HVS Hospitality Enews - W/e 14 December 2001

Macdonald Hotels, the UK's eighth-largest hotel chain, has announced its results for the six months to 4 October. Pre-tax profit of £7.5 million was up 7% on last year's comparable period, with turnover surging by 81% to £70.4 million. The group's 25 wholly owned hotels emerged relatively unscathed from the effects of the terrorist attacks in the USA and foot-and-mouth disease in the UK to post a 4% rise in occupancy to 66% and a 9% rise in RevPAR to £98.58. However, the group's 48 Heritage hotels, which it purchased earlier this year in a £235 million joint venture with the Bank of Scotland, suffered from their proximity to London, which has been badly hit by the loss of business from the USA. At these hotels, occupancy fell 4% to 70%, with RevPAR falling 3% to £93.28. Nevertheless, Macdonald Hotels sees great development potential in the Heritage portfolio, which will be expanded by up to 500 rooms thanks to a £60 million investment by the joint venture over the next five years. In addition, all Heritage hotels will take the Macdonald brand name by June 2002. Although the company sees considerable trading challenges ahead, it views the geographic spread and quality of its portfolio and the cost savings arising from the Heritage integration as just some of the reasons for future optimism.

NH Hoteles has brought to four the number of hotels it operates in the Argentinian capital Buenos Aires with the opening of the NH City. The five-star hotel, which has 303 rooms, has been refurbished for a cost of euro 22 million, and its opening makes NH Hoteles the second most important chain in the city. NH Hoteles now has seven hotels, more than 700 rooms, in Argentina. Meanwhile, Spanish travel group Globalia plans to own 15 hotels by 2004, according to its Director General Angel Carrasco. Globalia currently owns five hotels, some 800 rooms, in the Canary Islands and the Balearics and has a strategy which focuses on the Spanish tourism market. The group has currently put on hold plans to invest in the Dominican Republic and Cuba until the demand for tourist services recovers.

A spokesman for Nomura has denied reports that Guy Hands, the outgoing head of its Principal Finance Group, may have to renegotiate the £1.25 billion sale and leaseback deal on the Le Méridien chain. The original deal, for 12 of the 150 hotels, was struck with the Royal Bank of Scotland earlier this year at the time of Nomura's £1.9 billion acquisition of the Le Méridien portfolio. The reports come with the revelation that Le Méridien may fail to make a profit this year as a result of the economic situation, yet it must fulfil its obligation to pay the Royal Bank of Scotland the greater of either 25% of its revenue or £50 million a year in rent. Mr Hands, who will retain the management contract on Le Méridien when he sets up his own investment fund next year, may now be forced to bring forward a £1 billion sale and leaseback deal with German bank DePfa on 12 European hotels that was not scheduled to begin until the second half of 2002. These are troubled times for Le Méridien, which has seen some hotels in the Middle East and the Far East withdraw from the chain in protest at the cost of Nomura's 'art and tech' renovation. Le Méridien's President, Bernard Lambert, is reportedly set to leave next week, together with Fabio Piccarillo and Michel Noblet, respective heads of the North American and Middle Eastern divisions. Meanwhile, the privately owned Pubmaster, pub estate group Laurel, and Enterprise Inns are three of the five confirmed bidders in the £500 million sale of Guy Hands' Inn Partnership, the chain of some 1,240 pubs which Nomura acquired from Greenalls in 1998 for £370 million. It is expected that a final bidder will be chosen at the beginning of 2002.

Jarvis Hotels has realised recent speculation by signing a deal with Compass Group to become the first franchisee of the Travelodge brand. Jarvis's new 98- room hotel at Glasgow Airport will carry the name from its scheduled opening in the first half of 2002. According to Travelodge's Managing Director Simon Turl, franchising is part of the group's strategy for growing the brand in the UK as Compass Group looks to have a presence in all of the UK's major travel hubs. There are currently 213 Travelodge hotels in the UK, some 12,000 rooms, with a further ten hotels under development.

Robert Breare has emerged as the favourite from among 140 potential bidders aiming to acquire the prestigious 27-room, five-star One Devonshire Gardens hotel in Glasgow. Mr Breare provided the hotel's founder Ken McCulloch with the financial backing to open the hotel in 1986. The sale has arisen after the hotel's present owner Residence International went into receivership nearly two months ago, suffering from the slump in tourism in the aftermath of 11 September. It is expected that the name of the new owner will be announced soon. Elsewhere in Scotland, Corus and Regal Hotels has sold the 100-room Atholl Palace near Pitlochry to Dublin-based Castle Hotel Group for an undisclosed sum, although the asking price was reportedly in excess of £3.5 million. The new owners have started work on upgrading the hotel to what they refer to as a three-star standard.

Radisson SAS is set to operate the newly opened Conference Centre East, which is adjacent to the Radisson SAS Hotel at Oslo international airport. The conference centre has approximately 4,000 m² of conference space, making it the largest in Norway. Meanwhile, the German open-ended fund Commerz Grundbesitz Investgesellschaft (CGI) has acquired a hotel development at Charles de Gaulle airport in Paris. The 300-room hotel, which is due to be completed by 2003, will be acquired by CGI and will then be leased back to Marriott Hotels and Resorts, which will operate it under the Courtyard by Marriott brand. The deal is CGI's first sale and leaseback with a hotel operating company. CGI currently has three hotels in Europe, in Wiesbaden, Frankfurt and Lisbon. Elsewhere, almost ten months after first announcing the sale, Hungarian airline Malev has sold its 50% stake in Malev-Pannonia Hotels to Pannonia Hotels for an unreported sum. The sale means that Pannonia, the Hungarian arm of Accor, will have a 100% stake in the 351-room, five-star Hyatt Regency Hotel in Budapest, which Malev and Pannonia had jointly owned and operated since the hotel's opening 20 years ago.

Sol Meliá has officially inaugurated the 80-room, four-star Meliá Trujillo Boutique Hotel, the company's third hotel in the Extremadura region of Spain and its ninth Meliá Boutique hotel in Europe. Fomento de Extremadura, in which Sol Meliá holds a 50% stake, invested euro 7.81 million in the renovation and enlargement of the hotel, which forms part of an agreement Sol Meliá signed with the regional government in 1999 to promote quality tourism in the region. Sol Meliá has also announced an agreement with real estate company Metrovacesa to lease two new hotels. The 135-room, three-star Tryp Almussafes hotel is set to open in 2003, to be followed a year later by the opening of the 126- room, four-star Tryp San Lázaro in Santiago de Compostela. Meanwhile, the 112- room, four-star Meliá Confort Girona in the Catalonia region of Spain will be one of the hotels that it will upgrade to the Meliá Hotels & Resorts brand, part of a strategy, which includes the phasing-out of the Meliá Confort brand, aimed at reducing the number of brands Sol Meliá operates.

Selfridges has applied to City of Westminster council for planning permission to redevelop the existing 250-room Thistle Hotel as part of a £300 million mixed-use development at its flagship store on London's Oxford Street. Subject to approval, work on a new 336-room hotel would begin in summer 2002. Only last month, Selfridges reportedly approached Ian Schrager Hotels as the store sought an operator from the four-star or five-star sector to succeed Thistle. Property developers Stanhope are funding the redevelopment and will take a 175-year lease on the site upon completion. Elsewhere in the UK, Cardiff's Central Hotel will be renovated on behalf of its new owner, The Old Monk pub company, to create a pub that will also comprise 50 hotel bedrooms. Meanwhile, Brian Warder and Ricky Scragg have sold the 68-room, three-star Everglades Park Hotel in Widnes, Cheshire, to Lyric Hotels for an unreported sum.

The second annual Depa Middle East Hotel Awards, one of the leading events in the international hotel industry calendar, will be held at the Semiramis Inter- Continental Hotel, Cairo, on 18 April 2002. More than 200 five-star hotels from across the region are expected to compete for awards in 15 categories, including best new hotel and best hotel design project, with a special award for the Middle East hotelier of the year. The entries will be assessed, and a shortlist drawn up, in mid February by an international panel of hoteliers, designers, consultants and restaurateurs. The panel includes Stephen Head of the Lausanne Hotel School, Mohamed Buzizi of Bahrain Hotels Company, Stuart Scher of Taylor Nelson Sofres and Russell Kett of HVS International. Further information may be obtained by contacting Paul Rouse of Mirage Global Events (Cyprus) at [email protected]. General details are available from the website at .

Credit Suisse First Boston has retained its 'Buy' rating on the group's shares, saying that current trading was encouraging and that the group's recent results were at the high end of the market range.

BNP Paribas has cut its rating on Accor's shares from 'Outperform' to 'Neutral' as it sees weak GDP growth for 2002.

The share price has reacted badly to speculation that Six Continents may be about to bid for NH Hoteles. However, it was reported last week that Six Continents would not make any major acquisitions for the next six months.