HVS Hospitality Enews - W/e 2 November 2001

Whitbread has announced its interim results to 1 September and has clarified recent speculation about its restaurant business. The group's pre-tax profit fell 25% on last year's comparable period to £135.7 million, although this figure includes ten weeks' trading from Whitbread's pubs and bars division which was finally demerged in May. Group turnover before exceptionals was also down, by 24% to £1.14 billion. As expected, the sale of the 154 underperforming Café Rouge, Bella Pasta, Abbaye and Mamma Amalfi restaurants was confirmed. Whitbread's Chief Executive David Thomas said that it had received a number of approaches for the restaurants, but added that any sale would take at least six months. In the meantime, the doomed brands will be managed separately from the Restaurants Division. However, the Brewers Fayre, Beefeater, TGI Friday's, Costa and Pizza Hut chains will all be retained. Indeed, there will be new Pizza Hut and Costa outlets in Newcastle upon Tyne and Manchester, and a refurbished Brewers Fayre in Gateshead.

In the two months since the end of its half-year, Whitbread has seen like-for-like sales at its five Marriott hotels in London fall 25% as the number of visitors from the USA declines in the wake of the terrorist attacks of 11 September. Conversely, sales at provincial Marriott hotels have risen by 3.9%. As a result of the downturn in London, capital expenditure of £50 million has been deferred on Marriott-related projects such as the conversion of the group's former Chiswell Street head office in London into executive apartments. Plans for a new £20 million Marriott hotel in Leicester have also been postponed. Overall capital expenditure of £150 million, of which £60 million was earmarked for its hotels, will be deferred for the current and coming financial years. There will be 300 redundancies at the Marriott chain and the pay of all remaining employees will be frozen. In contrast, the group's Travel Inn brand has seen sales rise by 5.6%.

NH Hoteles has revised its recently announced sales figures for the first nine months of 2001 and has also revealed profits for the same period. The sales figure has been upgraded from euro 547.6 million to euro 556.4 million which, although still below some analysts' expectations, represents a 47% growth on the previous year. The growth was boosted in part by the euro 138.5 million generated by Krasnapolsky Hotels, which NH Hoteles acquired last year for euro 495 million. Pre-tax profit for the first nine months was higher than most market predictions, coming in at euro 66.98 million, a fall of 8.9% on last year. In common with many hotel groups, NH Hoteles has been hit by the global economic downturn, made worse by the terrorist attacks in the USA. Although the group previously stated that the terrorist attacks had had a limited impact on its performance, Maria Munoz, an analyst with Banesto, considers that NH Hoteles will feel the full effect in the fourth quarter of 2001 and the first quarter of 2002. Analyst Bear Stearns has downgraded its forecast for NH Hoteles' full year 2001 EBITDA to euro 275 million.

SAS Hotel Manchester, a subsidiary of Rezidor SAS Hospitality, has sold the real estate of the 360-room Radisson SAS Hotel Manchester Airport to an unnamed buyer for a capital gain of approximately euro 13.5 million. The sale, which will help reduce SAS group's net debt by approximately euro 60 million, is part of Rezidor's strategy of concentrating on hotel management and franchising while reducing the capital it invests in real estate. Rezidor will continue to operate the hotel under a long-term lease agreement. Meanwhile, Carlson Hospitality, which franchises the Radisson brand, is to have a second hotel in London bearing the Country Inns and Suites brand. London Town Hotels, already the largest franchisee of Choice Hotels in London, is to refurbish the Elizabetta Hotel Kensington and reopen it in January 2002 as the 80-room Country Inn and Suites by Carlson London-Kensington.

A decline in tourism following the terrorist attacks in the USA coupled with the demise of national carrier Swissair has led to the shelving of several hotel construction projects in the vicinity of Zürich's Kloten airport. Airport operators Flughafen Zürich's plans to build a hotel in the Butzenbühl district are to be reviewed after the federal government denied the city a casino licence. The hotel would possibly have been managed by Radisson SAS. The German real estate company Bülow has asked for more time to consider plans for a 360-room property for Park Plaza Hotels in the Opfikon district, the district where Mövenpick recently scrapped plans for a 100-room hotel, citing market saturation as its reason. However, elsewhere in the same district, a group of French investors plans to push ahead with its project to build three new hotels, some 800 rooms, in cooperation with Six Continents.

vIan Schrager Hotels is one of several hotel operators that have been approached by Selfridges as it draws up £250 million redevelopment plans for its flagship Oxford Street store which include the existing 250-room Thistle Hotel. Thistle's lease expires at the end of the year and Selfridges is keen to attract an operator from the four-star or five-star sector to reinforce the store's up-market image. If Ian Schrager Hotels were chosen, the Selfridges hotel would be its third property in London, complementing its designer hotels, the 150-room Sanderson and the 204-room St Martins Lane. Selfridges hopes to put a detailed planning application before Westminster council by Christmas.

Pannonia Hotels, the Hungarian arm of Accor, has plans to expand both in Hungary and in neighbouring countries, according to its Investment Director Istvan Szauter. New hotels with the Ibis and Novotel brands will open in major Hungarian cities such as Györ, Debrecen and Miskolc, and, by summer 2002, Pannonia expects to be operating new Ibis-branded hotels in the Croatian capital Zagreb, the Yugoslavian capital Belgrade and in the Slovakian cities of Bratislava and Košice. Pannonia, which operates 20 hotels, some 3,500 rooms in Hungary, also announced the opening last month of the 96-room Novotel in Székesfehérvár. The euro 6 million hotel, originally set to open in August 2001, will be operated by Pannonia under a euro 5 million, 22-year sale and leaseback arrangement with Bank Austria Creditanstalt Leasing Hungary, reportedly the first such arrangement in central/eastern Europe.

Choice Hotels Scandinavia plans to open five new hotels in Finland over the next 18 months. According to the Managing Director of Choice Hotels Finland Kaj Degerholm, the plans would involve the acquisition or leasing of new hotels or the offering of franchising contracts. Choice Hotels Scandinavia entered the Finnish market a year ago when its Swedish subsidiary signed a franchise agreement to operate five Good Morning Hotels, some 468 rooms, in five separate cities. At the time, Choice aimed at doubling its presence in Finland within two years. Meanwhile, in the UK, Choice Hotels Europe (CHE Group) has agreed to sell the 60-room Quality Hotel Bradford to a private hotel operator for £1.8 million, payable in cash on completion. The proceeds from this sale and those from CHE Group's recent £850,000 disposal of the 53-room Comfort Inn Arundel will go towards paying off the group's debts.

Hyatt Regency, the Greek hotel and casino operator, has announced its results for the nine months to September. Pre-tax profit for the period was up 18.1% on the previous year to euro 30.2 million. Turnover increased by 6.37% to euro 110.3 million, of which euro 7.9 million was contributed by its hotel in Salonika with the remainder coming from its casino in the city. The turnover from the hotel was up 12% on the previous year and the hotel's average occupancy of 75% has been unchanged by the terrorist attacks in the USA. The company's board has projected full year pre-tax profits of more than euro 41 million, with turnover expected to reach euro 146.7 million. Meanwhile, Hyatt Regency will reportedly invest euro 58.7 million in the complete refurbishment of the 341-room Hotel Grande Bretagne in Athens. The hotel is owned by Lampsas, in which Hyatt Regency is the leading shareholder with a stake now reported to be 25%, and will be closed for its refurbishment from the end of this month until the first quarter of 2003. Hyatt Regency is controlled by the Laskaridis family, which owns the rights to the Hyatt brand in Greece.

The two-star Turist Hotel in Bucharest is set to become the second hotel in Romania to operate under the Howard Johnson brand. The hotel's owners Parc Hotels have signed a 15-year franchise contract and the hotel will open in 2003 after a euro 2.17 million renovation. The first Howard Johnson-branded hotel will be the Dorobanti, which is set to open in Bucharest in May 2002. A third property, the Paltinis Hotel in Sinaia, will open at the end of 2003 after a euro 4.4 million renovation. Howard Johnson aims to have 800 rooms in Romania by 2004.

Although profits may have been down in the first-half, analysts such as those at Deutsche Bank are impressed by the company's 'self-help' programme and recommends the company's results be taken positively by the market.

Despite posting a fall in nine-month profit, NH Hoteles remains buoyant. Analysts Bear Stearns consider that the group is trading at a slight premium compared with its peers.