HVS Hospitality Enews - W/e 25 May 2001

The Compass Group announced today that it has agreed to sell Le Meridien Hotels for £1.9 billion to Grand Hotels (M) Acquisition Company, an enterprise set up by Nomura's Principal Finance Group (PFG). The deal marks an end to the sale of the Forte Hotel division, which has generated a total funds of £3.26 billion, to be used to further expand the Compass Group's contract catering interests. The Le Meridien deal is expected to be completed within six weeks and is conditional upon certain regulatory conditions. Earlier this week Compass reported an upbeat trading statement when it announced its half-year results. Pre-tax profits rose to £234 million from £91 million due to the inclusion of Granada businesses such as the Travelodge budget hotels and the Granada motorway service stations. The latter is to be rebranded as Moto at the end of August at a cost of £6 million. Profits from continuing operations of £268 million were at the top end of analysts' expectations. Meanwhile, Guy Hands who heads up Nomura's PFG, has accused Britain's hotel and catering industry of failing to meet international standards and challenges the £51 billion tourism industry to gain a voice and stand up for itself.

Harbour Quay has received planning permission for a 200-cabin superyacht hotel to be moored permanently in London Docklands. Vosper Thornycroft, Britain's leading shipbuilder, has won the contract to fit out the 144-metre superyacht, which is due for completion in the first half of 2003. according to the Chairman and Managing Director of Harbour Quay, Jeremy Logie OBE, the venture is the first floating hotel in the world to be designed with the five-star specification and there are plans to roll out the idea in other cities throughout the world.

Bass featured strongly in the press this week announcing its interim results as well as securing a prised asset in China, the 514-bedroom Regent Hong Kong Hotel for £241 million. Following the sale of 988 unbranded non-core pubs the restructured hotel and leisure group reported a 19.7% increase in turnover to £2.1 million and operating profit up 9.6% to £365 million on continuing operations. Profit before tax and exceptional items rose by 4% to £337 million, which was near the top end of analyst expectations. The hotel division achieved a 26.7% rise in operating profit, fuelled by strong growth in continental Europe. Despite acknowledging that the slowdown of the US economy had impacted upon profits during the second quarter, Bass's Chairman Ian Prosser, remains optimistic about second-half trading, with the group's exposure to the downturn limited due to its geographical spread. Meanwhile, Bass will use its financial stability to continue to expand its portfolio in areas where the economic downturn has depressed prices. According to Finance Director Richard North, Bass is committed to growing its upmarket brands and is looking to further invest in the US and Asia as well as target Germany, France, Spain and Italy within Europe. Last week, Bass was rumoured to be interested in acquiring the US-based Wyndham International for US$ 4 billion. Wyndham, however, is thought to have rejected Bass's original offer, but is understood to have now provided Bass with further information in order that the UK hotel giant submit a revised offer. Meanwhile, a second party, as yet unnamed, is understood to have expressed an interest in Wyndham. If such rumours are true, a bidding war may ensue.

As referred to briefly in the previous article, Bass announced the purchase of the 514-bedroom Regent Hong Kong Hotel from the property developer New World Development Co for £241 million. Bass stated that the transaction would reinforce its position as the leading branded hotel company in China, with the hotel to be rebranded Hotel Inter-Continental, Hong Kong. The deal is expected to equate to 10.9 times EBITDA of £22 million. While initially the deal may look expensive compared with hotels trading in Europe, the deal is expected to be earnings enhancing in 2001. Meanwhile, Four Seasons, the current operator of the hotel has finalised an agreement to manage the Four Seasons Hotel Hong Kong, currently under construction. The hotel is part of the International Finance Centre Complex and is scheduled to open in 2004. In the meantime, Four Seasons will continue to own until 2010 a 25% stake of the operating lease on the Regent Hong Kong, from which the company earned US$ 4.77 in dividends in 2000.

Macdonald Hotels, which recently completed the £ 235 million acquisition of 48 Heritage Hotels from Compass by a joint venture partnership with the Bank of Scotland, has announced that Guy Crawford has been appointed an executive director with immediate effect and becomes Managing Director with responsibility for all hotel operations. Previously, Guy Crawford was Managing director of Heritage Hotels. Meanwhile, Gerry Smith has been promoted as Deputy Chief Executive of Macdonald Hotels. The announcement comes at a time of aggressive expansion by the company as an owner and operator of quality hotels throughout the UK.

Millennium & Copthorne (M&C) has announced that it has entered into a global strategic marketing alliance with Maritim Hotels, the leading German hotel operator. The alliance will provide both parties with immediate penetration into each other's markets and is expected to exploit synergies, reduce costs and eventually lead to enhanced revenues. According to Frau Dr Gommolla, Chairman of Maritim, the alliance provides Maritim with instant marketing exposure in key gateway cities throughout Europe, Asia and the USA. Meanwhile, M&C will benefit from Maritim's strong foothold in the German market. According to Kwek Leng Beng, Chairman of M&C, Maritim is an excellent partner and shares a vision of operating standards in the first class international hotel sector. M&C comprises 89 hotels, some 24,300 rooms in 13 countries; Maritim comprises 39 hotels, some 10,500 rooms, in all of Germany's key cities and major destinations as well as in Mauritius, Tenerife and Riga.

Chief Executive John Wilson of Millennium & Copthorne has confirmed that the group will most likely dispose of its Copthorne hotel chain in order to focus on becoming a pure upscale hotel company. The 30-strong Copthorne Hotels are not currently on the market, instead John Wilson is happy to wait until the price is right and hinted that the chain would have a new owner five years from now. At present Wilson believes there is a growing divide between the asking price and that which a potential buyer is willing to pay. Meanwhile, the UK-based company is understood to have up to US$ 1.5 billion to spend on quality upscale assets either through ownership or management contract in key gateway cities where it currently has no representation. Key cities include Tokyo, Bangkok, Brussels, Amsterdam, Berlin, Frankfurt, San Francisco, Washington D.C., Miami and Shanghai.

Club Mediterranee, the French tourism and leisure group is once again the subject of speculation concerning a possible takeover. German-based Preussag, Europe's biggest travel company, has purchased a 10% stake in Italy's largest tourism firm Alpitour, via a strategic alliance with its owner the Agnelli Group, which itself owns a 20% stake in Club Mediterranee. According to Preussag's Chief Executive Michael Frenzel, the euro 40 million deal establishes a foothold in the extremely important Italian market. Analysts view the alliance as making strategic sense for two main reasons; firstly, Preussag previously had no positioning in Italy; secondly, the deal helps prevent Preussag's rivals from profiting from Alpitour.

Accor has announced plans to boost its Middle East portfolio to eight per cent of its hotel interests by 2003. In Dubai, Accor plans to open two hotels at the Convention Centre at the Dubai World Trade Centre Complex. One hotel will trade as a Novotel, comprising 400 bedrooms, and the other will trade as an Ibis, comprising 200 bedrooms. Both hotels will open in time for the 2003 World Monetary Fund and World Bank meetings. The Dubai government is forecasting 10 million tourist arrivals by 2010, with major hotel investment planned. Accor, however, intends to differentiate itself from other proposed hotels such as the 674-bedroom Grand Hyatt Hotel, the 156-bedroom Hilton and the 172-unit Dubai Marriott Executive Apartments, by targeting the mid-market and budget market. Accor's other proposed hotels for the region include a 130-bedroom Sofitel Al Ain, UAE, due to open in September 2001; a 180-bedroom Novotel in Bahrain; a 130-bedroom Sofitel in Yemen and a 330-bedroom Sofitel in Makkah.

Carnival Corporation of the USA has announced that it is to relinquish its ties with Airtours, the UK's leading tour operator. Carnival is the tour operator's largest shareholder and is expected to net £350 million from the sale of its 25% stake. Carnival's Chairman and Chief Executive Micky Arison, stated 'strategic reasons for Carnival's continued minority ownership in Airtours are no longer compelling'. The announcement overshadowed Airtours' interim results, which proved better than analysts had predicted. Despite an operating loss before exceptionals of £77.4 million, turnover rose 32% to £2.1 billion. Furthermore, strong forward bookings give an encouraging outlook for the year.

Corinthia Hotels, the Maltese-based hotel company, has announced plans to invest euro 69.8 million in the reconstruction and refurbishment of the five-star Budapest Royal Hotel, expected to reopen in summer 2002. Corinthia Hotels operates one other hotel in Budapest, the five-star, 310-bedroom Hotel Acquincum which last year achieved an occupancy rate of 68%. In April, Corinthia Hotels announced plans to invest euro 56 million to buy and renovate hotels in Croatia. Corinthia Hotels has applied for the privatisation of the Croatian hotelier Cavtat and plans to invest euro 20 million to convert the property into a five-star luxury hotel.

In its bid to gain a greater presence in Greece and in particular Attica, Accor, has announced that it has formed an alliance with the Greek-based hotel company Chandris Hotels. Accor will take on the management of Chandris Hotels and acquire a small stake in the company's capital, in exchange for its stakes in the Novotel Athens and the Sofitel Spata Airport. Together, the two companies plan further co-operation and are understood to have identified various properties through which to promote the Ibis brand. Meanwhile, Accor, which last year purchased a 20% equity stake in Orbis, the Polish hotel company, plans to announce its strategy for a merger with Orbis by mid-June. To date there has been no details available concerning the merger. Analysts are looking for a strategy which would improve Orbis's image, following first quarter financial results falling below analysts' expectations.

HVS International's London Office has published the Hotel Valuation Index 2001 (HVI 2001), its annual review of trends in European hotel values. The survey now covers 29 gateway cities across the continent, with the largest gains in value enjoyed by hotels in Amsterdam, Berlin, Milan, Brussels and Prague. The HVI 2001 shows that hotel values (expressed in local currency per room) rose by 7.6% across Europe in 2000 compared with 2.7% in 1999, 9.1% in 1998, and 12.0% in 1997. London remains the most expensive hotel market, with values per room exceeding euro 550,000 per room. The average for Europe as a whole across the 29 cities in the survey is euro 230,400. HVS International anticipates continued increases in European hotel values, although growth is expected to be slightly lower than in 2000. Please click on the following link to download a copy of the publication: . Alternatively, the publication will be distributed to all readers of HVS Hospitality Enews next week.