Sleeper March/April 2009
Head Office
Hotel Analyst www.hotelanalyst.co.uk
Being late into an opaque market
Received wisdom has it that the only their books. Buyers are scared of entering episode. A glance at LIBOR rates suggests which will drive values down further.
way to make money in the hotel business the market right now in case values have that there is at least trust now among the The final piece needed for any sizeable
is to buy and sell at the right time. much further to fall. In any case, the lack banks that they are not going bust. transactions is the return of debt. Once
Operating hotels is incidental. of debt means few buyers are willing to After September, the financial crisis banks have cleared out their “toxic
For the deal makers who hold true to do deals in any case. led onto the economic crisis. This has assets” their confidence should return
this maxim, the art of buying is to be last This will change: the question is when seen governments respond with a huge and they can begin to feel their way
into an opaque market. The game is now and how quickly. As ever, the hinge monetary and fiscal stimulus. While towards lending more.
on to guess when the opacity ends. point is debt, or rather the return of a not preventing a major recession, it Most bankers believe that lending will
There are certainly buyers around. At reasonable level of debt to fund bigger seems highly unlikely we will have the return from the bottom-up, first with
the beginning of February, HEI Hotels deals. depression some feared. more small deals by individual banks and
said it was looking to spend $1.5bn on The banking crisis that started the Finally, there is the task of putting more then gradually towards club deals and
hotel deals in 2009 in North America. whole downturn appears to be entering credit back into the economy. This one is then on to syndication.
Similar funds are around in Europe. its third and final phase. First we had still not fixed but there are mechanisms A good example of the issues right now
At ALIS, the hotel investment the panic about whether the banks were in place to start the fix. And “bad banks” is Le Meridien in London’s Piccadilly.
conference held in California at the end sound. This started back in the summer seem the most likely way things will be This is a big asset that needs a big chunk
of January, the consensus seemed to be of 2007 and reached its crescendo in fixed and lead to a return to something of transformative capital. The deal has
that debt was where the action will be for September 2008 with the collapse of like a functioning banking system. been tantalisingly close to being put away
this year. Lehmans. In terms of hotel deals, values have but has fallen due to problems with debt.
Even distressed owners are not yet It can be argued that the underpinning been impacted first with the tightening of Once transactions like this are signed-
selling as lenders are giving them more of the global banking system by the credit conditions which shoved yields out. off, the end of the opaque market will be
time rather than take the assets onto world’s governments has ended this Currently, EBITDA is taking a pounding near.
Europe set for revpar falls
Tim Helliwell, Head of
Hotel Finance Barclays
Europe is expected to repeat the revpar for the year overall but declined 8.2% in Italy. Also, Chappell expected mature
Bank says: “Yes - not only
drop of 4.2% suffered in 2008 in 2009, November and 5.8% in December. All the markets to hold up better than new and does Hotel Analyst cover
according to Jamie Chappell, Managing major countries were in negative territory emerging destinations.
the key stories, it provides
Director of STR Global. But he warned by November and December. Meanwhile, PWC is now forecasting a
informed comment and the
that this average figure will vary across Chappell warned of the “Copenhagen 23.3% drop in revpar for London during
different markets. One of the worst hit effect”. The Danish capital in the last 2009, the worst case scenario outlined
angle that leaves the reader
looks set to be London, at least according downturn suffered a price war that saw last November. “Falling consumer spend
reflecting, I hadn’t thought
to PricewaterhouseCoopers, which in five-star hotel rooms selling for less than and investment, combined with the
of that!”
January said its “downside” case for the three-star rivals. By 2007, rates had still prolonged financial market crisis, will
UK capital was now to become the official not returned to the levels seen at the peak restrict economic growth over the next 12
forecast. in 1998. months,” said Liz Hall, Head of Research
Speaking at the 4th New Year Hotel With some exceptions, notably for Hospitality and Leisure at PWC.
Investment Summit held on January 13 Prague, this cycle has not seen significant The expectation is for a 2% drop in UK
in London at the Mayfair Hotel, Chappell oversupply and operators’ increased GDP this year following a 0.9% rise in
unveiled performance figures for the year yield management expertise both mean 2008. “Although visibility is restricted,
2008. that the “downturn should be less painful evidence points to an unprecedentedly
To sample visit:
These showed that Italy, Spain and and we will come back sooner”, said poor hotel outlook for the year,” added
hotelanalyst.co.uk/sample
Ireland had suffered the most with Italy Chappell. Hall. The beneficial effects of the fall in
down 9.9% for the year. The biggest falls, It was noted, however, that markets Sterling were acknowledged but this
For more details visit:
however, occurred in the last quarter with more international brands were was expected to be countered by a drop hotelanalyst.co.uk
of the year with double digit drops for holding rates better than those dominated in margins and a switch by domestic UK
or call 020 8870 6388
both Italy and Spain. The UK stood still by individual owner-operators such as holidaymakers to self-catering.
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