HVS Hospitality Enews - W/e 16 November 2001

In its third-quarter trading update, Hilton Group revealed that compared with the same two months last year RevPAR had fallen by 10.7% in September and October, warning that the decline was expected to continue for at least the next six months, particularly at hotels in gateway cities such as London, Paris and Amsterdam. To date, the group's five-star hotels in London have been hit hardest, with RevPAR for the two months plunging by 31.7%. The group revealed last month that it had seen occu pancy at all its London hotels drop 20% in September in the wake of the terrorist attacks in the USA. In contrast, the group's provincial UK hotels and those in Germany and Scandinavia have fared better: RevPAR across continental Europe fell by only 17.7%. Some good news came with the announcement that Hilton's hotel division showed an increase in pre-tax profit of 2.7% for the four months to 31 October. In addition, the group's betting and gaming businesses, from which it derives almost one-fifth of its profits, showed increased turnover, aided in part by the abolition of betting duty. Meanwhile, Scandic Hotels, which Hilton acquired earlier this year, is to operate the 220-room Palmen hotel project in Linköping, Sweden. The project was recently sold by Sweden's NCC to Norway's City Finansiering for euro 15.3 million and will be completed by May 2002.

Radisson SAS, Swissôtel and Millennium & Copthorne are reportedly close to completing deals with the Turkish government to operate or lease hotels from a selection of six state-owned properties shared among the cities of Istanbul, Ankara, Izmir and Bursa. All the hotels on offer have good locations but are currently unprofitable. The government hopes to make a net profit of euro 143.8 million from the 15-year plan as it looks to pull the country out of recession by selling or leasing state enterprises to meet budget targets backed by the International Monetary Fund. Meanwhile, luxury hotel operator Conrad Hotels is looking to establish a hotel in the Turkish capital Ankara. Conrad presently operates one hotel in Turkey, the 625-room Conrad Istanbul.

NH Hoteles has given an update on its recently announced plans to establish NH as its flagship pan-European brand. The NH brand will replace the Golden Tulip, Tulip Inn and Alfa brands, acquired when NH Hoteles purchased Dutch chain Krasnapolsky last year, in the Netherlands, Belgium, Germany and Switzerland. The Atlanta and Brussels Airport hotels in Belgium, and the Grand Krasnapolsky and Amsterdam Centre hotels will be the first hotels to be rebranded, but the process as a whole will be gradual and will be determined by the requirements and circumstances of each hotel. NH Hoteles has also revealed that synergies following the merger with Krasnapolsky will boost operating income by euro 43.4 million between the last quarter of 2001 and 2005. Meanwhile, Sol Meliá has made its debut on the island of Malta with the official inauguration of the Sol Suncrest hotel in the northern resort of Qawra. The 458- room, four-star hotel, which Sol Meliá will manage under an agreement with Suncrest Hotels, will be the group's tenth hotel in ten different countries around the Mediterranean region.

A partnership between Accor and French holiday resort operator Club Méditerranée (Club Med), which has been long-rumoured, has now been ruled unlikely by Accor's founding co-chairman Paul Dubrule. Although Mr Dubrule felt that Club Med had some valuable sites and agreed that Accor ought to have exposure to the tourism industry, he said that Club Med was too expensive and was in a currently vulnerable sector. Club Med recently reiterated its interest in possible alliances as it seeks an upturn in its fortunes. Elsewhere in France, the budget hotel chain Mister Bed has been acquired by American investor Lone Star. The portfolio of 24 hotels, some 1,859 rooms, is spread among major towns and cities in France and supplements Lone Star's 13 existing properties, some 1,260 rooms, in the country. Lone Star plans to grow the Mister Bed chain through the addition of further hotels.

According to sources close to the company, Jurys Doyle is planning to build a second hotel in Glasgow, which would complement its 136-room, three-star Jurys Glasgow Hotel. The proposed hotel would be aimed at the mid-price market and would reportedly have in excess of 300 rooms. Meanwhile, Choice Hotels Europe (CHE Group) has sold the 75-room Quality Hotel Ayr to an unnamed private buyer for £900,000, payable in cash on completion. In common with CHE Group's two other recent disposals, the proceeds will go towards paying off the group's bank loans. Elsewhere in Scotland, the Togwell family is inviting offers in excess of £695,000 for its 65-room, two-star Esplanade Hotel in Dunoon. South of the border, the Gloucestershire town of Cheltenham may see a new £1 million 91-room, four-star hotel if developers Pine Hall are granted planning permission. Pine Hall, which first put the proposal before the local council in March, envisages the hotel as catering for corporate events and is in negotiation with eight hotel firms. Meanwhile, a group of shareholders headed by Simon Lowe, Howard Malin and Andrew Leeman has sold the 32-room Bishopstrow House Hotel in Warminster, Wiltshire, to Von Essen Hotels for an undisclosed sum. Von Essen Hotels operates six country house hotels in the UK.

Orient-Express Hotels, which operates 22 de luxe hotels worldwide, has seen revenue and net income for the third quarter to 30 September decline in comparison with the same period last year as a result of the events of 11 September. In the wake of the terrorist attacks, the company warned that it would be unlikely to meet its target for full year net income owing to the ensuing downturn in the third quarter and a traditionally weak fourth quarter. Net income for the third quarter was US$7.5 million, down almost 30%, with revenue of US$67.9 million down 7.3%. However, the company said that it had made a significant recovery in October and was also looking at several potential acquisitions now that prices were lower.

Germany is set to see two new luxury hotels open in 2004. Six Continents is entering into a joint venture with Germany's Dorint Hotels to build a 286-room hotel on the select Königsallee shopping street in Düsseldorf. Meanwhile, Hilton is to open a 566-room, five-star hotel on a mixed-use developement adjacent to Berlin Zoo. Hilton currently has one hotel in the German capital, the 502-room Berlin Hilton. Meanwhile, according to Ghislain Lenaers and Vsevolod Iampolski, the Honorary Consuls of Belgium and Luxembourg, respectively, the two countries are to invest euro 22.6 million in building a four-star or five-star Radisson SAS hotel in the Moldovan capital Kishinev. The project was described by the two consuls as strategic and favourable to the Moldovan economy. Moldova's prime minister Vasile Tarlev added that there was another possible project open to study; namely, the reconstruction of the National hotel, work which could cost up to euro 7.9 million.

Luxury hotel operator Four Seasons Hotels and Resorts has announced its results for the third quarter to 30 September. Net income of US$20.1 million was up by 38.6% on last year's comparable period. However, this figure was boosted by the disposal of the group's 25% ownership interest in The Regent Hong Kong Hotel for a gain of US$15.1 million, and its 67% interest in the 162-room Four Seasons Prague to Dublin-based Quinlan Partnership for a gain of approximately US$4.1 million. The terrorist attacks of 11 September and the general economic situation meant that the group's 22 US hotels achieved 52.9% occupancy in September, a fall of 24.7 percentage points on last year's comparable period, which translated into a fall in RevPAR of 20.4%. RevPAR at the core European hotels fell by 1.9%. The company expects overall RevPAR to fall by 30-35% in the fourth quarter to give a full year 2001 decline of 12-13%. Nevertheless, the group is to forge ahead with the addition to its portfolio of the 165-room Four Seasons Hotel Buenos Aires and the Four Seasons Resort Carmelo in Uruguay, for which it has signed management agreements. The company also expects to open a further 11 hotels worldwide over the next two years in locations including Budapest, Cairo, Sharm el Sheikh, Amman, Riyadh, Doha, Shanghai, Tokyo and Miami.

Hungary's Danubius Hotels has issued its results for the nine months to 30 September. Pre-tax profit of euro 18.5 million was up 0.2% on last year's comparable period. Net sales also rose, by 10.8% to euro 107.3 million. However, despite these positive results, Danubius is to shed between 200 and 250 jobs by the end of 2002 as part of a cost rationalisation programme sparked by the events of 11 September. The subsequent decline in tourism has led to fiercer competition in Hungary. Elsewhere, Hungarian travel agency Vista has signed a contract with an unnamed Dutch investor to build a new euro 13.9 million apartment hotel in Budapest. The property, which would include 'Vista' in its name and which would be operated by Vista, would have 120-150 units and is scheduled to open in 2003-04.

The share price has performed well despite the group's announcement of recent poor results and possibly worse to follow. Lehman Brothers' analyst Fraser Ramzan said the group's RevPAR was in line with expectations.

Confidence in the group has been encouraged by the announcement of its cost savings plan and a synergies plan that will boost operating income over the next four years.

Some analysts have downgraded the group's stock after last week's disappointing results for the first nine months of 2001. Analysts are not optimistic about the group's prospects over the next few months.