CONFERENCE REPORT
The conference season
Throughout October, Sleeper’s reporters travelled far and wide to report back from the annual spate of investment conferences...
International Hotel Conference 20-22 October – Hilton Molino Stucky, Venice
Report by Guy Dittrich
A cautious yet realistic sense of optimism was in evidence at this year’s International Hotel Conference. Talk in the corridor was of the “never been busier” and “it (the recession) wasn’t as bad as it could have been” variety, giving a palpable sense that, once the current year is out, 2011 should see the start of real growth.
Andrew Sangster, Editor, Hotel Analyst and moderator of the opening plenary session set the scene for the audience of hoteliers, investors, lawyers, consultants and suppliers. Neatly ploughing a middle furrow, Sangster saw that the recession had been bad (the “worst and longest” according to panellist Russell Kett, Managing Director, HVS) with falling GDP and double-digit drops in RevPAR, yet unemployment and foreclosures had not been as high as expected. Patrick Fitzgibbon, Senior Vice President, Europe & Africa, Hilton Worldwide sees Hilton “climbing out of where we were” and being led by Asia and the Middle East, then Europe and finally the USA.
Thomas Magnuson, CEO of Magnuson Hotels, agreed, “the US environment is much worse (than Europe)”. Magnuson Hotels are a US-based “marketing utility” provider supplying distribution services on a commission-only basis to around 1,500 independent hotels in North America and have just entered the European market signing up 55 hotels in the UK. Both Russell Kett and Wolfgang Neumann, a consultant who was previously European President of Hilton and more recently CEO of Arabella Sheraton, the joint- venture partner with Starwood Hotels & Resorts in Germany, identified the mixed impact of the recession. Kett contrasted the English examples of Liverpool, a “real problem for hoteliers and bankers and with more supply to come”, and London which is “on fire” and has had its best ever occupancy this last summer. Neumann acknowledged that amongst a positive general trend there were pockets of greater success with “Germany being a powerhouse that surprised everyone”. Neumann went on to explain that it was corporate
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demand that had returned, albeit cautiously, and this was the main volume driver behind the improvements in RevPAR across the board. Neumann’s prediction for RevPAR growth in Germany for 2011 was within the broad range of 3-5% and certainly positive. With Fitzgibbon labouring the
advantages of the consistency of brands, Neumann argued that with over 800 brands, differentiation was key especially given a more sophisticated and demanding audience. Fitzgibbon also promoted the advantages of an international distribution system to which Magnuson reacted saying that the main trend he saw was the rise of the independents (hoteliers), those that might use his system. Thereafter he neatly followed with regular references to the advantages of Magnuson Hotels’ pay-as-you-go distribution offer advising hoteliers, of whom Rezidor and Accor were notably absent, to “make sure your suppliers are performance based”. Russell Kett referred to the “stalemate” of banks unable
to lend and hotels unable to service their debts in the current downturn. “We are fighting our way out of it but it is the capex side that is the huge challenge,” Kett continued referring to the expected long delay before development loans will come forward. Fitzgibbon agreed that this was especially difficult for owners who had bought at the top of the market and still needed to invest. “If hotels have used their FF&E reserve then they are OK but many hotels don’t now have these available,” he explained. A direct result of such deferred
investment is seen in falling guest satisfaction as identified by the JD Power hotel survey presentation earlier at the conference. Once the benefit of lower rates has been removed, guests are becoming increasingly disappointed with the service and staffing during their hotel experience. “With volumes (occupancy) increasing, rates remaining low and costs that cannot be tightened any more, the guest experience will suffer,” explained Neumann. It is those hotels that are nimble Continued overleaf...
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