hospitality news Autumn 2007

A view from the top

The fifth International Annual Hotel Conference took place at the Hilton Cavalieri Hotel in Rome on 17-19 October 2007. More than 350 international delegates participated in various platform and think-tank sessions on hotel investment, development and management strategies. The conference featured 90 high-profile speakers from the industry. For those of you who could not make it to the event, this is the 'view from the top'!

International Hotelier Global Citizen Award

The inaugural Global Citizen Award is designed to recognise savvy business practices and humanitarianism, as both are the foundation of the hospitality industry. Hans W.R. Kennedie, President and CEO of the Golden Tulip Hospitality Group, received the 2007 award for the impact he has made in the hospitality industry for more than 20 years and for his significant humanitarian contributions to elder care and the European food-service market in the Netherlands.

Economic forecast

RevPAR growth has been healthy for 2007 and will continue to remain positive as we head into 2008. In the UK, London is performing significantly stronger than the regional hotels. The good news is that the demand for hotel rooms still outstrips supply. As such, the number of hotels in planning and construction will continue to rise in Europe and the rest of the world.

Effect of 'credit crunch'

Much has been reported on the 'credit crunch' in the media. Some delegates observed that there might be more pressure on new deals and perhaps a slower pace on new developments. Others felt that it is a good time for those with money to invest in hotel property and probably a bad time for owners to sell their portfolio. Overall, there is still a lot of money in private equity firms and in private wealth for hotel investment. Investment banks continue to retain confidence in the hotel real estate market.

Investors' expectations

When looking at investors' expectations on their return, attitudes differed depending on their geographical locations. In Asia, for example, the investors are essentially family owners who are patient and willing to wait for a return on their investment. In the US, there is more emphasis on making a profit and selling the asset. In the Middle East, low labour costs have meant high profits so investors are looking at early returns from their investment.

Human capital

There were widespread concerns that the hotel industry is not attracting talent and retaining it in the business and that the industry is still doing very little to address this serious issue. Human resources has always taken a low priority because real estate investors have traditionally focused on financial return as a top priority. The irony, however, is that a return is only achievable if there is a real commitment and focus on the part of investors on the employees of operators, their welfare and ultimately their commitment to delivering a service - the very essence of the hospitality business. Many delegates felt that it is the joint responsibility of educational establishments, hotels and employees to work together and actively knock this issue on the head.

Branding

With the 'big five' creating 'tiers' in their respective brands to capture a wider market, the challenge will be for hotels to maintain consistency of brand and in the service they provide to their guests. As the luxury end of the market relies on uniqueness, it was questionable if the current trend is sustainable and, in the long run, deliverable by an international chain brand. Some delegates felt that there is still room in the market for everyone to compete in the market. Amidst the competition out there, it was acknowledged that the iconic nature of certain well-established independent and boutique operators will do well in the long term.

Sustainability

As 'tankers of the urban landscape', there was consensus that hoteliers will need to seriously focus on their carbon footprint, particularly as consumers are increasingly starting to care about their environment and the corporate social responsibility of operators. The challenge going forward will be for hotels that were built at different times and have different operating procedures. With new projects, developers are already looking at sources of renewable energy. The commercial impact is that hotel investors will have to change their outlook on financial returns if they have to invest in greener issues going forward.

Julian Yew
Head of Hotel & Leisure Group