HVS Hospitality Enews - W/e 10 August 2001

In an effort to focus on its more successful operations, and shed what it sees as perennial underperformers, Whitbread, the hotel and leisure group, is considering the sale of all of its high street restaurants for approximately £300 million. The portfolio is thought to include approximately 930 restaurants, including the Pelican group, which owns the Café Rouge and Bella Pasta chains; 250 Costa coffee shops; a stake in 442 Pizza Hut restaurants and TGI Friday's, the chain of transatlantic food outlets. However, according to one source, Whitbread is having difficulty attracting buyers. Some are holding out for the right price; one bidder has been deterred by the terms of the property leases. A management buyout of some or all of the brands is a possibility. The proposed sale is the latest in a series of disposals, following Whitbread's sale of its pubs and its brewing operations. Meanwhile, Whitbread has announced that it is to double the size of its David Lloyd health and fitness chain by opening 52 clubs over the next five years at an estimated cost of £500 million. Eight clubs are to open next year, including sites in Manchester, Epsom, Cheam and Fulham.

Hungarian-based Danubius Hotels has posted first-half results that have exceeded most analysts' expectations. A net profit of euro 6.5 million was boosted by the company increasing its stake in Lecebne Lazne, its Czech spa company, from 65% to 95.4%. Had this not happened, then Danubius's revenues would have increased by only 0.7% instead of the 14% recorded. Net profit has fallen slightly on last year's euro 6.75 million, due largely to increased competition in the four-star and five-star markets, the strength of the Hungarian forint and renovation costs of approximately euro 21.5 million. According to Attila Vago, an analyst with Concorde Securities, with these factors firmly entrenched the second half is unlikely to bring any improvement. Vago forecasts Danubius's full-year 2001 profit to be approximately euro 15.4 million, little changed on 2000.

Queens Moat Houses (QMH) has denied newspaper reports that it is in talks about the £250 million sale of its 24 Holiday Inn hotels in Germany to Hilton Group. Hilton is looking for further expansion, particularly in southern Europe, to build on its recent £612 million acquisition of Scandic Hotels. According to Andrew Coppel, QMH's Chief Executive, although the hotels are trading in line with expectations, there are doubts as to their future and he is open to offers for them. If Hilton were successful, then all 24 hotels would be rebranded as Hilton, thereby delivering a blow to Six Continents which owns the Holiday Inn name. The potential for such action on Hilton's part could lead Six Continents to bid for QMH's German portfolio. Meanwhile, Six Continents is selling, for £30 million, nine of the 79 Posthouses it acquired for £810 million in April 2001. The hotels, located on Teesside and in Leeds, Manchester, Lincoln, Nottingham, Derby, Stevenage, Croydon and Dover, are being sold because either they do not fit the group's strategy or they are operating close to an existing Holiday Inn.

Mövenpick, the Swiss hotel and restaurant group, expects to beat its 2000 performance despite reporting a fall in first-half net profit from last year's euro 5.9 million to euro 4.8 million. This decrease was attributed to difficult economic conditions in the group's core markets, with consumers opting for lower-margin products. Revenue rose by 2.2%, compared with last year, to euro 429.6 million. Operating profit fell from euro 7.9 million to euro 6.7 million, a decline attributed to higher costs in connection with the restructuring of the group's fine foods division in Asia. Mövenpick expects a better second-half performance, assuming that the demand pattern does not deteriorate further, with higher season-related sales and improved operating results.

Pierre & Vacances, the French holiday village operator, has begun exclusive talks with property developer Nexity with a view to acquiring Maeva, France's second-largest residential tourism group. The acquisition, following its recent purchase of Center Parcs in continental Europe for euro 673 million, would allow Pierre & Vacances not only to tighten its grip on the domestic market but would also give it the critical mass to expand abroad: the company is keen to raise its profile through acquisitions, espcially in southern Europe. The only stumbling block, in analysts' eyes, is the purchase price, which has been estimated at anything between euro 70 million and euro 350 million. Maeva operates 250 resorts and the deal would increase the number of beds at Pierre & Vacances' resorts from 150,000 to 235,000.

Elegant Hotels, operator of luxury resort hotels in the Caribbean, wants to expand from six to 30 properties in the next five years, and is looking to acquire a hotel in London. The expansion plan is backed by private equity firm Cabot Square Capital, and is headed by Elegant's new Chief Executive Marcello Pigozzo, a former executive with both Sol Meliá and Inter-Continental. According to Pigozzo, Elegant is looking to acquire its first new property, in which it will take some kind of equity participation, by the end of the year. Sites in southern France and Mauritius are also being sought. According to Pigozzo, the company would persist with its focus on resort hotels aimed at the tourist, even in city centre locations.

Orbis, Poland's largest hotel operator, has seen its first-half net profit fall to approximately euro 5.2 million, down almost 58% from the comparable period last year. Sales revenue also fell, by 9.4%, to approximately euro 93.7 million. The decline in net profit was attributed to the economic slowdown, and its consequent effect on the number of business travellers; the strength of the Polish currency and to the increase in the supply of hotel rooms following the completion of a number of hotel projects. An average room rate of euro 60.8 is down 10.9% compared with last year, while occupancy fell 3.2 percentage points to 49%.

The international luxury hotel groups Le Méridien, which is owned by Nomura, and Nikko Hotels International, which is operated by JAL Hotels Company, a subsidiary of Japan Airlines (JAL), have announced the expansion of their global strategic alliance to encompass all of Nikko's hotels in Japan and China. The alliance, which pooled the sales, marketing and reservations resources of the two companies, was signed in April 2000 and was limited to Nikko's 42 hotels, some 14,924 rooms, in Europe, North America and the Asia Pacific region. This latest expansion, which will incorporate Nikko's 21 Japanese properties and the 616- room Quingdao Hai Tian Hotel on China's northeast coast, brings the groups' holdings to 169 properties in 63 countries worldwide. The alliance has been mutually beneficial. In 15 months, through several sales and marketing initiatives, Le Méridien has seen its business in the Japanese market increase by 30%, where the group now outperforms the market, making Japan Le Méridien's third-largest revenue-generating market. In addition, thanks to JAL's Mileage Bank loyalty programme, the number of Japanese staying at Le Méridien's European hotels has increased 42%. In return, Nikko Hotels has, through inclusion in Le Méridien's promotions, gained exposure in markets where it currently has no hotels in parts of Europe, Israel, other Middle East countries and Africa. According to Bernard Lambert, Le Méridien's President and Managing Director, future plans could include the exchange of staff, increased joint sales activity and closer ties on reservation and loyalty programmes.

According to Jay Rasulo, Chairman and Chief Executive of Euro Disney, the company will shortly reveal the name of the 'large European company' which is to operate the fourth hotel to be developed near the site of Disneyland Paris, Europe's biggest tourist attraction. In February, Euro Disney signed agreements with Airtours, Bass Hotels & Resorts (now known as Six Continents) and Groupe Envergure for them each to develop one hotel, adding 1,100 rooms to the existing 6,000 rooms. A 30% increase in visitor numbers, to 17 million, is predicted when the new movie theme park Disney Studios opens, an opening scheduled for spring 2002. The four hotels will help cater for this increase in visitor numbers.

According to a report in the Independent on Sunday newspaper, Chicago-based Strategic Hotel Capital (SHC) is looking to add a UK hotel to its portfolio. Laurence Geller, SHC's Chief Executive, has come to London with £700 million to spend on a luxury hotel. According to Geller, he is actively negotiating on several properties and is interested in acquiring the Marriott Hotel in Grosvenor Square, if the price is right. The hotel is believed to be valued at approximately £100 million. News that the freehold of the Hilton Park Lane, one of the world's most valuable pieces of real estate, is on the market for over £100 million may also be of interest. SHC now owns 30 luxury hotels worldwide and wants to increase its assets outside the USA from 20% to 30-40% of its portfolio. To this end, it is currently in talks with Hospitality Europe.

Despite Accor's optimistic outlook, it declined to give guidance on full-year earnings. This resulted in many analysts downgrading Accor's rating, and BNP Paribas suggested the risk of a profit warning