HVS Hospitality Enews - W/e 12 October 2001

Spanish hotel company NH Hoteles has announced its results for the first nine months of 2001. Total sales of euro 547.6 million were up 46.6% compared with the same period last year, yet the result was below some analysts' expectations. Hotel sales contributed euro 511.1 million to the total, an increase of 62.1% on last year. Average occupancy at the group's comparable hotels was 71%, with a 2.8% growth in RevPAR at its comparable hotels in major cities. The company said that the terrorist attacks in the USA had had a limited impact on business, revealing that total sales for September, with the inclusion of sales from its five Mexican properties, were up 4.3% to approximately euro 64.6 million. However, RevPAR at the group's comparable hotels in September was down 5.4% which, according to one analyst, was due more to weaker demand than to the terrorist attacks. Another analyst, Ignacio Chacon of Ibersecurities, said that the group would feel the impact of the terrorist attacks over the coming three months and predicted that RevPAR would be flat. Meanwhile, NH Hoteles has announced the opening of two new NH Express hotels. The first, a 60-room, three-star hotel in San Pedro de Alcántara, Marbella, cost euro 4.2 million and will operate under a management contract. The second is a 78-room hotel in Leganés, near Madrid, which will operate under a lease contract and cost euro 6 million. The latest openings bring the total number of NH Express hotels to 13, some 1,076 rooms, with a further six hotels, some 523 rooms, under construction.

Accor has signed a 15-year contract with Société Hotelière du Palm Beach to manage the Palm Beach hotel in Marseilles. The hotel is set to reopen in April 2002, after a euro 16.7 million renovation, as a four-star luxury hotel under the Sofitel brand. The hotel will complement Accor's existing Sofitel in the city, the 130-room Marseille Vieux Port. Meanwhile, the company has announced that 15 projects planned for its economy brands Motel 6 and Red Roof Inn in the USA have been frozen in the aftermath of the terrorist attacks.

In an update on the announcement made at its annual general meeting in August, Jarvis Hotels has warned that sales and margins for the remainder of its half-year would be further weakened by the effects of the terrorist attacks in the USA and by the postponement of last month's Ryder Cup golf tournament. The company said that leisure sales, which account for 25% of turnover, had fallen by a further 25% since 11 September, although its core UK conference business was unaffected. In August, Jarvis Hotels warned that turnover for the first 16 weeks of its financial year was down by 5% on the comparable period of the previous year due to the effects of foot-and-mouth disease. Management has already taken steps to tighten up costs and improve operating efficiency. Thus, ongoing capital expenditure has been almost halved to £13 million, and the £200 million sale and leaseback plan announced in August has been delayed. Following this second warning, UBS Warburg cut its estimate of the group's pre-tax profit for the full year ending 31 March 2002 to £21 million. Jarvis is due to issue its first-half results towards the end of November.

In an effort to minimise its exposure to risk following the terrorist attacks in the USA, Marriott International has withdrawn from a euro 155.5 million project to build a hotel and conference centre in Stockholm. Marriott was part of a consortium including the construction companies Peab, of Sweden, and Strabag, of Austria, which had been chosen by the City of Stockholm to redevelop the Klaraterminalen, Stockholm's former central post office. The City of Stockholm is now inviting new bids from those parties which took part in the original bidding. Among the parties involved are the consortia Skanska, which includes Pandox, and NCC, which is reportedly linked with Accor. Meanwhile, in St Petersburg, Marriott's plans to operate a proposed 320-room hotel on the Fontanka Embankment in the city were dashed by the city's investment and tender commission. It overruled a decree by the city's governor which had given the go-ahead to the Lomonosov 7 limited partnership for redevelopment of a run-down building on the embankment into a hotel.

The sale of two of London's luxury hotels, The Lanesborough at Hyde Park Corner and the Langham Hilton in Regent Street, may be postponed as visitor numbers fall in the wake of the terrorist attacks in the USA. Abu Dhabi Investment Authority, the owners of the 95-room Lanesborough, put the hotel on the market in March this year and reportedly attracted the interest of Syrian-born investor Simon Halabi, who emerged as the surprise favourite with a bid of £120 million; Hyatt; a joint venture formed between Marriott and Bulgari; and the entrepreneur Ty Warner. The reported asking price for the hotel has been put at between £110 million and £130 million, and in any sale the hotel was destined to become the first to break the £1 million-a-room barrier. However, just days before the terrorist attacks, industry analysts were predicting that the sale would fall through as they believed the asking price was too high given the economic circumstances at that time. The 429-room Langham Hilton was put up for sale in August by its owners Great Eagle Holdings, based in Hong Kong, for an asking price reported to be £200 million.

According to some analysts, the terrorist attacks in the USA may mean that French tourism and leisure group Club Méditerranée (Club Med) fails to make a profit in its financial year ending 31 October. Club Med derives 20% of its clients from the USA and, according to analyst Arnaud Frerault of SG Securities, it is the end-of-season visitors who traditionally generate the group's profits. The news will ome as a setback to the group's Chief Executive Philippe Bourguignon who had stated in March that second-half results would make up all or part of the shortfall of the first six months, a period blighted by two profit warnings ahead of disappointing first-half results.

Although occupancy for September 2001 at Hilton Hotels Corporation's comparable owned hotels was 20-25% lower than it was in the same month last year, company President and CEO Stephen F. Bollenbach is confident that occupancy and ADR may approach the levels of 1999. Mr Bollenbach said that occupancy at its owned full service hotels, which are dependent on fly-in custom, was recovering - 66% on 3 October compared with 29% five days after the terrorist attacks - while those hotels relying mainly on drive-in business had seen consistently good levels of occupancy. ADR at the comparable owned hotels in September 2001 was down 20% on the same month last year, although in the first three days of October it had returned to its 1999 level of US$160. At Hilton's franchised hotels, an ADR of US$84 was 4% up on its 1999 comparable. Although reservations are increasing weekly and cancellations are falling, Bollenbach agrees that times are still bad. However, he is focused on 'managing for recovery': capital expenditure on maintainance of its owned hotels will proceed in 2002, as will significant renovation and investment projects currently underway.

Mövenpick Hotels and Resorts, the Swiss-based hotel and restaurant group, is to manage a new 120-room international first class hotel and conference centre, which are due to open in Bahrain in summer 2002. According to its President and CEO Jean Gabriel Pérès, Mövenpick has always had a great interest in Bahrain. The Gulf region has seen several new openings recently, including the 374-room Ritz-Carlton hotel near Doha in Qatar and the 154-room Hilton Dubai Creek, managed by Hilton International. Hilton International's Regional Sales and Marketing Director Guy Epsom said that the company's new 220-room hotel in the emirate of Ras el Khaimah, originally slated to open on 1 October 2001, would now open in December 2001. Elsewhere, Marriott International announced that it was to invest euro 142.5 million in a 310-room, four-star Courtyard by Marriott hotel due to open in Kuwait in the first quarter of 2003.

HVS International's London Office has recently released the 2001 edition of Trends and Opportunities for Hotels in the Middle East. This annual report reflects the position as at the end of 2000. Clearly the effects of the tragic events of 11 September are still unfolding and will need to be taken into account. A further update is therefore planned for publication early in the new year. The survey reports on a sample of 103 branded first class hotels. These hotels represent more than 31,000 rooms in ten Middle East countries. The report's author, Gerard Greene, confirmed that operating performances for hotels in the region showed increased performance levels in 2000 compared to 1999. Overall, the region's hotels recorded an average occupancy of 68% in 2000: the highest occupancy level for nine years. Please click on www.hvsinternational.com to download a copy of the publication.

Absolute Share Price Performance Over the Past Week 04/10/01-11/10/01

Jarvis Hotels
The share price responded accordingly to the company's issuing of its second profit warning within the space of three months.

Despite the group's expression of satisfaction with its nine-month performance, the share price has fallen slightly in response to some analysts' concern for the group's outlook.