility studies and inflated RevPAR analyses
and paid insufficient attention to the downward
rebasing of non-rooms demand.
A parallel problem has emerged mainly for
the global majors such as Hilton Worldwide,
InterContinental Hotels Group and Marriott
international with significant portfolios of
extended feature, full feature and classic feature
hotels held under management contract in the
UK Provinces. The pattern of sluggish reported
RevPAR and progressive decline in non-rooms
performance is the basis of our doubts that the
management companies earn much in incentive
payments on these management contracts. We
cannot be more explicit in this conclusion since
this is yet another area in which the chains lack
transparency. To make sense of events and their
implications for the hotel business in the context
of low visibility of hotel company reporting we
need to explore connections between events. For
instance, at the time of writing the real estate of
a portfolio of 42 Marriott hotels, mainly in the
UK Provinces, is reported to be close to sale for
about £640 million. In 2007, the same portfolio
was acquired for about £1.2 billion. The sluggish
reported RevPAR performance as well as the
sharply declining non-rooms demand in the UK
Provinces can be considered as factors in the
halfing of the real estate value in this portfolio in
only five years.
TheuseofreportedRevPARinEuropeThere are regular examples to illustrate that
in many European countries reported RevPAR
has been decoupled from the supply profile
of hotels. One recent example illustrates the
point. In its publication, “European Cities Hotel
Forecast 2013”, PWC concluded that, “in 2013
Paris is expected to top the ‘fullest’ ranking
with occupancy at 79.1%; the ‘most expensive’
with ADR at €267 and the city with the ‘highest
RevPAR’, at €211.” The PWC analysis is based on
occupancy, rate and RevPAR data from STR Global.
In contrast, PWC expects that London will achieve
room occupancy of 77.1%, ADR of €174 and
RevPAR of €134, 36% less than Paris.
The problem with this city-wide analysis is the
implicit assumption of a like-for-like comparison.
Were it the case that the hotel supply profiles
of London and Paris were identical and that the
sample sets for which STR provides data were
fully representative of the cities’ hotel markets,
the conclusions would be valid. However, the STR
data is fundamentally flawed in this respect, as
the hotels supplying raw data are a self-selecting
group – those that wish to use STR’s services – not
a random sample nor even a set selected to reflect
the overall market profile. It is not of course clear
how PWC and STR define the “market” in each
city – is it, for example, the total hotel market,
the chain hotel market, the international chains;
does it include the suburbs and, if so, by what
definition; does it include all types of hotel and all
market levels or only a subset; and so on.
What is very clear to us is that there is no good
reason to assume that the hotel supply profiles
of Paris and London are identical – or even that
they have a close resemblance. Let’s take a look
at the profiles of chain hotel supply, as reflected
in the Otus Hotel Brand Database. (Numbers as at
December 2011.)
London includes 88,900 chain rooms, 15,500
more than Paris. Table 1 profiles the supply of
chain room stock in Paris:
While table 2 does the same for London:
Analysis
Table 1: Paris Chain Room Supply Profile
Urban Airport Suburban Total
Luxury 2% 2%
Up market 18% 3% 2% 23%
Mid-market 18% 2% 11% 31%
Economy 14% 3% 14% 30%
Budget 4% 1% 9% 13%
Total 56% 9% 35% 100%
Source: Otus Analytics
Table 2: London Chain Room Supply Profile
Urban Airport Suburban Total
Luxury 5% 0% 5%
Up market 38% 7% 1% 46%
Mid-market 14% 4% 3% 22%
Economy 15% 4% 7% 26%
Budget 1% 0% 0% 1%
Total 72% 16% 12% 100%
Source: Otus Analytics
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Some differences are immediately apparent.
First, 72% of London’s chain rooms are in urban
areas, against 56% in Paris. And nearly 60% of
London’s urban rooms – 38,000 in absolute terms
– are up-market or luxury. Paris has only 15,000 up-
market or luxury rooms in urban locations. Even if
we accept that in some circumstances that these
Parisian up-market and luxury hotels may be able
to achieve higher occupancy and rates than their
London counterparts, it tells us nothing about the
performance of the bulk of Parisian hotels. On the
contrary, other things being equal we would expect
the rooms turnover of the overall Paris market to be
dragged down by its large suburban exposure to
budget and economy segments.
We suspect therefore that the STR data set is
not actually representative of Paris as a whole, that
PWC’s conclusions are therefore based on false
premises and that their poor statistical analysis is
best described as naive.
Other examples of naive analysis include
Spain where the disseminators of RevPAR do
not differentiate between interior Spain and the
Costas. Spain is the largest economy in Europe
for hotel chains accounting for 398,000 rooms,
of which roughly two-thirds are in the Costas and
one-third in the interior. The Costas are different.
Most of the chain presence is in national chains
that rely on tour operators to generate demand
for their hotels. The global major chains have only
a token presence, 7,500 rooms, in the Spanish
Costas. But the tour operators price the holidays
by person rather than by room and are focussed
more on bed occupancy than on room occupancy.
A material proportion of total room stock on the
Costas closes for some months each year and
progressively the hotels are moving to all-inclusive
holidays, which further distort any hope of realistic
RevPAR data.
WhatcanbedonetomakereportedRevPARmoreeffectiveIn the calculation of RevPAR we propose the
following:
• Roomnightsavailableshouldbebasedonthe
total rooms in the hotel with no reductions.
• Room nights available should include every
night of the year.
• Roomoccupancy%should includeonlyroom
nights sold and should exclude complimentary
and internal hotel company use.
• Internal transfer pricing policies should be
declared and applied consistently.
• Thebasisofcalculationofrateallocationfrom
loyalty program points payment for room nights
should be declared and applied consistently.
• Travel agency commissions should be netted
from room rates paid.
• Non-rooms turnover should be reported as a
separate category.
In the use of RevPAR we propose the following:
• RealisethatRevPARcanbeapowerfulmeasure,
but realise that it is no panacea.
• BelessnaiveabouttheuseofRevPAR.
Summary and conclusionsAt least in prolonged periods of economic trauma
it is necessary to have credible and robust data
about hotel performance. Sadly, we do not have
that. The low visibility of the basis on which
the 900+ hotel brands in Europe calculate the
components of RevPAR and the poor analysis of
the hotel business by users of RevPAR as their
prime metric has caused havoc among the owners
of hotel equity and their lenders.
At Otus we have illustrated very regularly
over the years that in the absence of credible
and robust data from hotel companies, mature
analysis of the dynamics of hotel supply and of the
dynamics of economic structure are necessary to
make sense of the dynamics of the hotel business.
Indeed, on many occasions over the past five years
we have illustrated that hotel chain room supply
has increased despite the poor performance of the
European economies and that this is prolonging
the underperformance of the hotel business.
The hotel business now needs to improve its
credibility with all sections of the investment
community. We are clear that the hotel business
will not achieve this if we continue with insecure
calculation of the components of RevPAR and
naive analyses of complex hotel business problems
by its users.
Paul Slattery, Otus & Co Ltd
Ian Gamse, Otus & Co Ltd
continued from page 23
Analysis
www.Burba.com
Hot.E HA_Ad.indd 1 2/7/2013 2:43:35 PM
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Analysis
Whilst many protagonists described the hospitality
market of 2012 as “uncertain”, the phrase
being used for 2013 seems to be “modest”.
The uncertainty of the “fiscal cliff” in the US
(which inevitably effects all world markets) has
been replaced by a “fiscal ceiling”. Therefore,
whilst there will be growth, this growth will be
patchy in terms of both geography and type. The
challenge for hoteliers will be to build, manage
and differentiate their brands across all market
segments and territories and, in doing so, to
understand what customers are looking for to
build all-important brand and consumer loyalty.
The power of the brandBrand awareness remains a key influence on
the hotel sector and whilst there are numerous
challenges facing global hotel operators, these
operators remain best placed to face those
challenges. This said, as in so many walks of life,
some of the best ideas come at a micro level but
are then translated to businesses operating at
the macro level. This can be seen in the context
of the global hotel operators currently striving
to promote brands with their own, unique
independent identities. Established brands will
always have a place, but in today’s fast paced
world staying “current” is vital. A well-defined
brand, satisfying customer expectations in terms of
their experience is the cornerstone of the franchise
system, therefore hotel franchising remains critical
to growth and geographical expansion in the
hotel sector.
As we are all becoming increasingly aware,
the volume and richness of data and information
now available to consumers (and to the operators
themselves) is huge. Traditional media (such as
print) is no longer as important, digital platforms
like Expedia, TripAdvisor, Google Hotel finder and
a plethora of alternative sites are where consumers
GamechangersinthehospitalityindustryHoteliers need to embrace changes in the market, says DLA Piper’s Matthew Duncombe
obtain information. Add to this consumers’
requirement for mobile bookings (according to
statistics, just over 27% of mobile web browsing is
related to travel websites) and the rise and rise of
social media platforms disseminating information
(“likes”; “dislikes” and twiterrati followers), it is
easy to come to the conclusion that innovation
will be the focus for the hotel industry in the
coming years.
Technology:challengesandopportunitiesFew would disagree that the technological
revolution has become embedded in the travel
industry, but is the industry really taking the
bull by the horns? The majority of global hotel
operators are engaged in programmes to decipher
real time information and experiences and to
define their particular brands with consumers.
“Crowdsourcing” – the use of a defined crowd
to provide input into a particular problem – is
a methodology which the likes of IHG and
Starwood Hotels have already utilised, and in
the case of the latter was instrumental in helping
them develop what has become their successful
Aloft brand. However, the speed and scope of
technological change is a difficult quandary for
the hotel industry.
There was a time when technology in a hotel
was better than that at home. This trend has
somewhat reversed lately due to the domestic
spread of technology, such as smartphones and
tablets, tied with the significant infrastructure
costs for hotels to “get connected” and offer
guests the experience they now take for granted.
The prospect of seeing guest tablets in rooms
now seems possible, and research suggests there
are potential benefits for operators, where data
suggests guests are more likely to use services
such as room service or treatments if the services
are made available electronically via tablet app or
similar. Other services, such as f&b or more retail
related experiences (click & collect stores already
exist in city centres) could equally be offered
through partnerships with other brands that
resonate with the hotel. In the context of brands
and customer loyalty, these additional services
offer themselves as potential “micro brands”
that could be a differentiator for the operator.
The possibilities for operators seem vast and
it will be interesting to see how operators seize
the initiative.
Whilst adoption of technological change is seen
as “a must”, the legal implications of doing so are
numerous. The bigger players have the resources
to invest in new media platforms, mobile booking
systems, data harvesting and wifi access but they
will have to be cognizant of the e-commerce,
privacy and data protection, licensing, security,
cookies and numerous advertising issues
associated with it.*
Cyber security and cyber crime are extremely
topical issues which the hotel industry must
grapple with, given guests’ demand for
constant uninterrupted internet access. Equally
mobile booking systems create a conundrum
in the context that the virtual world is a multi-
jurisdictional world and thus it can be difficult to
establish what e-commerce rules and regulations
should be complied with (the country of origin
compliance issue under the EU’s e-commerce
directive); multi-jurisdictional terms and conditions
are feasible, but can be complicated. The use of
social media is fraught with risks and liabilities and
can operate both for and against the interests of
an operator, but generally the rewards outweigh
the risks if utilised appropriately.
The sustainability agendaInnovation can also be seen in the context of
eco-friendly policies. Today’s consumers are
increasingly environmentally aware and expect
the brands they affiliate with to be likewise
engaged. The combination of regulatory pressures
and guest requirements for sustainable and
value for money options make the hotel industry
extremely challenging.
Whilst not specifically targeted at the hospitality
industry, governments around the world are using
both a carrot and stick approach on sustainability,
with incentives such as tax credits and deductions
for sustainable development on the one hand
and schemes like the UK’s Carbon Reduction
Commitment (CRC) energy efficiency scheme
(which commits operators of both managed
and franchised hotels to be responsible for the
carbon emissions of those hotels) on the other.
Implementing sustainability policies across a
portfolio of hotels is particularly demanding for
hotel operators and achieving the right blend of
eco-friendly brand, with commercial realities and
local regulatory compliance is no mean feat.
•DLAPiper’sseriesof“ShiftingLandscapes”
articles (www.dlapipershiftinglandscapes.com)
provides an overview of the challenges
organisations face in the context of new
and emerging IT and digital technologies.
Matthew Duncombe is an associate
in DLA Piper’s Intellectual Property
and Technology group
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The Insider
Featured businessesAccor 6,10,11Akkeron 5,10,11Al Faisal Holding 12Alchemy Partners 15Amazon 3American Express 2Bank of America Merrill Lynch 3Barclays 1,3Bespoke 20Blackstone 3,15Carlson 13Carlson Rezidor 7CBRE 1Choice 5,10,11Christie + Co 9Colliers 20Colony 15Constellation Hotels 11Crownway Capital 1De Vere 3DLA Piper 26Ernst & Young 1Expedia 26Felcor 15Google 26Guestinvest 3Hilton 20,23Hogan Lovell 28HPT 14,15Hyatt 11IBRC 15InterContinental 7,8,9,20,23Jameson Inns 5Jones Lang LaSalle 4,5,7,8,9Leading Hotels of the World 4Lloyds 3Marriott 4,5,23Maybourne 1,3Melia 7,20Michels & Taylor 3Mint 1,3Motel One 20Orient-Express 4Otus & Co 22,23,24PhocusWright 2Powerscourt Group 3QHotels 15PWC 23,24Qatar Holding 11Rezidor 13Rocco Forte Hotels 28Royal Bank of Canada 3Savills 28SEB Asset Management 12Small Luxury Hotels of the World 8Starboard 28Starbucks 3,7Starwood 12,13Starwood Capital 1,3,11STR Global 7,23,24Taj 4Travelodge 7,9,20TravelClick 14Travelzoo 2Tripadvisor 26TRI Hospitality Consulting 2,16,17,18,22,28Tune Hotels 20Unibail-Rodamco 11VisitBritain 2Von Essen 9Wells Fargo Bank 3Whitbread 6,7Wyndham 14,15
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Forte’s profit challenge
What’sinaname?
Tough times for Rocco Forte, whose chain of
luxury hotels recently declared its fourth year of
losses in a row. Despite declaring hotel profits up
11% and a turnover that rose to GBP185.4m,
Forte’s eponymous company still filed a pre-
tax loss of GBP9.3m in the year to April 2012,
a modest improvement on the previous year’s
GBP9.6m loss.
Despite the numbers, the company is pressing
ahead. Forte recently opened its first health and
wellness resort in Sicily; and it appears to have
agreed a truce with the landlord at the Augustine
in Prague. Reports in the Financial Times in
November suggested Rocco Forte Hotels was to
be given 30 days’ notice to quit; today, the Forte
website is still taking bookings.
Building a strong brand is all very well, but what
if it upsets the guests? Many customers prefer to
feel their choice is something distinct, local and
different; it’s a challenge not just for the major
groups growing boutique hotel chains, but for
hostel operators too.
Paul Callingham of Starboard Hotels, who is
currently working on his second UK hostel project,
in Liverpool, is wrestling with the issues of a brand
name, as well as a suitable moniker for the venue’s
ground floor bar and restaurant. “We’re silent on
QuickeningtheprocessMichelle Webb, director of hotel transactions in
Savills London office, reckons that worse than the
reduced deal flow at present is the length of time
transactions are taking.
She spoke at the Hogan Lovells hotel
conference, which is supported by both Savills and
TRI Hospitality and was held in London in February.
You could feel her pain.
To help ease the deal process she gave a
presentation on the top 10 tips for getting over
the line. First up was to get your due diligence
done up front. She, understandably, cited Savills
approach with Admiralty Arch in London as a case
of how to do it.
Much more fun though was her giving the
Birmingham Hyatt and the Cardiff Radisson as
examples of how not to do it when it comes to
another tip, giving realistic forecasts. In the case of
the Birmingham hotel it went from a £35m asking
price down to a final transaction price of £26.8m
thanks in part to over ambitious forecasts. The
Cardiff Radisson failed to transact.
Realistic forecasts feed into another tip,
realistic pricing. Agents are never happy
suggesting prices should be lower but in the
case of London’s Cavendish, it went from £230m
down to £160m and endured a 24 month sales
process. A more realistic approach at the outset
would have secured another £10m at least
suggested Webb.
More prosaic were the tips about sourcing
debt and becoming a counsellor. But with this
latter Webb gave some insight into the wily ways
of brokers by suggesting it was important to
understand the buyer. In the case of the Premier
Inn sale in Cambridge this meant knowing that
institutions had to commit funds by their year
end. With the Malmaison sale and leaseback it
meant getting London under offer before taking
the other properties to institutions and keeping
the transaction off market to avoid delaying
the process.
Finally, Webb was candid enough to admit
her own struggles. “It took us 19 months to
sell the Radisson Blu in Glasgow.” Her advice:
“Never give up.”
the brand at the moment,” admitted Callingham,
“and we’ve still not got a name.” And one major
challenge is not upsetting hostel guests: “Our
client group almost rebels against the brand,”
he notes.
As for the Liverpool bar, it may just end up being
called the Kansas Food Company. Not because
Callingham’s colleagues love the Midwestern
state, or plan to serve barbecued ribs; but as the
new hostel is being converted from what most
Liverpudlians know as the Kansas buildings.