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24th European Hotel Investment Conference Brighter Skies Ahead? 14 November 2012 – The Dorchester, London


Words: Catherine Martin Photography: Courtesy of Deloitte


met at The Dorchester, London, for Deloitte’s 24th European Hotel Investment Conference. The conditions outside could easily have been mimicking the theme for the day, illustrated by bright sunshine emerging from behind the clouds that have hung over Europe’s economy for the past five years. Setting the scene, Nick van Marken, Global Head of Hospitality at Deloitte, revealed that after a synchronised global slowdown in 2012, the International Monetary Fund (IMF) forecasts a return to growth for 2013. So does this mean brighter skies ahead? Is there calm after the storm? van Marken’s weather report showed that current trading conditions are extremely mixed across Europe. “RevPAR performance in Europe is up by 5% for the year-to-September but still behind its peak,” he explained. “Looking at Europe as a whole, there is a clear north south divide: Northern cities such as London, Paris, Berlin and Frankfurt are all showing RevPAR growth for the year-to-date, while those in the South are showing RevPAR declines of up to 21%.” In terms of investment, European transaction volumes continue to be clouded by the absence of portfolio deals. “Total M&A (mergers and acquisitions) year-to-date is roughly $1.5tn so there are deals going on,”


A


s rays of daylight broke through the clouds on a brisk winter’s morning in November, executives from the hotel investment world


explained van Marken, adding that global hotel transactions account for c.$20bn of this. “However if you look at that versus a peak of $100bn, you can see how far we’ve fallen.” Of course there are more positive signs of


growth, assuming you’re prepared to move East. Looking to travel and aviation as a key indicator, van Marken quoted Airbus’ Global Market Forecast for 2012-2031, which predicts orders for new aircraft will reach 28,000 over the next twenty years. “A huge part of this growth is going to be driven by China’s domestic market,” he explained, adding that China will overtake the USA as the largest domestic market over the next ten years. Singapore and Hong Kong are also expected to overtake London and New York in the Global Financial Centres Index. Continuing to look East, Roger Bootle,


Managing Director, Capital Economics, showed that emerging Asia’s GDP had expanded by an impressive 30% since Q1 2008, while Latin America and Emerging Europe rose by 10% and 5% respectively. But “never knowingly optimistic”, Bootle


– as van Marken had introduced him – warned there were challenges ahead for the People’s Republic. “Overall, China’s GDP has seen a significant slowdown and this will continue. There’s no doubt in my mind that it faces a huge problem of adjustment going forward,” he predicted. “China needs to move away from a reliance on exports towards an


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economy more based on consumption. The extent to which that happens is going to be one of the leading factors bringing recovery to the West.”


And if all that wasn’t gloomy enough for the 500-strong audience, the UK’s performance and future prospects looked significantly worse. A graph charting GDP in the established industrial countries showed that the USA, Germany, France and Japan had recovered, or were close to recovering, loss of output since 2008, while the UK’s performance was “absolutely shockingly dreadful”.


The economist remained extremely gloomy about the Eurozone too, stating that there was little sign of growth in the near term. Talk of astronomical debt ratios, volatile commodity prices, and German under-spending left little to be thankful for. Not to mention the PIIGS, and in particular Greece’s disastrous GDP record, which Bootle predicted will lead to its exit from the Euro. There were brighter skies in some parts of the world thanks to minimal government borrowing. “I remain confident about the emerging markets continuing to grow strongly. Of course they will be adversely affected by a slowdown in the West but they’ve got the capacity to bounce back,” he concluded. As for the West, Bootle believes that the


USA, Eurozone and UK will “continue with austerity and face a long slog back to


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