HVS Hospitality Enews - W/e 30 November 2001

Compass Group has revealed that it has had a lot of interest from companies in the UK, continental Europe and the Far East keen to use the Travelodge brand under franchise. One potential partner is Jarvis Hotels, which is negotiating a lease on a 96-room hotel at Glasgow airport that could carry the Travelodge brand. The hotel was due to have been operated by Premier Hotels under the Days Inn brand, until Premier went into receivership. Compass sees franchising as a natural extension to the brand, with the potential for it to be developed overseas. Compass has 212 Travelodges, some 11,500 rooms, in the UK, and has the rights to the brand in most countries except America.

Paresh Kotecha, the man who developed Slaley Hall in Northumberland into a luxury golfing venue, and who later sold it to De Vere Hotels, has seen building work begin on the first hotel in a chain that will, ultimately, open at locations across the UK. The chain, known as Aston Hotels, will be pitched at the upper end of the budget market with a star rating of between three and four stars, according to Mr Kotecha. This first hotel, at Newton Aycliffe in County Durham, will have 100 rooms and is set to open by May 2002. Mr Kotecha expects to open five hotels within the next five years and is looking at locations across the UK, with the Northeast region particularly favoured. Meanwhile, developer KGL Estates wants to build an 80-room luxury hotel and conference centre in a multimillion pound development on the site of the former Teddesley Hall, near Cannock in South Staffordshire. The proposed development is subject to the approval of both the local council and the relevant government body. Elsewhere, over the border in Wales developer Glynllifon is likely to purchase the unoccupied Glynllifon mansion in Gwynedd and turn it into a four-star hotel. However, one project that will not be going ahead is the £9 million redevelopment of Gorton Monastery in Manchester as a 72-room, three-star hotel, which has been cancelled due to the current climate in the hotel industry.

Airtours, the UK's leading tour operator, has announced full year results to 30 September which are broadly in line with analysts' expectations. Compared with last year, operating profit before exceptionals rose by 57% to £147.4 million, boosted in particular by operations in Scandinavia and the Netherlands where operating profit almost trebled to £39.7 million. Turnover of £5.1 billion was up 15.9%. However, the company has warned of a challenging year ahead in the wake of the events of 11 September. One immediate outcome has been the company's shedding of 1,600 jobs at a cost of £11.4 million. Now, after an 8% fall in demand for winter bookings, winter capacity has been cut by 15% and summer 2002 capacity by 14%, although forecasts of a summer upturn should ensure that 2002 profits are in line with those of 2001. In the current climate, there has been speculation that Airtours may rekindle plans to merge with rival First Choice. Airtours is awaiting a decision on its appeal to the European Union, which blocked Airtours' hostile £950 million bid for First Choice in 1999 fearing 'collective dominance' of the UK market by the merged company. However, Airtours' Chief Executive Tim Byrne said that a successful appeal did not necessarily mean that a fresh offer for First Choice would be made. Indeed, Mr Byrne had reportedly been considering a chain of 50 Dutch travel agencies, the market price of which fell by 10% to £1 million after 11 September. Meanwhile, Airtours has announced that, subject to shareholder approval, its retail portfolio and airline will be renamed MyTravel Group.

JJW Hotels and Resorts, which represents the hotel interests of Saudi businessman Sheikh Al Jaber, is reportedly struggling to fund a deal for troubled Choice Hotels Europe (CHE Group). In the five months since Choice Hotels International announced the sale of its 70% stake in CHE Group, JJW had emerged as the frontrunner in the bidding, as it looked, and continues to look, for further expansion in Europe. If JJW does fail, then analysts consider that London Plaza Hotels, which acquired a 10% stake in CHE Group earlier this year, and Radisson SAS will make a joint bid. London Plaza would acquire CHE Group's owned hotels and Radisson SAS would take the franchise rights in Europe to the Choice, Quality and Sleep Inn brands. CHE Group has some 60 owned and operated properties in Europe, of which 45 are in the UK. Meanwhile, Choice Hotels International is reportedly seeking business partners in Bulgaria as it looks to build hotels in the capital Sofia and in the port of Varna on the Black Sea.

An Iranian investor, together with an unnamed group from the United Arab Emirates, is to invest US$250 million in the building of five hotels in Iran over the next five years. Le Méridien will supervise the building plans and will go on to manage the hotels. The project will include a US$150 million 500-room hotel in Tehran and four smaller hotels in the cities of Isfahan, Mashhad, Tabriz and Bandar Abbas. Meanwhile, according to the country's Department of Tourism and Commerce Marketing, Dubai is set to receive 12 new hotels between 2002 and 2004. The hotels, some 5,000 rooms, will represent an investment of euro 1.2 billion. It is forecast that by 2010 Dubai will have 400 hotels. Elsewhere in the region, German construction company Inpro and its Yugoslavian counterpart Energoprojekt have begun work on the four-star President Palace hotel in the city of Samarkand in Uzbekistan. It has also been reported that Safir Hotel Management of Kuwait is to manage a new 267-room hotel in Frankfurt, which is due to open at the end of 2003. Safir currently manages 50 hotels, predominantly in Arab countries in the Middle East and North Africa.

Despite the current downturn in worldwide tourism, Radisson SAS is to press ahead with a reported euro 90 million refurbishment programme as it looks to maintain brand standards, a plan which the company views as equally important as investment in new developments. Key renovation work, which is either already complete or due for completion by 2005, has been undertaken at 13 hotels in Europe and one in Bahrain. The work has encompassed a 107-room extension to the 351-room Royal Viking Hotel in Stockholm, where work will be completed by May 2002.

Sol Meliá has acquired its sixteenth hotel in the Catalonia region of Spain by concluding an agreement with Golf Hotel Malavella to manage a new five-star hotel located alongside the Catalonia PGA golf course at Caldes de Malavella, Girona. The 150-room Meliá PGA Vichy Catalán hotel is set to open in 2004 and continues two of the company's plans: provision of hotels that cater for golf fans and ambitions for further growth in Catalonia. Sol Meliá currently provides access to 60 golf courses worldwide. Meanwhile, NH Hoteles is reportedly planning to enter the French, Italian and UK markets through acquisitions or by rolling out new hotels.

Property company Hang Lung Development of Hong Kong has broadened the scope of plans announced last month aimed at hotel acquisition in southern Europe. The original plan was to spend up to euro 4 million on one project in the region and then increase this initial investment if results were favourable. Now, according to Hang Lung's Chairman Ronnie Chan Chi-chung, the company is looking at more than ten small hotels in southern Europe and could spend up to euro 57.7 million on acquisitions in the next few months as part of its diversification programme. Owing to the small scale of the investment, any acquisitions would be managed by Hang Lung and not by Grand Hotel Holdings, its hotel arm which currently has four properties in Hong Kong.

The biennial ICAEW/BAHA Hotel Accounting Conference has been recognised for over 20 years as the premier conference for those who specialise in all financial aspects of the hospitality industry. In the current climate, where the hospitality industry is in a state of constant assessment and reassessment, now is the perfect time to find out what leading business figures are thinking and doing. The conference provides cutting-edge analysis of, and comment and debate on, the issues that are of most interest to the industry. Currently, the messages emanating from world financial centres have never been more mixed: are we in recession? Is the US economy starting to improve? Will the airline industry ever fully recover from the events of 11 September? How long will it take for the UK to recoup the tourist business lost because of foot-and-mouth? Speakers include Brian Wallace of Hilton Hotels Group, David Thomas of Jarvis Hotels, David Cook of Choice Hotels Europe (CHE Group), Paul Slattery of Dresdner Kleinwort Wasserstein, Sarah Ellis of ABN-Amro, Martyn Levitt of Firmdale Hotels, and HVS London's Managing Director Russell Kett, who is delivering the opening presentation on 'Key Factors Affecting the Value of the European Hotel Industry'. Full details of this event are attached as a separate PDF file.

Analysts Bear Stearns regard the group's share price as lagging behind that of its competitors and rate the share price as 'Neutral'.

Bear Stearns has reportedly been surprised by the relative outperformance of the group's shares compared with other mid-market UK hotel operators.