volume 10 issue 5 – may-june 2015 hotelanalyst€¦ · of starwood hotels & resorts, driven...

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InterContinental Hotels Group’s CFO declined to comment on any possible deal involving Starwood Hotels & Resorts.

The refusal came as the company reported its

first quarter figures, which saw it open 7,000

rooms, but remove 6,000, a rate of exits it said

would slow during the year.

The group has been linked to a possible takeover

of Starwood Hotels & Resorts, driven by activist

shareholder Marcato Capital Management’s desire

for a merger. Alluding to the rumours, CFO Paul

Edgecliffe-Johnson told analysts: “We can’t really

comment on any specific situations.”

Echoing comments made at Hilton Worldwide’s

earnings call, Edgecliffe-Johnson said: “We’ve

got a good track record of creating value through

focusing on our brands, expanding those out

organically, launching new brands, taking our

brands into new markets and putting some capital

behind that where we think it’s appropriate.

“We always do a buy versus build analysis when

we see a new customer segment and taking that

as an opportunity for us to deliver to guests in that

segment. That’s what helped us identify Kimpton

as a business that we really wanted to acquire

last year. Where there’s an opportunity to get

something really attractive then – and if the value

works – we’ll go after that.”

The completion of the Kimpton acquisition in

January saw the company deliver net system size

growth up 4.9% on the year for the quarter (3.3%

excluding Kimpton), which the CFO described

• Hilton’s ‘entry level brand’ p4

• Accor opens booking to independents p6

• Duet makes Africa move p17

• The non-rooms dilemma p21

• PIGS feeding investor appetites p24

IHG side-steps the Starwood question

as its strongest third quarter for opening in five

years – adding 57 hotels – and its strongest third

quarter for signing in seven years, with more than

one hotel a day.

He commented that the Holiday Inn brand

family remained the company’s “engine for

growth”, accounting for nearly three quarters

of openings, with 5,000 rooms in the quarter,

and over 9,000 room signings. The brand also

accounted for around half of the 6,000 rooms

removed from the group’s portfolio during the

quarter, as the company continued to apply its

new standards across the estate.

During the quarter 7,000 rooms were opened

in the quarter and 6,000 were removed, 3,000 in

the Americas. IHG’s pipeline increased to 201,000

rooms, with nearly 90% in what the company

called “priority markets” and 45% under

construction. The company signed 14,000 new

rooms into the pipeline “as financing conditions,

particularly in the US, remain favourable for our

preferred brands”.

Edgecliffe-Johnson said that, consistent with

last year, the company expected the run rate

for exits to decrease from the quarter one level,

expecting a removal rate of 2% to 3% of its

opening room count for the full year.

The CFO said that the group was looking to the

Guest Reservation System it is developing with

Amadeus to “support future growth”, describing

“developing industry-leading technology” as “a

key enable of our commercial plan”.

As launch partner, IHG will work with Amadeus

Volume 10 Issue 5 – May-June 2015

continued on page 3

Savills HotelsFor investors, owners and operators alike, the hotel industry faces singular and extraordinary pressures. Our team understand some of these pressures, and they know the role property plays at the heart of any hotel business. www.savills.com +44 (0)20 7499 8644

Contents

News Review 3-19

Hotels piquing interest – Hilton’s

entry level brand – M&C, PPHE invest

– Accor opens booking platform –

CampbellGray looks to mid-market

– New World’s new partner –

Groups lift Hyatt, Strategic – Action

expands – Swire exits UK – Spanish

hoteliers accelerate – Boutiques

move mainstream – Pandox lists –

Franchisors shine – China operators’

hopes – Duet for Africa – Elegant

listing – Barcelo builds Latin America

– CP ousts StayWell

Analysis 21-25

The non-rooms dilemma

– PIGS feeding investor appetites

The Insider 28

Not just a new CEO – Bud and

breakfast – Conrad sticks up for itself

www.hotelanalyst.co.ukVolume 10 Issue 5 – May-Jun 2015

All enquiriest +44 (0)20 8870 6388

Editorial director Andrew Sangstere [email protected]

Deputy editor Chris Bowne [email protected]

Production editor Katherine Doggrelle [email protected]

Marketing Sarah Sangstere [email protected]

Subscriptions Anna Drabickae [email protected]

Design Lynda Sangstere [email protected]

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Hotel Analyst is published by

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Bubble, toil and troubleCommentaryby AndrewSangster

At the British Hospitality Association Summit

held at the end of June Mike Saul, head of

hospitality at Barclays, said that the debt markets

were “now almost oversupplied”, having gone

from a situation of virtually no funds being

available at the start of the recession.

Saul added that borrowers were now asking

for covenant light loans. And this was a narrative

heard too at the New York University hospitality

investment conference. In addition, the increasing

willingness of debt providers to increase the

multiples on which they make loans was raised at

the US event.

The US is a little way ahead of Europe in terms

of recovery. At the BHA Summit, Cody Bradshaw

of Starwood Capital made the point that the US

has seen six years of positive revpar growth. “The

UK has a long way to go and our investors agree,”

he said.

What we are seeing is a rerun of previous

boom and bust cycles. The debt markets are as

dysfunctional as ever: when money is tight and

most needed, when lenders stand to make the

most money, they are the most reluctant to lend;

yet when their margins have been shredded and

borrowers are requesting loans on terms that

cannot make sense, the banks fall over themselves

to hand out the cash.

The pro-cyclical nature of lending banks has

not been fixed by any of the myriad reforms

that followed the 2008 crash. Most worryingly,

the boom this time around looks set to be

particularly pronounced.

As Bradshaw said at the BHA Summit, the

amount raised from investors to plough into real

estate is “staggering”. It reflected the low interest

rate environment, he added.

With the prospect of interest rates remaining

low on historic terms for the rest of this

cycle, this stimulus is not going away. Adding

©This is copyright material. Strictly no photocopying or scanning – including sharing within your organisation

hotelanalystto this unprecedented monetary experiment is

quantitative easing which has pushed bond yields

to absurd lows.

There remains a significant gap between

bond yields and real estate yields. Historically, as

booms progress, this gap closes. If it happens this

way again (and why not?), then we will see eye-

watering prices paid for real estate over the next

few years.

And the bubble is not going to be focused on

the US. Bradshaw pointed out that of his current

fund, half of it would be deployed in Europe. The

past boom saw funds like his spend most of their

money outside of Europe. This time is different –

at least in this respect.

Bradshaw admits that UK prices for hotel

property are now high. But the UK remains an

attractive destination still as it is possible to do

business here. In much of the rest of Europe there

is too little liquidity with the possible exception of

Spain, he argued.

This appetite for hotel property means that over

the next 24 months there is likely to be a wave of

sales as funds that bought non-performing loans

– like Cerberus, Sankaty and Lone Star – sell, most

probably to private equity.

The good news, according to Bradshaw, is that

the new PE buyers will understand they need to

invest in properties that have had little spent on

them in over a decade. A major upgrade of the

UK’s and, less pronounced, continental Europe’s,

hotel stock is about to happen.

But then what? Have we built a much bigger

bubble than in 2007 only with central banks

having nothing left in their lockers to fight

back with?

Alongside these major cyclical challenges lies

the structural changes being wrought by the

digitisation of the industry. While there has been

much fuss made over the rise of online travel

agents, these players have been focused on just a

small fraction of the overall hotel business.

As more and more goes digital it is not just

the transient guest that the new digital players

will be poaching from hotels. This structural

shift is going to create as much trauma as

the coming boom and bust. If you want to

know more, be sure to come to Hotel Analyst’s

www.hoteldistributionevent.com.

In the meantime, there’s plenty for hotel

investors to chew on during the summer (assuming

you’re in the northern hemisphere) break.

Until this year it might have been possible to discuss whether an asset bubble was forming. Current evidence suggests that the debate must now centre on how and when the bubble will deflate.

©This is copyright material. Strictly no photocopying or scanning – including sharing within your organisation www.hotelanalyst.co.uk Volume 10 Issue 5 3

Bubble, toil and troubleNews

on the design, functionality and evolution of the

system, which will ultimately replace Holidex,

IHG’s proprietary reservation system.

While details of the product remain scant while

it is in development, IHG told Hotel Analyst sister

title Hotel Analyst Distribution & Technology: “The

community model involves a system being shared

by a number of companies. It’s highly innovative

and cost-effective, with Amadeus taking

responsibility for funding and maintaining the

system and each member paying a transaction fee

for usage. It’s a common approach and has been

utilised across the airline industry, with Amadeus

as the technology partner.

“The flexibility of the Amadeus community

model will allow IHG and other future community

members to use the GRS features in conjunction

with other systems to create competitive

advantage. As we’re the initial partner, we have

input into how the reservation system is designed,

which will give us an advantage over those who

join later – specific things we’ll have input on are

the design of the user experience; the system’s look

and feel; and which attributes can be searched,

filtered, booked and purchased by guests.”

Edgecliffe-Johnson told analysts: “We’re not

having to build our own back-end, that’s built

and paid for by Amadeus. What we’re building is

the bespoke system that we’ll put on top of that,

which I think is a differentiator for us.

“That bespoke front-end will allow us to offer

more personalisation and it will allow us to cross-

sell better when we get that in, so we think that

will drive revpar.”

The company has also announced changes

to the IHG Reward Clubs, with a new top tier

membership being introduced in July, offering

members 100% extra bonus points on qualifying

stays, which the group has claimed as an

industry first.

With both Choice Hotels International

and Wyndham Worldwide using their results

to announce the latest plans for their own

distribution technology, IHG will be hoping that

its own strategy – due to be released in 2017 –

will set it apart and attract the owners it needs to

kick-start its expansion before the pressure from

activist shareholder Marcato Capital Management

pushes it to more drastic efforts.

HA Perspective [by Chris Bown]: IHG is facing

tough times. While there is quiet for now, the

potential for a combination of IHG and the

embattled Starwood Hotels is odds on to be up

for discussion once again.

IHG’s management has once again delivered

a solid set of operational results, and its balance

sheet is among the most complete, as regards a

transition to an asset light hotel brands company.

But there remain questions about relative scale,

and about the rate of growth. Aside from bolting

on the Kimpton acquisition, portfolio growth has

withered. IHG reported a net portfolio increase of

1,000 rooms in the last quarter, when its peers

such as Hilton and Marriott are growing faster,

and accelerating their pipeline additions, too.

IHG has long been honest about actual system

size, quoting the numbers of rooms it loses as well

as those it has added. Sometime, those removals

are down to the company’s ditching of properties

that are failing to make the grade; sometimes – as

probably happened at the Heathrow Holiday Inn

recently – they are simply outbid.

While the emphasis on quality rather than simply

chasing quantity is to be welcomed, in terms of

the likely impact on future profits, the bare facts

are that IHG has been expanding less fast than its

peers. Does size matter? It does when analysts and

agitating shareholders stare at the graphs. While

the addition of Kimpton looks to have been a deft

move, it remains to be seen what synergies IHG

can garner from its new brand, outside the US.

Critics might suggest that IHG’s recent advances

into newer technology, and a revamp of the loyalty

programme, are merely keeping up with the

crowd. Choice and Accor are making interesting

technology moves, as the sector appears to

be moving towards cloud hosting; Starwood

and Hilton are chasing the first smartphone-

originated guest stays. On the loyalty front, IHG’s

announcement came as Wyndham announced

a similar upgrade for its own programme.

[Additional comment by Andrew Sangster]: At

Hotel Analyst we have long argued that the big

issue ahead for hotel brand/operating companies

is finding a role in a world where they are

outgunned marketing wise by online players.

We believe it is such a profound issue that not

only have we launched a separate newsletter on

the issue (www.ha-dt.com) but we also run a

conference (www.hoteldistributionevent.com).

IHG is at the very centre of this debate. In some

ways, it has done more than any other hotelier

to give its brands meaning. The launch of Even

Hotels and Hualuxe demonstrates clearly that IHG

understands the importance having hotel brands

that mean more to consumers than simply the

price bracket/amenity offer.

The acquisition of Kimpton was a similarly

inspired bolt-on of a chain that has established itself

as offering something beyond the commodity-like

quality of traditional big box hotel properties.

What is not yet clear is how IHG is going to

transform itself in the face of its diminished

marketing power relative to the online distributors.

The analogy favoured by Hotel Analyst sees

the online players being retailers and the hotel

companies the product brands, producing branded

goods to sit on the shelves of the retailers.

This is a far from perfect description of the

situation as there is enormous amounts of

shareholder value to be preserved in fighting off

the threat of the online players and maintaining

direct distribution.

But there is also an opportunity for the brave

hotel brand company to embrace the shift and

openly acknowledge its situation. The challenge

is in reshaping the relationship with hotel

property owners who will not put up with the

existing management agreement and franchising

structures in such a context.

Get it right though, and the first mover

has a huge chance to be the dominant hotel

brander globally.

continued from page 1

The company said that the sector would see

further growth in demand given a shortage of

investable stock in other asset classes, increasing

interest from Asian investors and a recovering

debt market.

CBRE reported that, as an asset class, hotels

were seeing the strongest increase in interest, with

EUR3.74bn of deals made. Total hotel investment

volume was up by 116% on the year in the first

quarter, against the real estate sector as a whole,

which saw investment up by 31%.

The company said that “growing institutional

demand for fixed-income, operational-lease

encumbered assets has resulted in lease yields

sharpening across Europe in the last 12 months.

Significant yield sharpening is also apparent for

unencumbered assets, as opportunistic investors

Hotels piquing interestEuropean hotel investment volumes more than doubled in the first quarter of 2015, according to CBRE.

continued on page 4

©This is copyright material. Strictly no photocopying or scanning – including sharing within your organisationwww.hotelanalyst.co.ukVolume 10 Issue 54

News

are keen to take full control of hotel operations

and aggressively asset manage to realise maximum

returns under improving trading conditions and

reduced pressure on operating costs.”

The UK has seen the greatest pressure on lease

yields. In London yields in Q1 2015 were 4.25%,

down from 5.5% in the same quarter in 2014,

while in the regions yields were 5%, down from

6.25% (for prime sites).

Strong trading growth in the UK, with trevpar

up 1.1% on the year in London and 5.3% in the

regions, was expected to continue on the back of

forecasted economic growth and a limited supply

risk, with high market liquidity and a continuation

of mounting transaction volumes the likely result.

Yields were flat for leases in Paris, Warsaw and

Brussels, but down across the rest of the region.

For management contracts and vacant possession,

yields were either flat or down.

Southern Europe is recovering, with EUR878m of

deals done, mostly in Spain where private equity is

being drawn to a recovery in trading, with goppar

up 24.4% on the year in Madrid. Transactions were

up 238% in the country for the quarter.

CEE and Austria saw the most dramatic growth

in transactions – up seven times – from a low

base, as institutional funds looked to Vienna,

Prague and Tallinn. CBRE described the market as

“benefitting from a spill-over of capital previously

looking at assets in Western Europe, based on

attractive yields and healthy performance data”.

While London and Paris saw yields under

pressure as supply was limited, Germany continued

to hold its position as a safe haven for investors,

with growth in transactions of 225%. CBRE noted

that low government bond yields had increased

the interest of institutional investors to purchase

fixed income, core hotel assets, which dominate

the German market. With trading strong, interest

is expected to grow and the country has seen this

reflected in some pressure on yields, with a drop

from 5.75% to 5.0% for the big five cities.

CBRE anticipated further growth in demand for

European hotel investment “given a shortage in

investible stock in other asset classes, the increasing

interest of Asian investors, a widely positive trading

performance outlook, lower-for-longer interest rates

and a recovering debt market”.

This has proven to be the case. Since the end

of the quarter a number of prominent deals

have been done, including the purchase by

Constellation Hotels Group of Coroin, the holding

company for Maybourne Hotel Group, which

owns and operates the Claridge’s, Connaught and

Berkeley Hotels.

Accor has also continued to embrace its

expanded role as a hotel owner, both buying and

selling within its estate, most recently with the sale

and franchise-back of 29 hotels in Germany and

the Netherlands for a total value of EUR234m,

including a EUR25m renovation plan. Of the 29

hotels sold, 27 were acquired in June last year as

part of the acquisition of the Moor Park portfolio.

The deal illustrated that the transactions market

in Europe is currently flexible enough to allow

both new entrants – currently taking the form of

largely Asian investors – and current players to

pursue their investment strategies.

HA Perspective [by Chris Bown]: Welcome to

the world of cash chasing investments. A decade

ago, hotels were a hidden vehicle appreciated by

the few, but today they are seen by the many as a

cash generating asset.

There’s more appetite to head further afield, too.

Recently we have seen Chinese insurance companies

start their international asset allocation campaign,

with major purchases in New York and Sydney. And

Qatari investors, all the while continuing to add to

their European holdings, recently bought into a

new Hong Kong joint venture.

With yields reducing, and asset prices rising,

markets inevitably move towards a point where

new development makes financial sense. This

alternative has, of course, been compromised by

a lack of development finance, but with banks

doing shared-risk group-funding deals, and other

entrants moving into development finance, this

too is an area where the ground is shifting.

[Additional comment by Andrew Sangster]:

Hotel asset prices have, like most other asset

classes, reached levels last seen at the height

of the previous boom. Is the bust just around

the corner?

The bear case is centred on historic metrics

within the asset class. And certainly, prices look

very full on this basis.

But the bulls would urge you to look at where

hotels sit in relative terms to other asset classes.

With bonds at unprecedented lows there appears

much more room for yield compression. In this

analysis we are barely mid-cycle and there are

multiple years ahead of further rising prices which

anyone jumping out now would miss out on.

The late Tony Dye of investment firm Phillips

& Drew famously called the huge dot com share

price crash but did so two years too early. He was

ultimately proved right but in the meantime he

lost his job.

It looks highly likely we will again have a Dr

Doom scenario in a few years. But there is much

money to be made before then. Just make sure

you are sitting on chair when the music stops.

continued on page 5


The group continued to cut debt and said that it

intended to start returning capital to shareholders

during the second half of the year. The company

benefited from conversions from other flags, with

40% of openings during the quarter coming from

non-Hilton brands.

Chris Nassetta, president & CEO, told analysts

that the group was considering “an entry-level

brand that would replace what space Hampton

has exited as it has moved up. We could have a

slightly lower price point brand in the mid-scale

segment and price point, that would allow us to

capture customers earlier in their lifecycle and

garner their loyalty.”

Nassetta said the group was “very hard at

work”, with an announcement expected within

the next 12 months, with the brand likely to

launch in the US as a franchise flag.

Commenting on the potential for a takeover

of Starwood Hotels & Resorts, Nassetta said: “It

would be silly to say we would never participate

in M&A activity” but that any deal would have to

be a “thoughtful strategic fit” with “the economic

drivers such that you could see significant

value accretion”.

Nassetta concluded that the company had “an

amazing set up” which would see it “continue to

grow at an accelerating pace” adding: “I do not

think we have a strategic gap that we cannot deal

with ourselves”.

The company has continued to rationalise its

estate, announcing plans to sell the Hilton Sydney

for AUSD442m (USD351m), continuing to manage

the property subject to a 50-year management

Hilton to launch ‘entry level brand’Hilton Worldwide raised its full-year earnings guidance and confirmed plans for an “entry level brand” within the next year.


agreement. Hilton expects to use the proceeds of

the sale, net of transaction costs, to further reduce

long-term debt. The group ended the quarter on

3.9 times net debt to adjusted Ebitda.

CFO Kevin Jacobs said: “We remain well on our

way to achieving our target leverage goals during

the second half of the year. At that point, we

intend to begin returning capital to stockholders,

starting with the introduction of a dividend.”

Hilton Worldwide opened 53 hotels with over

8,000 rooms during the first quarter of 2015,

over 40% of which were conversions from non-

Hilton brands. Nassetta said the conversions were

largely into the DoubleTree and Curio brands,

commenting: “At DoubleTree, it’s coming from

some of our competitor brands, a little bit of

independent. If you look at Curio, a little bit of

competitor brands but largely coming from

independent hotels.”

The company has maintained its net unit growth

forecast of 40,000 to 45,000 rooms, representing

6% to 7% room growth in the management and

franchise segment for the year. Nassetta said that

the group continued to see “tremendous interest”

from owners in Canopy, its new accessible lifestyle

brand. Canopy has a total of 15 hotels either in

the pipeline or with signed letters of intent.


News

continued on page 6

For the full year, the company raised the low

end of its previously-issued guidance range. It now

projects adjusted per-share earnings of 79 cents

to 83 cents, versus the earlier range of 78 cents

to 83 cents.

The CEO said that he believed that the company

was at a “very healthy part” of the cycle, adding:

“I think the fundamentals are as good as I’ve

ever seen them. Supply is still at historically low

levels and everything that you see going into the

next two or three years suggests it’s going to be

significantly below 30-year averages. We feel

really good about where we are in the cycle.”

Having reported 6.6% revpar growth on the year

in the first quarter, in the US, where the company

generates nearly 80% of its adjusted Ebitda, the

group forecast mid to high single-digit revpar for

the full year, with continuing demand growth

driven by an improving economy, combined with

historically low supply growth should continue to

delivering solid fundamentals.

In Europe, the group expects mid single-digit

revpar growth, anticipating mixed performance

across the region, with positive trends in Germany

and Southern Europe tempered by anticipated

economic and geopolitical challenges in France

and Eastern Europe, respectively.

HA Perspective [by Chris Bown]: So Nassetta has

counted Hilton out of the Starwood chase, instead

busying himself with adding new brands.

Hilton’s interest in a new budget brand presence

is at odds with the market. Other majors such as

Marriott have little interest in the segment, declaring

that trendy new Gen Y brand Moxy is as cheap as

it will go. Choice, meanwhile, one of the leaders in

the segment, is looking to move upmarket.

However, Hilton’s interest will have been

increased by news from analysts that the economy

sector is performing well in America, where it

intends to start. STR figures suggest the segment

outperformed the US market as a whole last

year, with revpar up 8.7%. Supply growth for

the segment is below the US average, at 0.3% vs

0.9% for the industry overall in 2014.

Among those brands profiting from the situation

is Motel 6, which Blackstone owns. The recently

refinanced portfolio saw an average 67.2%

occupancy last year with revpar up 9.8%, now

standing 4.9% above the previous peak of 2007.

With Hilton under pressure to start paying a

dividend, and continue to pay down debt, don’t

expect a major takeover bid, to get Hilton’s

economy journey off the start line. As you were,

Travelodge owners.

M&C opened four hotels in the quarter, and

stands with a pipeline of 20 to add to its current

portfolio of 123 properties globally. It is also in the

process of refurbishing five hotels, denting income

through the current year.

PPHE, meanwhile, operating regionally across

Europe, delivered strong operating figures

but warned that investment in expansion and

extensive renovations would hit results through

the rest of the year.

At M&C, higher room rates drove group

revpar up 2.6% at constant currency, or 5.8%

as reported. While revenue was up 8%, profits

before tax were down 5% as labour costs hit New

York and Singapore hotels.

Refurbished rooms and contributions from

newly-acquired hotels helped the figures.

Australasia was the best performing region in

the first quarter, with revpar up 15% as Chinese

visitor numbers increased. The US hotels delivered

an 11.8% uplift in revpar, flattered by the

contribution from the Novotel New York Times

Square. Excluding this, New York hotels suffered,

with revpar falling 8.8%.

Across Europe, revpar increased an average

5.7%, with rest of Europe performing better

than London, where the Chelsea Harbour hotel

delivered most of the 2.3% revpar gain. In Asia,

room rates tumbled 10.5% in Singapore, while

occupancy dropped in the rest of the region

by 7.4%.

“Overall trading results in the first three months

of 2015 were in line with the slower trading

pattern that the group normally sees in the first

quarter and in line with expectations, although it is

too early to predict performance for the full year,”

said chairman Kwek Leng Beng. “Management is

focused on maintaining profitability by containing

costs, especially in Singapore and New York.”

Revpar picked up 13.9% at PPHE, with

occupancy up 4.8% to an average 77.5% and

room rates up 6.9%. Revenues were up 12.5% for

the three month period, to EUR61.5m, flattered by

exchange rates.

“During the quarter we have made good

progress across our new hotel projects and hotel

renovations, with our renovation and rebranding

project in Croatia nearing completion in time

for the summer season,” said CEO Boris Ivesha.

“Whilst extensive renovations at several hotels

planned for 2015 may have a temporary negative

effect on the performance at these hotels due

to closures of rooms and public areas, the board

believes that this investment will have a positive

impact on the group’s long-term performance. ”

At PPHE, there were concerns that the strong

pound may start to discourage mainland European

guests from visiting London, where the company

has a substantial amount of its portfolio.

“The strength of Sterling against the Euro

may have an adverse effect on demand from

European markets for our hotels in the UK,” said

the company in its announcement. “Management

is closely monitoring the group’s performance to

ensure such trends are identified and acted upon

if required.”

As with any group that owns significant

M&C, PPHE plan investmentsBoth Millennium & Copthorne and PPHE looked forward to expanding their portfolios, as the pair delivered quarterly trading updates.


News

The company said it expected the move to triple

the number of hotels offered on its Accor Hotels

website, taking it to more than 10,000 rooms

by 2018.

In a presentation, the company confirmed

that it would continue to work with online

travel agents.

The new service will gradually become available

to hoteliers at the end of June, with guests able

to access it from July 2015. As part of the plans,

the group has changed its name to Accor Hotels

to tie it more closely to its AccorHotels.com

website, which will be the central point of contact

for consumers.

Sébastien Bazin, Accor Hotels chairman & CEO,

said: “This is the first time when a marketplace as

defined by Amazon has existed in the travel space

by hoteliers, for hoteliers. We need to stop having

the perception that the lowest price is on the

online travel agent sites. We need to disseminate

this truth.

“We’re not building this to have additional

revenues. We’re doing it in order to have a

connection with the customer which is going

to be more frequent. In the digital world, all the

companies that are successful today have three

things: traffic, technology and choice. They also

have frequency of customer relations which are

monthly, weekly, even daily.”

Jean-Luc Chretien, EVP marketing &

distribution, added: “We will not demand an

exclusive relationship with any of our partners. All

we’re doing is offering an additional channel at a

more advantageous cost. Using our channel will

be the lowest cost acquisition. There is no entry

fee, but reservation comes with a commission.”

The company will invest EUR22m on its digital

transformation, on top of EUR225m previously

announced. The move follows the group’s

acquisition of Fastbooking.

Accor Hotels said that it had ‘higher ambitions’

in the UK and Germany, where it had fewer hotels

than markets such as France and has identified 300

cities globally to target. It will look in particular at

the midscale and upscale sectors.

The independent hotels distributed on the

AccorHotels.com platform alongside the group’s

branded hotels will be selected, it said, on the

basis of hotel criteria with guest reviews taken

into account. The company said that AccorHotels.

com was already the leading online hotel booking

platform in several markets, including France,

Brazil, Australia and Germany.

Bazin said: “Accor Hotels is placing its powerful

digital tools at the service of independent hoteliers

and increasing the choice available to its customers

by adding more hotels and more destinations.

“We are becoming a trustworthy, selective

and transparent third party and we are once

again amplifying the in-depth transformation

undertaken within the group since 2013. These

initiatives and the launch of the new Accor Hotels

application are designed to enrich the content of

our digital ecosystem and reinforce our position

as a hospitality industry pioneer and trailblazer.”

The latest version of the AccorHotels app will

see all the brand apps united in a single app

which features all the group’s hotels and, as of

this summer, will also include all the independent

establishments offered on the booking platform.

The group said that it aimed for the app to

become one of mobile device users’ top three

travel apps. It includes features such as: storage

of information such as flights, train tickets, an

e-check-in/fast check out, access to the digital

press, city guides (available from early July), and

other services which will be gradually introduced,

notably taxi booking and room service ordering.

In March this year deputy CEO Vivek Badrinath

told Hotel Analyst Distribution & Technology

that Accor would consider adding hotels to its

portfolio without requiring them to join up to

its existing brands.

Badrinath said: “Are we open to distributing

third-party hotels? Why not? It’s an easy yes in

places where we’re not. If we want a hotel in

Kazakhstan, where we don’t have any hotels and

it could be added and customers could earn points

with the loyalty system.

“Even in places where they’re not in the

Accor opens booking platform to independentsAccor is to open its booking platform to independent hotels, confirming plans first revealed to this publication’s sister title, Hotel Analyst Distribution & Technology.

properties, portfolio performance is affected by

refurbishments. M&C has five projects under way,

in Alaska, Buffalo, Los Angeles, New Zealand

and at the Bailey’s hotel in London. The company

opened four new hotels during the quarter,

in Oman, Saudi Arabia and the UAE, while it

terminated a franchise agreement in Wellington,

New Zealand; it now has 123 hotels open and a

pipeline of 20 more.

In London, PPHE is extending its Park Plaza

Riverbank hotel, adding 184 more rooms that

should come on stream at the end of this year. It is

also proceeding with a 494-room hotel in central

London and a 168-room hotel in west London,

both of which should open in 2016. Also through

this year, two hotels in Amsterdam and one in

Utrecht are due for significant upgrades.

HA Perspective [by Chris Bown]: M&C is not

alone in suffering a downturn in New York and

in Singapore, as both these markets experience

difficult operating conditions. But the rest of the

portfolio is delivering, and the active pipeline of

new additions and refurbishments continues

to improve revenues. Notably, however, M&C’s

pipeline is largely asset light, operating under

management contracts, meaning its investment

activity is in improving and upgrading its current

hotel portfolio.

At PPHE, in contrast, there is a major capital

investment programme under way, as the

company sets out to build the additions to its

portfolio itself. Having purchased sites in London

judiciously at the right point in the cycle, it is

now developing them to create additional space,

and at different price points to its largely Park

Plaza branded portfolio in the UK capital. Long

may London keep delivering – and it should,

so long as the Euro does not sink too much

further against sterling.


There is a contrast here between an owner,

operator and developer (PPHE) and an owner,

operator and brand owner (M&C). While PPHE

does have its own brand in art’otel it has been

happy to run the bulk of its properties under a

Carlson Rezidor badge.

PPHE has been able to tap into the resources of

a larger brand infrastructure, notably for its loyalty

scheme and distribution activities. At M&C, by

contrast, it is trying to do much of it by itself.

PPHE recognises its scale disadvantage and is

prepared to work around it. M&C, although bigger,

is a long way from having the resources of a global

major. The M&C approach has been to plough on

regardless, fighting in a conventional way, rather

than adopt the guerrilla style tactics of PPHE.

While there is no guarantee PPHE will win, it

looks to have a far better chance in the long run

than M&C does with its current approach.


continued on page 7


News


same catchment area. In Berlin, where we have

25 properties, would we support another 10?

Probably. Could we? Why not? Amazon has

Marketplace, which is essentially giving their

distribution to direct competitors, and they make

money out of it.”

The time has now come to put the plan into

play and see if it pays.

Perspective (by Hotel Analyst Distribution &

Technology editor-at-large Peter O’Connor):

Following much industry speculation and more

than a few rumours, Accor has finally shown its

hand and revealed precisely how it intends both to

work more closely with independent hotels as well

as compete more effectively with the global OTAs.

And in the process they has also shed more light

on why they recently invested in online marketing

provider Fastbooking.com.

In effect what Accor is doing is adding another

potential layer of service for hotel owners. If you do

not want to get Accor to run your hotel through

a management contract, or do not want to buy

its brands and operating expertise by buying a

franchise, then perhaps you will be willing to

purchase its superior access to online markets?

And all of course for a small (compared to the OTAs

that is), totally performance-related, fee?

Complementing this with a direct website, direct

bookings engine and online marketing services

comes from the Fastbooking part of the puzzle,

creating a very compelling portfolio of services for

an independent property struggling to find its way

in the electronic world. And FastBooking’s existing

portfolio of clients gives it the running start that it

needs to get to the critical mass required to make

the entire venture profitable.

But while the benefits for independent hotels

are clear, and in many ways more attractive that

further selling their soul to Booking.com by

adopting BookingSuite, the potential for Accor

is even greater when considered from a strategic

perspective. Not only do they have another product

to offer to potential owners, one that assuming

they do a good job will also serve as a recruitment

tool for franchises and management contracts, but

finally they have some useful ammunition with

which to fight the global OTA menace.

By allowing independents to be distributed

through its electronic systems (online and mobile),

Accor is eating away at one of the OTAs’ key

differentiators – choice. By quickly and easily

expanding the number of hotels offered in each

key destination, the company is giving consumers

a reason to check out its website and mobile

presences, as the expanded product selection

means the latter are far more likely to find a match

with their travel needs, particularly in markets

where Accor’s brand penetration is not high.

The big question is whether 10,000 properties

will be enough? Even though this effectively

triples Accor’s existing offer, and will be focused

on 300 key cities, it pales into insignificance

when compared with the 600,000 and 435,000

properties claimed by Booking.com and

Expedia respectively. And what Accor may have

underestimated is the substantial cost of getting

hoteliers to sign up. Each of the major OTAs

maintains extensive (and expensive) supply teams

dedicated to finding and keeping inventory to sell.

With the financial aspects of the deal not yet

public, it’s difficult to comprehensively assess the

feasibility of Accor’s brainwave. But irrespective

of what the actual commission figure eventually

turns out to be, the resulting revenue will help

refill the company’s war chest, giving it what it

currently lacks – a sustainable source of revenue

with which to fight its online marketing battle

with the OTAs.

Thus all things considered Accor’s courageous

move to transform itself into distribution channel

for the independent hotelier looks highly

interesting. Assuming that commission levels

do actually turn out to be substantially lower

than those of the existing OTA-based channels,

independents are likely sign up for this new,

low cost, source of business in their droves,

reducing for the first time the stranglehold that

Booking.com currently has over the European

hotel sector.

The company is also planning expansion into

the mid-market, with the launch of the Baby Gray

brand, due later this year.

The group has entered into a partnership with

Audeh Group, the sole owners and developers

of the new 180-room Le Gray Amman Hotel

and Residences, which is due to open in 2017

as part of a development comprising 62 private

residences, a 19 storey tower of luxury commercial

offices and a retail component to be curated by

CampbellGray Hotels.

The family-owned Audeh Group was founded

by Issa Audeh. Its real estate development

division was formed in 2009 and is based in

Amman where it is committed to developing

residential, commercial and boutique operations.

The company said it was “not bound by location.

Our expertise enables us to seek out and develop

partnerships in new and emerging markets”.

CampbellGray Hotels told this publication:

“Gordon Campbell Gray met Saad Audeh when

the latter was a guest at Le Gray Beirut. Audeh

loved the property and decided it was exactly

what he was looking for in Amman.

“The partnership will give CampbellGray

Hotels the ability to expand and diversify faster

than they could on their own. Each side of the

partnership brings something very different

to the table. Gordon brings the hospitality

and luxury hotel development side, while the

Audeh Group brings a wealth of global property

development knowledge.”

The first three projects to be announced under

the partnership are a second Le Gray, to be located

in Abdali, Jordan; the relaunch of Malta’s The

Phoenicia; and redevelopment of The Machrie

Hotel and Golf Links on Scotland’s Isle of Islay.

Saad Audeh, director of Audeh Group, added:

“I have grown tired of the corporate chains of

cookie-cutter hotels, and know that many of

today’s travellers, whether on business or for

leisure, want a hotel that simply makes them feel

great each day. We are thrilled to be working with

Gordon and his super-professional team, and see

this partnership as an opportunity to create many

fabulous new hotels of the kind at which I have

always wanted to stay.”

The company also confirmed to Hotel Analyst

that it would be launching a mid-market brand

under the name Baby Gray, which was currently in

the design process. A site for the new flag has not

been confirmed, but Campbell Gray commented

during the recent Arabian Hotel Investment

Conference in Dubai that the city would be a

strong choice for one of the hotels.

He said: “It will have more limited service [and

be] more youthful. For us design is very important,

CampbellGray looks to mid-marketCampbellGray Hotels has announced a partnership with the Audeh family, which will see the group grow in Europe, The Middle East and Asia.

continued on page 8


News

so it will be a very specific design and it will be

quite a cool brand. It’s for a younger market so will

have an affordable entry point.”

Dubai shares Campbell Gray’s feelings over a

need for more mid-market product. As this issue

was going to press the emirate’s Department

of Tourism and Commerce Marketing Dubai

said that it expected to see more mid-market

hotels in the coming years as a result of

government incentives.

Incentives offered by the Dubai government

to encourage the three and four-star segment

included: waiving a 10% municipality fee levied

on the room rate for each night of occupancy for

a specific period; reducing construction-approval

process to two months; standardising all approvals

through the Dubai Municipality; and allocating

government land for such hotels.

So far this has seen the launch of Rove Hotels,

a partnership between Dubai developers Emaar

and Meraas, growth from Premier Inn and the

introduction of Jumeirah Group’s Venu. The

market will be intrigued to see what a company

with the philosophy “everything matters” will do

for mid-market hotels.

HA Perspective [by Chris Bown]: As every great

general manager knows, it’s always worth keeping

an eye on your guest list. Audeh loved Le Gray

in Beirut so much, he wanted one for himself, in

much the same way as Sébastien Bazin’s stay at

Mama Shelter prompted Accor’s investment in

that new brand.

The selection of key sites for the new

CampbellGray hotels might seem at first a little

curious. Beirut is joined by Jordan, with Malta

and a remote Scottish island following on. Fine

for guests who like to stay in out of the way

places, but hardly a portfolio of locations with

which to attract business customers. But this

is surely the point. It is not a chain trying to

emulate the global majors.

Under the arrangement, the Grand Hyatt, Hyatt

Regency and Renaissance Harbour View will be

sold into the joint venture. New World will receive

a consideration of HKD18.5bn, of which HKD10bn

will be received in cash. The two investors will

then have 50% each of the new venture.

The deal cancels a planned spin-off of the

group’s key hotel assets, in a bid to return cash

to fund new development projects. Instead, the

new deal will provide New World with additional

working capital, while also giving it a well-funded

partner for undertaking further hotel investments.

The Grand Hyatt is recognised as a flagship

property; located in the Wan Chai district of Hong

Kong, it has 539 rooms and was opened in 1989.

The Renaissance Harbour View has 857 rooms,

located on the Victoria Harbour waterfront; while

the Hyatt Regency is located over the Tsim Sha

Tsui railway station in one of Hong Kong’s busiest

districts, and has 381 rooms.

“We are very pleased with this new joint

venture and are looking forward to the beginning

of what we hope is a long term relationship and

opportunities to do more together with the new

partner,” said New World executive vice-chairman

Adrian Cheng.

“The transaction offers the best of both worlds

for NWD shareholders: we continue to retain a long

term interests in these prime hotel assets in Hong

Kong whilst at the same time recycling capital to

pursue other value enhancing investments. The

transaction is also consistent with NWD’s strategy

to effectively allocate resources throughout

the group.”

The three hotels were recently valued by Savills

at a total of HKD21.3bn, against a combined book

value of HKD2.76bn.

New World had previously looked to sell off

the three hotels in a share issue in 2013, but

the attempt was abandoned as markets were

looking volatile.

New World calls itself a conglomerate, with

interests in property, infrastructure and services,

department stores, and hotels. The group has

stakes in 18 hotels listed in its most recent

accounts, with the properties located across Hong

Kong, China, the Philippines and Vietnam.

It also owns hotel management group

Rosewood, which is expanding its operations with

the new Penta brand, and currently manages just

over 40 hotels internationally with close to 40 in

the pipeline. The disposals will leave New World

with a further three hotels in Hong Kong: The

Hyatt Regency in Sha Tin, a 440 room Novotel and

695 room Penta.

HA Perspective [by Chris Bown]: By persuading

the Abu Dhabians to come on board, New World

has achieved a long held objective of releasing

value from some of its largest hotel properties.

Earlier attempts to float having failed, it now

appears to have a deal that not only returns the

company cash, but gives it a well-funded partner

with which there will be options to maybe sell

more of its hotels into the mix, or else to make

further acquisitions.

The impact of the deal could be felt much

further afield than Asia. Among New World’s

portfolio is the Penta economy hotel brand, which

the company has been expanding aggressively

across Europe, as well as in Asia. The extra cash

could well be used to buy further scale for the

brand. In the UK, for example, growth has come

from conversions of several Ramada hotels, and

further similar additions of smaller chains may be

under consideration.

For the new joint venture, there is always the

potential down the line to convert into a Reit,

should conditions be right. But with ADIA as an

investment partner, there is unlikely to be a rush

for an exit route.

[Additional comment by Andrew Sangster]: This

is a case of Far East capital joining up with Middle

Eastern capital in yet another sign of the growing

power of non-Western players.

The assets tick all the right boxes for a sovereign

wealth fund like ADIA – super-prime locations in

one of the world’s key gateways and irreplaceable

luxury real estate. At around USD1.2bn it is also

the sort of chunky investment that maximises the

return on the time spent by ADIA’s advisory team.

To these ends it is hard to see ADIA becoming

excited about supporting Rosewood as it seeks

provincial properties in the UK and elsewhere in

Europe, even with ever compressing yields.

New World finds new partnerListed Hong Kong real estate company New World Development has agreed a joint venture with the Abu Dhabi Investment Authority, that will see it sell 50% stakes in three of its hotel properties.



Groups lift Hyatt and StrategicNews

“The groups are sort of back to historic norms,”

said Strategic CEO Rip Gellein, with pharma,

finance and technology sectors leading. “Going

into ’16 we’re seeing some very strong advanced

booking. So, so far so good.”

The increase in group activity fed through

to non-rooms revenue at Strategic, with the

category up 9.7% and banquet revenues up 11%

year on year. “Numbers in the first quarter were

truly impressive.”

At Hyatt, groups helped the company to

record occupancy levels. CEO Mark Hoplamazian

reported: “Group rooms revenue at comparable

US full service hotels was up a strong 10% in the

quarter with average daily rates up approximately

6%. This is the eighteenth quarter in a row that

we’ve seen rate growth for our group business.

And this quarter’s rate growth is the strongest,

since the second quarter of 2007.”

Around 85% of the year’s group bookings are

already committed, in line with expectations, and

the momentum in group business looks set to

continue into 2016. Hoplamazian said that food

and beverage business is worth USD3.5bn a year

to Hyatt, and generates over USD1bn of profit.

Strategic’s Gellein also sees the group spend

being sustained: “When you see cooperate spend

like we did in the first quarter, will corporations

continue to spend like they’ve been spending?

That’s a hard thing to forecast. But profitability

in these companies continues to strong and

their desire to get together in person continues

to be strong. So we’re pretty darn optimistic

at the moment.”

Strategic CFO Diane Morefield noted: “Our out-

of-room spend or F&B is up in the low-teens and

actually is above peak, even though group room

nights are still about 7% this year, below peak.”

Similarly, Hyatt has seen strong rises, reported

Hoplamazian. “Banquet revenue per group room

night in the US now exceeds the prior peak in

both nominal and real dollars. Banquet revenues

grew at a faster pace than group room nights over

the past seven years, which means that groups

are increasing their spending on F&B even when

adjusting for inflation.”

While there was an acknowledgement that the

strong first quarter of 12% revpar growth will

not be repeated through the full year, Strategic

management increased their full year guidance

to the 6% to 8% range for 2015 revpar growth.

Gellein told analysts: “We aren’t seeing great

impediments at this point….but I’d say that we’re

probably at this point more cautious than we were

last time you and I spoke.”

Hyatt enjoyed revpar up 7.4% in comparable

constant dollars; at select service hotels in the

Americas, revpar was up more than 10%,

with three quarters of the improvement down

to rate growth.

Both companies took a hit in the New York

market, where rates have been dragged down

by new supply. Local revpar for Hyatt was down

7.1%, further dogged by tough comparables from

2014, and poor weather.

Internationally, Hyatt said revpar in EAME/

Southwest Asia was up 1.4% on a constant

dollar basis. “We are seeing relative strength in

the UK and Germany, while France continues to

struggle,” added Hoplamazian. The Middle East

was also relatively weak.

At Strategic, management largely has the

portfolio where it needs to be, and just one hotel

property and a land parcel are up for disposal. As

to acquisitions, Gellein was quizzed by analysts

over whether he would be interested in purchasing

properties from Starwood. He expected them

to bring properties to market over the coming

months, he said: “To the degree that they’ve got

assets that fit the description of what it is that

we’re interested in, we have raised our hand in

the past, and we’ll continue to raise our hand and

say we’d be interested.”

Strategic CFO Diane Morefield is working on a

refinancing package to reduce the cost of debt,

while extending maturity by a further two and a

half years. A USD650m five-year credit facility is in

negotiation, which will be secured against a pool

of hotel assets.

Hyatt’s Hoplamazian didn’t rule the company

out from any major corporate activity, though

was not specifically asked about Starwood. He

said: “We have significant liquidity available

including nearly USD1bn of cash and short term

investments…we also have undrawn borrowing

capacity of USD1.5bn.” The focus remained

focused on investing in opportunities in key

gateway cities, investing in resorts, investing in

urban select service and in group-oriented hotels.

Around USD350m is expected to be spent this

year on capex projects, with half being invested

in the new Grand Hyatt Rio de Janeiro, which is

expected to open at the end of this year.

Asked whether Hyatt would look at acquiring

other brands, Hoplamazian replied: “Yes, we

would consider it.” He noted the group had

previously subsumed AmeriSuites, Hotel Sierra

and Avia.

HA Perspective [by Chris Bown]: A really strong

first quarter set 2015 off to a great start, but

already there are signs that the pace of uplift in the

US market is looking to decline a little. Gellein is a

little more cautious, and others are suggesting the

market will soften into 2016. But for those with

good group business, there is no such worry about

that part of the market. Corporate America looks

to be spending on conventions and gatherings

once more, just as they have in previous upturns.

And that’s a great help to not only the brands,

but the companies who own and manage the

properties, too, who benefit substantially from

non-rooms activity.

Hyatt was not directly drawn on whether it

would link with Starwood, but Hoplamazian looks

poised to with the firepower to make a significant

move, should he spot a suitable opportunity.

In contrast, Strategic has spent some time

getting its portfolio tidied up. Apart from the

Marriott in Hamburg (which was not mentioned,

but clearly dragged down the overall revpar

growth), it is now a purely US focused business. It

is not currently paying a dividend, and Gellein was

wary of committing to a time when it will once

more, but the pressure must be building.


How much better can it get? From a performance

perspective there is a growing consensus that in

the US it will be a case of diminishing returns from

here on in for the rest of the cycle.

That is not to say that there is nothing more to

come: far from it, the expectation is that we are

now midpoint in the cycle with a strong second

half to come over the next several years.

The good numbers are likely to pour petrol on

the M&A fire that is steadily taking hold. For a

change, the action seems to be with the asset light

players. But more real estate focused companies

like Hyatt or Strategic are likely to see activity too.

In the case of Hyatt, it may well look to add

a brand company to its portfolio. And it has a

significant advantage in not being scared of taking

on real estate at the same time.

For REITs such as Strategic, the opportunity

lies more with waiting to see what will become

available as brand companies swoop and

accelerate any divestment strategy, as is likely to

be seen with Starwood Hotels.

Stronger group business helped lift performance at both Hyatt and Strategic in the first quarter, with results ahead of expectations.


News

The company, which is an owner, developer

and asset manager of branded three and four star

hotels in the Middle East and Australia, said that

it remained on course to reach its target of 5,000

rooms by 2020.

The group finished the year with 1,488 rooms,

a 48% increase on the previous year. The addition

of 300 new rooms to the pipeline brought it to

1,332 rooms, a 29% increase on the year. Action

Hotels said it expected to reach 2,820 rooms by

2017 and had “further new hotel development

opportunities in advanced discussions”.

Sheikh Mubarak A M Al-Sabah, founder and

chairman, said: “The macro-economic conditions

in the region continue to underpin our strategy

of focusing only on the economy and midscale

segments of the hotel sector. The growth of intra-

regional travellers, both business and leisure, and

their associated demand for affordable, consistent,

value-for-money accommodation continues to

accelerate. This is all supported by increasing per

capita incomes, ease and availability of air travel

within the region.

“The recent oil price volatility presents Action

Hotels with further opportunities as more business

travellers seek less expensive hotel accommodation

without sacrificing quality.”

For the full year adjusted Ebitda increased by

34% to USD11.3m, with revenue up 26% to

USD37.6m. Revpar, occupancy and rate were

up across the portfolio. The group said that, for

the first four months of the new year its hotels

were performing in line with expectations and

contributed a 22% increase in gross operating

profit on the same period last year.

2014 saw Action Hotels, part of Kuwait’s Action

Group Holdings, list on AIM in London, with the

intention of funding the expansion of its portfolio,

which focuses on three and four star hotels,

predominantly in the Middle East, with the hotels

on a freehold or long leasehold basis.

According to STR Global, only 13% of the

total supply of rooms in the region fall into the

economy and midscale segments.

The company is brand agnostic, with hotels

operated under long-term management

agreements with Accor, InterContinental Hotels

Group and Whitbread, using the Ibis, Holiday Inn,

Staybridge Suites and Premier Inn brands.

At the time of the IPO, Katie Shelton, director,

corporate broking at Sanlam Securities, Action

Hotels’ broker, told Hotel Analyst: “You can get

over-dependent if you’re attached to just one

brand. You can get better terms from some than

others – they will offer you exclusivity, for example.

We’ve found that you can drive the operators’

competitive natures as well as cutting reliance on

one operator.”

The group signed its deal with Whitbread in the

same year, with Action Hotels confirming that it

planned to invest c. AED 378m (GBP63m) over

the course of the next two years as it builds and

develop the new hotels. Premier Inn will undertake

long-term management contracts on the hotels,

which are due to open between now and 2016.

Last year also saw the group’s chairman Action

Hotels meet with Accor CEO Sébastien Bazin

to discuss the pair’s ongoing partnership in the

Middle East, which began in 2005 and now

numbers five hotels, with a further four hotels in

the pipeline by the end of 2017.

Bazin commented: “Our strategy within

the region is to expand our rooms by using an

asset-light model which, in addition with the

requirements to work with local partners, makes

Action Hotels a great partner for us.” With asset-

light growth the target for many of the global

operators, the company can expect to enjoy many

more meetings such as that with Bazin.

HA Perspective [by Chris Bown]: While Action is

a small developer, its focus on two regions where

branded mid-market hotel growth is strong,

should serve it well.

The market has yet to get excited about Action.

Since the London market float, which drew in

GBP30m, the shares have moved up, then down,

and currently sit close to their launch price. But

being listed does present the opportunity to tap

the market for more investment capital, should the

company need it, before revenues from completed

hotels start to feed in, over the coming months.

Having built strong relationships already with the

big brands, Action is in a good position to keep

building. Accor and IHG are very much interested

in growing in Australia, as well as the Middle East.

Action Hotels lives up to its nameAction Hotels announced another year of rapid expansion, reporting portfolio growth of 48%, taking it to 2,820 rooms including its pipeline.

No reason was given for the move, with the

Hong Kong-based owner continuing to pursue

global expansion with a debut hotel in the US set

to open this year.

Swire confirmed that the hotels were being

marketed confidentially, with no further details

available at the time of going to press. Local reports

suggested that at least one of the hotels would

be sold shortly, in line with the current exuberant

market for properties in the UK provinces, driven

by a recovery in trading which has seen growth

outstrip that of London in recent months.

Swire Properties, based in Hong Kong,

launched Swire Hotels in 2008, and has what it

describes as a collection of “intriguing urban

hotels in mainland China, Hong Kong and the

UK”. The group has also invested in a number

of properties, including the Conrad Hong Kong,

Island Shangri-La Hong Kong and JW Marriott

Hotel Hong Kong.

In the UK, the company launched a new brand

under the “Chapter Hotels” flag, with the first

site, in Cheltenham, opened in 2010. The second

one, The Magdalen Chapter, opened in Exeter in

2012. The other two hotels, the Avon Gorge Hotel

in Bristol and the Hotel Seattle in Brighton, were

not converted to the new brand, with the latter,

located in Brighton Marina, not fitting the ethos

of contemporary design in a period building, the

hotel being a new-build.

Swire acquired three of the hotels in 2006 when

it bought the Alias Hotel Group, with the fourth

site, in Bristol, bought the following year from

Peel Hotels.

Alias Hotels was created in 1999 by Nigel

Chapman and Nicholas Dickinson, the founders

of Luxury Family Hotels, with Luxury Hotels

Management as a parent to both groups. Prior

to the sale to Swire, the then-five-strong Alias

Hotels group was sold in 2004 for GBP30.4m to

a joint venture of the Alias management team

and GuestInvest, the buy-to-let hotel company

headed up by Johnny Sandelson – now part of

development company Siahaf, which has been

working with the Sultan of Brunei – which went

into administration in 2008.

Swire to exit UKSwire Properties has appointed Christie & Co to market its four-strong UK hotel portfolio, marking the company’s exit from the country.

continued on page 11


News

Meliá Hotels International is continuing to

pursue asset-light growth, while NH Hotels, which

described its asset value as “underpinning the

business”, has continued to pursue both leases

and management contracts.

Meliá Hotels International confirmed the

recovery in demand in Spain, not only in the

leisure segment but also in city hotels, which saw

revpar growth of 14.6%.

During the quarter, the company added 14

new hotels, all under management or variable

lease agreements and 86% outside Spain, with a

special focus (71%) on emerging markets. In line

with the group’s strategy to strengthen the leisure

segment and its upscale and premium brands, the

signed hotels belong to the ME by Meliá, Meliá,

and Innside by Meliá brands, in addition to the

resort hotels added to the recently-revamped Sol

Hotels brands.

The company said it expected to beat its

objective of adding 30 new hotels in 2015.

The group also described an “unprecedented

intensification of hotel openings between 2015

and 2018”, with more than 60 hotels expected

to join its system.

Melia said that it would continue to renovate

its resort hotels in the Balearic Islands, the Canary

Islands and the Costa del Sol. Earlier this year

it sold seven of its largest resort hotels in Spain

to Starwood Capital for EUR176m, as part of

the revitalisation of the Sol brand. The pair are

expected to add further resort properties.

Looking ahead, the group expects to see high

single-digit increase in global revpar, 60% of

which will be rate driven.

At NH Hotels overseas growth has most recently

been from acquisition, with the EUR48m deal to

buy Hoteles Royal, which saw it add 20 hotels in

Colombia, Chile and Ecuador. The properties are

currently being rebranded, with 11 due to take

on the NH Collection flag. Eighty-three per cent

of the rooms are under pure operating variable

leases. During the period the company also

added two hotels in Europe, opening one hotel in

Belgium under a lease and one in Portugal under a

management contract.

The company said it would maintain growth

in strategic markets based on strengthening its

presence in Europe and creating a greater platform

in Latin America. In September the company

signed the agreement with HNA Group to develop

a portfolio of hotels in China under management

contracts with HNA and with third parties. Both

groups will each contribute EUR8m in 2015 and

2016 to develop a prototype hotel and to promote

the NHG brand.

During the quarter the company signed lease

agreements for three hotels in Europe and a

management agreement for a site in Argentina.

The group’s total estate of 385 open hotels at the

end of the quarter was split into; 79 owned, 71

managed, 20 leased and the remainder franchised.

In a presentation to investors, the company

said that the total value of its portfolio at the end

of 2014 had reached EUR1.6bn. CEO Federico

González Tejera said: “2015 will also be a year

of investments although many of the five year

plan initiatives will start to deliver” and that

the company aspired to be “the best option for

investors looking to sign a lease or management

contract with a top rate operator in the city or

business segment”.

The company is in the second year of its five-year

strategic plan, in which it said it was “betting on

growth in prices and leaving unprofitable channels

and segments, complete the implementation of

the IT systems” as well as completing 75% of

investments of the repositioning of its portfolio

and continuing to negotiate rent reductions.

Total investment in the plan has been estimated

at EUR220m between 2014 and 2016, with 60%

Spanish hoteliers accelerate expansionNH Hotels and Meliá Hotels International both used their first-quarter results to outline their global expansion plans, backed by a recovery in their domestic market.

At the time Dickinson said that the deal would

allow the group to participate in the then-nascent

trend for sale-and-leaseback deals, thus far the

domain of large hotel companies. It was hoped

that this would kick-start Alias’s growth.

One year later LHM bought the group out of its

deal with GuestInvest in order to market it, with

Dickinson, then chair of LHM, commenting that,

“given the strength of the hotel market and the

excellent trading results of the Alias Hotels group,

our shareholders’ interests would be best served

by buying out the GuestInvest contract thus

enabling us to immediately launch the group into

the market”.

The by-then four-strong group was then split

up with Swire acquiring three hotels as part of

plans to launch itself in Europe, a deal which, at

the time, was hoped would propel it to a portfolio

of over 100 hotels. The remaining hotel, the Hotel

Rossetti in Manchester, was sold to Brownsword

Hotels, where it remains.

LHM’s Chapman has since returned to the UK

from Portugal, where he and Dickinson opened

the Martinhal Beach Resort Hotel, to launch

Halcyon Hotels & Resorts with a site in Cornwall.

At Swire, the group will continue to expand

through its East and House brands, with its first

hotel in the US due to open under the East brand

in the US this year.

Chapter Hotels, lead by Brian Williams,

managing director of Swire Properties Hotel

Holdings, had planned to rival Malmaison and

Hotel du Vin with a focus on quality and value.

The brand’s demise comes as Malmaison and Hotel

du Vin are facing another sale, with no significant

expansion to show for their early aspirations, but

hope of a fresh start. Chapter and Alias before it

appear to have run out of luck.

HA Perspective [by Chris Bown]: A major trading

group, Swire owns everything from the Cathay

Pacific airline to ships and Coca Cola bottling

plants. Property interests see it as one of Hong

Kong’s leading developers with growing activities

in China. But it has not really gained traction

as a hotel investor or operator.

Given that its airline has a major hub in Hong

Kong, one might have expected Cathay to look at

carving out a position in hotels in growing destination

markets for Chinese visitors, as other Chinese travel

groups such as HNA have been looking to do.

In the UK, there were aspirations to build a

chain, but clearly not enough of a commitment.

The two Chapter properties in the south west of

the UK are in characterful historic buildings, and

could make an attractive addition to several UK

hotel groups. With the market strong, Swire looks

to be timing its exit well.

Where the focus now looks to lie is in building

its luxury East and House brands, which are also

small in scale but focused on major destinations.

East is branching out of Asia, with a third property

in Miami. Meantime, there are plenty of hotel

opportunities on the company’s doorstep, in

mainland China – a country that, through its other

business interests, it knows well.




News

of investment in owned hotels and 40% in leased

hotels (linked to renegotiations).

The group is dividing its estate into three new

brands; NH Collection, NH Hotels and Nhow. So

far, NH Hotels has renovated 25 properties, and

said that NH Collection, with 31 hotels at the end

of the first quarter, (rising to 57 hotels in late 2015)

was “beginning to show its potential in terms of

both quality – with better scores even in hotels

which have not been subject to refurbishment –

and prices”. ADR increase at NH Collection was

up 11.9%, against the group’s four-star sites, with

saw rate increase by 5.9%.

As part of its portfolio optimisation, the group

said it planned to sell between 13 and 15 hotels

this year, of which four had been sold by the

end of the quarter. The five-year plan calls for

EUR125m of assets, largely in Spain, to be sold.

The company expected full year revpar growth

to be between 5% and 7% (it was up 5.5% in

the first quarter), with Ebitda up by 25% on the

previous year including the contribution from

Hoteles Royal. Strong rate growth across NH

Hotels’ portfolio in the first quarter compensated

for drops in occupancy globally.

The group has continued to cut its debt, with

net debt at the end of the quarter at EUR744.4m.

At both Meliá Hotels International and NH

Hotels, the past few years have been about

strategic plans and hoping to come out of the

other side of the Eurozone crisis. With Greece

still teetering on the edge the region is not out of

danger, but the two companies are hedging their

bets with overseas expansion.

HA Perspective [by Chris Bown]: The Spanish

economy is turning around, and is on a positive track

once more. That helps both Melia and NH, but it

helps NH more, as the company continues to have

more of a portfolio reliant on the Spanish market.

The investors who have toughed the last few

years out, and the lenders who have taken on

NH’s massive debts, must be breathing quiet

sighs of relief.

The pair seem to have set their hearts on making

central and southern America their strategic

expansion area. Whether this is simply because

of a common language and cultural history, or

because of sound fundamentals, time will tell; but

news of a downturn in Brazil, noted by Accor, will

already be sending a shiver across the sector.

NH continues to be happy signing leases.

It recently won the bidding for a lease on a

substantial new hotel in Amsterdam that will be

a nhow. It is to be hoped that these new leases

are on terms that will still work, should there be a

downturn in the future.

“You’re watching the boutique sector become

industrialised,” warned Cody Bradshaw of

Starwood Capital. “It has become really saturated

in the last five years. It was design and F&B driven,

but now even the budget brands are delivering

that. And the big brands are developing their

affiliation brands.”

Grace Leo of Reignwood Investments noted the

pace of change is accelerating. “How I perceive

it today, the moment you launch that trend or

look, you’re out of date,” she warned. “It’s very

capital intensive – you have to have some timeless

qualities.” Leo is herself currently overseeing the

creation of a 100-room boutique hotel, private

members club and 41 luxury apartments in a

historic building in the City of London, and noted

that project had, itself, been through more than

one iteration before construction started.

Rafi Bejerano, managing director of AB Hotels,

agreed: “We need to be consistent, we can’t afford

to refurb every five or six years.” Success came, he

said, not from seeking to be the most profitable,

but from managing his hotels with passion.

“I think it’s fair to say the banks are warming to

the boutique hotel sector,” said Charles Human

of of HVS.

“The only way to find yield is to take on

development risk,” said Bradshaw, noting

escalating construction costs in the UK in general,

and London in particular. “We’ve got to be

moving up the risk curve, if we want to work in

London.” He noted Starwood Capital’s significant

involvement in the UK market extends to around

60 properties today. Many of those were acquired

under the Principal Hayley and De Vere Venues

brands and will be relaunched next year, under the

group’s new urban brand.

“You’ve got so many different variables, it’s a

six-way marriage,” said Bradshaw. Among the

key considerations for a boutique success was

delivering a great food and beverage offer. “For

the big brands, F&B is an afterthought, though it’s

becoming less so.”

Working with an investor or property owner also

means being ready to adapt, he warned. “Who

you’re signing with today may not be who you

are doing business with tomorrow.” Kimpton’s

management now needs to engage with IHG,

while Morgans – “clearly an M&A target” – could

soon have new masters, he predicted.

Bradshaw said he took three lessons from the

success of Ace in Shoreditch, which Starwood

Capital recently sold in a GBP150m deal, a price at

which he said “there’s still juice in the lemon” for

the new owners Limulus. The first was anticipating

the growth of a market; the second was fitting a

round peg into a square hole; and the third was

dealing with key man risk.

In taking a punt on the Shoreditch area of

London, Starwood Capital did what it is good

at, said Bradshaw – there’s no point waiting until

others have populated a potentially upcoming

location. He tipped Bloomsbury as the next

opportunity in central London – “it really is a

hidden gem” – and noted Starwood has the

Russell Hotel there, which it is investing in. “We’re

making a bet on the neighbourhood.”

Secondly there was building itself, previously

a Crowne Plaza, was a very standard chain hotel

construction, he added. Finessing the structure

into a boutique feel had been a challenge.

Thirdly, the loss of Ace founder Alex

Calderwood, who died in the Shoreditch Ace

just six weeks after it opened, could have been

a devastating blow, said Bradshaw. “If you lose

the key singer, will the band still sell albums?”

he asked, noting that the loss of a key individual

was particularly problematic in the boutique

sector. Thankfully at Ace, a strong team

meant the hotel and the brand has continued

to flourish.

HA Perspective [by Chris Bown]: As Hotel

Analyst’s latest Boutique Hotel report notes, the

segment has a number of challenges. It’s still more

profitable than many other parts of the hotel

market, so no wonder too many people want

Boutique hotels move mainstreamWhile funding may be getting easier, making a success in the boutique hotel sector remains a distinct challenge. Investors in the sector said that finding a truly original business edge is the key to success, in a panel at the Boutique Hotel Summit.




to append the word boutique to their offerings,

when frankly they offer guests little that is

personal, quirky or unique.

Affiliation brands such as Marriott’s Autograph,

while scooping up the occasional boutique

property, hardly offer a boutique choice, so varied

a mixed bag of properties do they gather together.

And then there are the large boutique chains, such

as Kimpton, which will struggle to grow further

while retaining a non-corporate feel.

Arguably the best attempt by a large corporate

to get into the boutique market came in the

form of Denizen, once destined to be Hilton’s

eleventh brand. Though launched in 2009, it

never saw the light of day after accusations

that former Starwood executives had moved

to Hilton holding a sheaf of blueprints for the

lifestyle/boutique concept.

As the investor panel noted, the original ideas

are often tied to one individual, and for a new

boutique concept to be bankable, and replicated,

it needs to be in the hands of a team who can

add new properties without watering down the

magic. And it needs to be a saleable unit, so that

a new investor can take over a property, safe in

the knowledge that the magical formula of the

successful boutique brand will continue to deliver

great returns.

One of the team close to the original Ace

London deal described the Ace as a hotel where

you had to wear flip-flops, a leather jacket and

a beard to get served – and that was just the

women. The brand may have become just a little

more mainstream now, but it’s that edgy feel that

pulls in guests and locals – and creates boutique

hotels that are great investments.

News


The listing comes as attention has turned

towards the Nordic region, with overseas investors

showing an interest in what has traditionally been

a market dominated by domestic players.

CEO Anders Nissen described the float to this

publication as potentially the country’s biggest in

15 years. The listing of what could total 60 million

shares – representing 40% of the company (and

20% of its votes) – in Stockholm was priced at Skr

100 to Skr110 per share.

Pandox was listed on the Swedish stock

exchange until 2004, when it was bought by

Norwegian investment firms Eiendomsspar and

Sundt in a public tender offer. The two companies

are now looking to cut their ownership in the

group, while remaining long-term shareholders

with 50%. The company will list its Class B shares,

which carry one share to one vote, against a ratio

of 1:3 for Class A shares.

Nissen told Hotel Analyst: “It could be the

biggest flotation in Sweden in the past 15 years.

For them [Eiendomsspar and Sundt] it has been

a very successful investment. Pandox has been

delivering an equity return of 18% year-on-year,

since they acquired the shares in 2004. They need

to balance out their portfolios and the timing is

very good. We need access to the capital market

for the future.

“When this is done, then it will be time to start

buying again. At the moment we are focused

on floating. I have been both a private and a

public manager – it is of course special to float

a company again which you helped establish 20

years ago and I am looking forward to seeing

how the capital market will value us – although

it is always easier to be private.”

At the end of March the company’s hotel

property portfolio comprised 104 hotels with a

total of 21,969 hotel rooms across eight countries.

The hotels are primarily full service hotels in the

upper-medium to high-end segments in cities

that are either international destinations or

have a high proportion of regional demand. The

company valued its property portfolio at SEK27bn

(USD3.2bn) at the end of last year.

The group’s business is divided into two

segments: property management, which

comprises 89 investment properties owned

by Pandox and leased on a long-term basis

to regional and international hotel operators,

and operator activities, which comprises 15

operating properties owned and also operated

by Pandox.

The announcement came shortly after Midstar

announced the launch of Midstar Hotels, a

privately-held hotel real estate company backed

by four Swedish investors. The group plans to

build a portfolio of approximately SEK5bn over a

three to five year period, looking at hotels with

development potential and properties with stable

cash flow, with over 100 rooms in regional and

major cities in the Nordic region.

Ola Stendebakken, CFO, Midstar, told this

publication: “We’ve spent the better part of a

year raising this capital and we have a 10-year

horizon on this. We’re starting with a blank piece

of paper on this – we’ve been looking in Norway,

Sweden, Denmark, even Finland. Because the

99% of the Scandic market is leases, we’ll be

looking at leases.

“All the investors are pension funds. They’re

looking for returns in the mid to low teens and,

because we’ll have a conservative leverage – 50%

to 60% – we should achieve it. It’s a very niche

investment strategy and the clarity attracted the

investors. We’re long term in every aspect and

there are people looking into the real estate

market who wouldn’t normally look at it.”

HA Perspective [by Chris Bown]: The Nordics

simply seem to like to do things their own way.

But international investors are now turning their

attention to the area, undoubtedly encouraged

by the fact that Scandinavian hotels come with

leases. It’s something the operators increasingly

dislike – witness the lengths Accor is going to,

to get out of them. In Scandinavia, too, Rezidor

is slowly negotiating its way out of troublesome

leases, having been caught out financially by too

many agreements that simply favour landlords,

leaving red ink on the brand’s balance sheet when

markets turned quiet.

With Pandox refreshing its bank balance,

Midstar looking to buy into the market and

overseas investors turning their minds to the

Nordics, the question will be what happens to

prices in the face of such demand. As Hotel

Analyst has noted recently, property yields are

reducing everywhere as a wall of investor funds

chases safe returns. It looks as though hotel prices

in the Scandinavian region will also be on the rise.

For buyers, while the region has delivered solid

returns over recent years, there will be concerns

about the medium term impact of oil price moves

on an economy such as Norway, which depends

heavily on a healthy oil exploration sector.

At Pandox, Nissen has always been comfortable

speaking his mind, arguing passionately for active

management, a new approach to agreements

between landlord, operator and brand and being

candid about the shortcomings of some asset-

light brand operators. He may find his candid

approach a little harder, once the business is in the

public eye again.

Pandox lists as Nordics open upPandox is to return to the public markets with a listing which could value the group at up to Skr16.5bn (USD2bn).


Franchisors shine for owners

Wyndham Hotel Group also saw its system

grow, as both companies launched new initiatives

to make themselves more attractive to owners.

At Choice Hotels International, the company

said it had seen “flattish” unit growth for the

first quarter, as a result of its rejuvenation of the

Comfort brand, but executed 99 new domestic

hotel franchise agreements during the period,

a 68% increase compared with the prior year’s

first quarter. This was credited to a combination

of increased new construction and conversions,

which rose 21% and 90% respectively.

The company’s domestic pipeline of hotels

under construction or approved for development

increased 36% and the total pipeline increased

30% this quarter compared to the same period

last year.

Steve Joyce, president & CEO, told analysts:

“We believe our growing development pipeline

positions us well for an accelerated organic net

unit growth in the near term at a pace at least

a couple of hundred basis points higher than

current levels.”

CFO David White added: “We are particularly

pleased that we are starting to see a reduction in

the level of financial incentives required to execute

conversion franchise agreements.”

The increase in new construction pipeline was

led by the Comfort brand, which increased 40%

compared to the same period last year. Executed

franchise contracts for the brand increased

by 150%.

Choice Hotels International took the

opportunity of its first-quarter results to announce

new branding for the company, with a new

logo, look and feel, and an advertising campaign

spanning TV, radio, digital, and mobile. Joyce said

that the campaign was designed “to accelerate

the growth of Choice’s brand awareness and

celebrate connecting people face to face via our

hotels and our brands”.

Joyce hailed the company’s Skytouch cloud-

based marketing and distribution business, which

now represents 10,000 rooms. Joyce said that

the division anticipated signing 1,500 properties

this year. Despite the growth of the company’s

own distribution system, the CEO confirmed that

its business with the online travel agents was

“continuing to expand as it is for everybody else

in the industry”.

The company works with TripAdvisor as well

as Booking.com, with around 12% of business

coming from the OTAs. Joyce confirmed that it was

also in discussions with Amazon, commenting:

“We’re assuming they’re going to be a valid

channel. We’re looking forward to potentially

striking a deal with them and doing business with

them as well”.

Looking ahead, the company forecast that

revpar would increase by approximately 7% for

the second quarter and range between 6.5%

and 8% for full-year 2015. This was a fall from

the 10% recorded in the first quarter, with White

blaming strong comparables with last year.

At franchising rival Wyndham Hotel Group, the

company expected to see system growth of 3% to

5% this year as a result of its acquisition of Dolce

Hotels & Resorts putting it ahead of its long-term

growth target of 2% to 4%.

CEO Steve Holmes told analysts: “I wouldn’t

focus too much on the pipeline for us because

we’re not a lot of new construction. We do have

some new construction but we have properties

that we sign the franchise agreement and

open them in the same month. We’re largely a

conversion company.”

The company saw its system size increase

by 3.2% in terms of rooms on the year in the

first quarter.

The group recently unveiled a number of new

initiatives to its franchisees, including a new

loyalty programme, as well as “access to better

technology and a renewed emphasis on quality

and brands”. The new Wyndham Rewards

programme offers what the group has described

as “the industry’s most simple and generous

offering” by allowing members to redeem for

a free night at all 7,500 participating properties

worldwide for 15,000 points.

The company has also signed an agreement

with Sabre Corporation to migrate its central

reservations systems to the SynXis Central

Reservations solution, which the pair said made

Sabre the exclusive global central reservation

system provider for the world’s largest

hotel company.

Total system-wide revpar increased 1.7%

compared with the first quarter of 2014. Domestic

revpar increased 7.7%, but was partially offset

by a 9.8% decline in international revpar, pulled

down by China.

Holmes told analysts that the group would

continue to expand in China, commenting: “We’re

seeing a lot of growth with Super 8. We’re also

adding Wyndham Hotels. That obviously does put

some pressure on our international revpar growth

because the Chinese market does not price as

well as the European markets. We’ll just live with

the fact that it creates a little bit of a pressure

on international revpar growth.”

The company reiterated its previous guidance

of Adjusted Ebitda of approximately USD1.285bn

USD1.315bn across Wyndham Worldwide as a

whole. Adjusted diluted EPS of approximately

USD4.81 to USD4.96 was increased from the

previous forecast of USD4.75 to USD4.90.

Choice Hotels International has chosen The

Clash’s Should I Stay or Should I Go as the theme

for its advertising campaign. It will be hoping that,

much like The Clash, it is The Only Band That

Matters for owners.

HA Perspective [by Chris Bown]: There’s a

change afoot among the hotel majors. Technology

is coming to the fore, in strategy discussions and

results presentations, and it is not just about apps

or attracting Gen X and Y. Increasingly, hotel

groups are realising that technology can provide

greater efficiencies, and automate much of the

basic stuff that still today is being handled by

humans, or by users with legacy systems.

Choice has persisted with Skytouch, and looks

to be winning customers round; it has previously

spoken about getting its portfolio embedded in

in-car technologies, too. IHG has just announced

it will partner with Amadeus to develop a new

guest reservation system, while Accor is buying

up tech start-ups to build its digital prowess. And

Wyndham has teamed up with Sabre to handle

reservations.

There has also been a subtle change in the

public attitude towards the OTAs, which is

becoming less antagonistic. At Choice, Joyce

appears to be embracing new arrivals such as

Amazon. His declared figure of 12% of business

obtained via the OTAs compares with Whitbread’s

recent revelation that it pays the OTAs for 9% of

its bookings. This is the level at which the smart

players are engaged, in their battle for direct share

of market online.

Choice Hotels International said that it expected to see growth accelerate, driven by an increase in construction and conversions.

News

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Despite this, both are pressing ahead with a land

grab that sees them continuing to expand fast.

And the next move will be to expand upmarket

from the initial focus on budget brands.

“We started to see a clear improvement starting

from March,” said China Lodging’s CFO – and

now incoming CEO – Jenny Zhang. “So the same

hotel revpar trend actually performed better in

March compared with January and February, and

that trend continued into April. April performance

was also further improved from March.”

At Home Inns, CFO Cathy Li was less optimistic:

“We haven’t seen clear signal for recovery or any

rebound so far, while — so we still think this kind

of decline may continue in quarter two.”

At China Lodging, revpar slipped from RMB152

in the first quarter of 2014, to RMB145, as both

occupancy and room rate slipped. Occupancy

was down from 88.1% to 84.6%. The company

blamed a softer macro economy in China, and the

timing of Chinese new year.

At Home Inns, the quarter saw occupancy

down 2% and ADR down 3.2%, sending revpar

down 5.5%. Occupancy averaged 80.8% with

ADR averaging RMB151.

The expansion continues apace for both

companies. During the quarter, China Lodging

opened 182 hotels, leaving it with 2,177 in total.

Of these, it opened 154 under its three economy

brands, HanTing, Elan and Hi Inn; with 27 in its

midscale Ji and Starway and just one new upscale

hotel. It finished the period with a pipeline of

686 properties.

Home Inns opened 70 hotels in the quarter,

ending the period with 381 hotels in the

development pipeline. For the full year, it expects

to add around 400 properties. Over 90% of these

will be franchised and managed. Chief executive

David Sun said there was a modest slowdown in

the pace of expansion, as the group had opened

487 hotels in 2014. But he added: “We are still

very confident for the long-term perspective

of China travel and leisure and also the lodging

industry. So we’re not changing too much on the,

I would call, short-term or long-term strategies.”

Both companies are planning to return cash

to shareholders. With free cash flow growing

China Lodging expects to start buying back

shares, later in the year. But, said Ji: “We clearly

will continue to deploy the cash into attractive

investment opportunities.” At Home Inns, Li said:

“We announced the share repurchase program in

March, which we believe is an appropriate form of

returning cash to shareholders and to increase the

shareholders’ return.”

In response to analyst questions, Zhang said

China Lodging had a number of factors that set

it apart. “First of all, we’re aggressive growth

company, that has being reflected in our goal for

market brand strategy and our early investment

into different segments. That’s the underlying

driver when we’re showing a much better growth

ratio compared to our peers today. That has been

reflected in our top performance compared to our

peers and as you just mentioned, how we view

acquisitions and how constructive we have been

in shareholder value creation.”

China Lodging gets 85% of bookings from

the 35 million members of its loyalty programme.

Zhang said members who did not make a booking

in two years were expired. Home Inns counts 28.1

million loyalty scheme members, up 54.4% year

on year. It says 26% of its bookings now come

from its mobile app.

Zhang said the link with Accor would create

substantial changes. “We’re going to become

much larger multi-brand hotel group and at the

same time, around this core of hotel business.

Possibly, if we’re successful you’re going to see a

lot of other types of business which have some

connection over utilising our capability and the

experience or platforms developed by this core as

a hotel company. For example, we have set up we

have invested into a joint venture with a couple of

renowned venture capital investors to explore the

opportunity in the apartment business that could

be one of those businesses.”

Home Inns said its Yitel brand did particularly

well, and is likely to be expanded further as a

result. The company has also launched a new

midscale brand, HomeInn Plus. “We aim to fill in

gaps between our economy brands, namely Home

Inns, Motel, Fairyland, and our existing midscale

brand, Yitel,” said Sun. The aim is to open 60 to 80

Homeinn Plus hotels this year, while accelerating

the expansion of the Yitel brand.

“We think about 30% of our new openings into

’15 will be in the midscale segment,” said CFO

Cathy Li. She warned that Homeinn Plus hotels will

cost around 30% more to build than the economy

product, and Yitel around 70-80% more, and as a

result, short term margins would not improve.

HA Perspective [by Chris Bown]: These two

businesses have staked out the ground across

China such that their economy brands have

cornered the market, and they continue to expand

at pace, to underline that dominance. And more

than any other country market globally, they are

able to drive direct sales – with Home Inns taking

more than a quarter from its mobile app.

While continuing to build their economy

dominance, both are now looking upmarket.

China Lodging has its joint venture with Accor to

help on this front, though is still backing its own

brands, too.

Curiously, both appear to have enough funds

to continue expanding, while starting to buy

back shares.

By any measure Qi Ji’s achievement at China

Lodging has been substantial. The business was

started ten years ago, and has created more than

2,100 hotels in 314 cities in that time. It still has a

massive development pipeline, and has – according

to a company presentation – consistently delivered

higher absolute revpar and same store revpar

improvements, than its peers.

Now, the joint venture with Accor promises to

help catapult the company into further growth in

the midscale and upscale sectors, by managing

Accor’s existing portfolio in the country. The

deal gives China Lodging more properties to put

within its distribution and loyalty systems, while

Accor will be hoping to get greater exposure for

its brands, and pick up more outbound Chinese

business as a result.

Medium term, the question must be whether

the economy hotels will continue to be the fastest

growing market segment. As GDP continues

to grow, and pay packets improve, will Chinese

consumers start to want slightly more comfortable

places to stay? If so, rebranding and upgrades will

be needed.

Accor aside, the international chains have

largely steered away from entering the country’s

budget market, though Hilton recently teamed

up with local partner Plateno to introduce its

Hampton brand – a potential rival for Yitel. Hilton

will be adapting its brand for the Chinese market,

including making the hotel rooms smaller. It is

expecting to open up to 400 hotels over the next

three to five years.

Whichever way the market goes, China Lodging

and Home Inns are like the winner of most

Monopoly games – they have grabbed the right

properties to see them through.

China Lodging, Home Inns hope for better timesThe Chinese market is starting to move upward once more, with both China Lodging and Home Inns hoping the pick-up will help their businesses. The pair reported slipping performance figures, thanks to the country’s weaker economy.


News

The company said that it saw opportunities

to develop and sell hotels in sub-Saharan Africa,

where the region had seen sustained economic

growth but hotel development remains limited.

Reports suggest that Duet is aiming to raise

an initial USD200m for the venture, which will

see it develop, design, build, own, operate and

ultimately sell a portfolio of internationally-

branded midscale and upscale business hotels.

Jean-Marc Grosfort, the former CDO, Middle

East and Africa, Marriott International, will be the

non-executive chairman of Duet Africa Hotels.

The venture will target fast-growing and

resource-rich countries such as Nigeria, Ghana,

Ivory Coast, Ethiopia, Tanzania, Mozambique,

Kenya and Uganda. The focus will be on greenfield

developments or significant refurbishments in

standalone or mixed use format with office,

residential and retail.

The pair said that they saw “significant

opportunity” to enter the hotel sector in sub-

Saharan Africa given the region’s sustained

economic growth of over 5% pa, the current

favourable hotel demand-supply imbalance and

the high barriers to entry.

Currently there are only an estimated 84,000

branded hotel rooms in Africa with the majority

in North Africa and South Africa. Hotels in the

pipeline are typically subject to long gestation

periods due to funding issues and poor execution

capabilities with 62% of the hotel rooms reported

to open in 2015 not yet on site.

Marc Fily, hotel development director, Bouygues

Bâtiment International, said: “We have working

relationships with almost all international hotel

operators and have designed and built more than

24,411 rooms over the last 40 years on almost

all the continents. Most of the hotel operators

consider that sub-Saharan Africa is a priority

development destination for them with a fast

growing demand. All hotel operators we are

currently discussing with in relation to several

development opportunities in sub-Saharan Africa,

are enthusiastic about the venture which is ticking

all the boxes.”

David Harper, head of property services, Hotel

Partners Africa, told Hotel Analyst: “Duet are one

of the first movers into the hospitality fund space

in sub-Saharan Africa, and tying in with Bouygues

bring a sense of credibility to their stated desires.

The value of having a well recognised and

competent construction company can lead to cost

savings in terms of financing costs and deduced

construction delays.

“It is our experience at Hotel Partners Africa

that one of the key areas where developments

become ‘unprofitable’ is when they get delayed

for too long…and a half built hotel earns no

revenue. Even if the initial cost estimates appear

slightly higher when a large international

construction group is used when compared with

local firms, the higher likelihood of an on time

complete means the actual cost of development

when taking into account the returns on capital

employed, are lower, and the investor gets their

money back quicker.

“There are many areas where this fund can

exploit shortages in supply. It is likely they will

concentrate initially in areas where there is room

for a good quality (four or five star) business

hotel with over 150 rooms, as these could be

considered the ‘low hanging fruit’ in the African

hospitality market.”

Duet will be hoping to succeed where others

have failed, and feast on the results.

HA Perspective [by Chris Bown]: Having a

large construction partner on board is one thing,

actually building in locations where construction

materials are hard to transport, and skilled workers

are scarce, is another. That’s the reason Hilton is

making a play for prefabrication, teaming up with

Chinese container maker/shipping group CIMC.

Whichever route you take to build, there are

the same challenges of finding sites, obtaining

title and permission to build, which is easier and

more transparent for some parts of the continent

than others.

For Duet, the private equity involvement will

inevitably need to focus on the exit route, and who

will buy African hotel investments. Fortunately,

there appears to be a number of potential investor

buyers; not least – as Hotel Analyst noted recently

– local governments, who love the constancy of

cashflow from a hotel, in contrast to the yoyoing

returns of some local financial instruments.

Duet makes Africa moveUK-based private equity firm Duet has signed a partnership agreement with Bouygues Bâtiment International to form Duet Africa Hotels.

Elegant will raise GBP63m in a placing of new

shares, which is to be managed by Zeus Capital.

Private equity backer Vision Capital will receive

close to half of this as it sells down its stake,

retaining 23.8% of the company. Also selling

a part of their holding will be the company’s

management, though they will be left with around

5.3% of the newly-enlarged share capital.

Elegant runs five luxury resort properties on

Barbados, named the Colony Club, Tamarind, The

House, Crystal Cove and Turtle Beach. Between

them, the hotels are reckoned to account for

around 25% of the island’s four and five star

rooms. The portfolio includes restaurants such as

Daphne’s, a haunt popular with celebrities.

The float will return GBP32.2m to the group

to fund expansion, with further properties in

Barbados and the Caribbean in the frame. The

current portfolio has most recently been valued

at USD235.5m.

Dan Bate, corporate finance director at Zeus

commented: “The portfolio of five luxury hotels on

Barbados’s west and south coasts and a high quality

beachfront restaurant captured our imagination

and it is extremely pleasing that the well managed,

profitable Elegant Hotels Group with its well

positioned expansion strategy and a 7% dividend

yield was able to appeal to some of the highest

quality institutional investors in the City.”

The expansion strategy for Elegant is to add

hotels by “expansion through acquisition and

joint ventures with other operators and entry

into management contracts, in each case both

domestically and in the wider Caribbean”.

The company was originally formed in 1998,

bringing the five resorts under one banner. Three

of the properties, which were all built in the 1950s

and 1960s, operate on a bed and breakfast basis,

while two are all-inclusive resorts. All offer on-

site programmes for children, and provide water

sports and entertainment.

Elegant reported revenues of USD58m in the

year to end September 2014. In recent years, the

group has hired seasoned hotel professionals,

including ex-Hilton Howard Friedman as CEO in

2008, ahead of major property refurbishments.

Elegant looks to Caribbean expansionBermudan resort operator Elegant Hotels has announced a UK listing that will return its initial backers over GBP30m. The deal will also provide the group with funds to expand its Caribbean portfolio.



News

Vision Capital bought into the company in

2004, when it purchased a mixed portfolio of

investments that included the Avebury Taverns

pub chain.

However while the sun continues to shine, not

everything is rosy in the paradise of Barbados.

Less than a year ago, Barbados Hotel and Tourism

Association president Patricia Affonso-Dass noted:

“Between June 2012 and today we have seen

continued declines in arrivals and visitor spend on

the island, we have seen closures of hotel properties;

we have seen continued challenges in our source

markets. And while they have slowly begun to creep

out of the deep recession and start showing signs of

positive growth, the competition from other warm

weather destinations is fierce,” she said.

Figures from STR Global reveal that Barbados

saw revpar slip 0.7% from 2013 to 2014, as

occupancy fell. A recent report noted that any

improvement in Caribbean markets had been

down to rate increases. Deal flow has picked

up: in its May 2014 Caribbean Hotels Monitor,

Whitebridge Hospitality’s Paul Thomas noted:

“The Caribbean has also witnessed a boost in

transactions with activity increasing by 65%.The

stand-out deal of the year has to be the acquisition

of Hotel Isle de St Barts by luxury operator LVMH,

bought for a reported USD4m a key.”

The report also noted that construction activity

in the Caribbean would remain subdued: “A

return to pre-recession construction activity is

unlikely as long as better value deals continue to

be had through acquisitions of distressed resorts.”

The Bahamas has seen an increase in room stock,

mainly down to the Baha Mar project, while

Molasses Reef on the Turks & Caicos will see

supply increase by 25%.

HA Perspective [by Chris Bown]: Vision Capital

has waited a long time to take profits from its

investment in Elegant – more than a decade might

be a record for a private equity investor. A sale of

shares to a number of investment funds will finally

yield them some cash.

In common with other markets, the Caribbean

market has seen the froth of the boom, followed

by recovery, and even now some stalled projects

are being revived. Part of that froth involved

fractional ownership deals, some of which failed

spectacularly to deliver.

But for Elegant, which already has a strong

market position in Barbados, the opportunities

must be elsewhere in the region. KPMG’s

2014 Caribbean hotel survey noted that Cuba,

Aruba and the Dominican Republic were

all seeing increasing visitor numbers, while

established destinations such as Barbados saw

a fall of 2.2% in visitor numbers, over the

2008-13 period.

The region continues to get around half of its

holidaymakers from the US, and with that economy

strong, spending should continue to increase.

However, with plenty of other competitors – not

least the Hispanic hotel groups – adding new

resorts around the region, those tourists have an

ever increasing choice, close to home.

continued on page 19continued on page 19

The move comes shortly after Barcelo agreed

a joint venture Spanish Reit with private equity

investor Hispania, which will spin off 11 of

Barcelo’s Spanish hotel properties into a new

investment vehicle. That transaction will have

given Barcelo the cash to move into Occidental.

Barcelo has bought a 42.5% stake in the

business from billionaire Amancio Ortega, and

several other minority shareholders. The remainder

of the business is in the hands of Spanish

bank BBVA.

The disposal is the result of a process started

just over a year ago, when Ortega and his fellow

shareholders appointed Morgan Stanley to sell

their holding. At the end of last year, the process

stalled, after offers received – including one from

Barcelo – failed to meet the sellers’ requirements.

According to Spanish media, the chain attracted

six offers, from Barcelo, Marriott, Mexican chain

Posadas, Host in partnership with Hyatt, KSL and

Iberostar, and Caribbean Property Group with

Perella. At the time, bids of around USD600m, or

10 times the company’s ebitda, were expected.

The deal gives Barcelo 11 hotels in Latin

America and the Caribbean, with around 4,000

rooms. Of these, six are in Mexico, two in the

Dominican Republic, two in Costa Rica and one in

Aruba. Adding to Barcelo’s existing portfolio gives

it 21 hotels in Mexico, and a dominant position in

the Dominican Republic, leapfrogging AMResorts

to top spot.

“With this agreement, Barceló Hotels & Resorts

takes a very important step in its growth strategy

in Latin America, consolidating its position in

this very important Caribbean region. Barceló

is confident that this transaction will generate

significant synergies both Occidental and for

Barceló,” said the company in a statement.

Spanish media suggest that while some of

the properties may be rebranded following the

deal, others will continue for now under the

Occidental banner. Barcelo will also need to invest

on upgrading the properties, whose condition was

one reason for previous buyout offers falling short.

The Latin American region has been a strong

performer recently, and a focus of attention

for other Spanish hotel companies. Melia has

reported its resorts in the region delivering strong

revpar growth, while listed Spanish hotelier

NH has recently bought Hoteles Royal, a chain

that gives it increased presence in Colombia,

Chile and Ecuador.

Ortega and BBVA bought Occidental in 2006,

paying EUR706m for the company. It has since

exited from several Spanish properties that were

within its portfolio. The last year has seen Ortega

exit his hotel investments, which included a 10%

stake in Spanish hotel group NH.

The joint venture with Hispania was announced

in February, and saw an initial 11 Barcelo hotels

and a shopping centre sold into a new Reit

focused entirely on holiday resort hotels in Spain.

The properties, amounting to just under 4,000

keys, are the first in what is intended to grow to a

portfolio of three times the size, over time.

The initial investment sees Hispania invest

EUR339m in return for an 80.5% stake in the

new Reit. Barcelo retains the balance, and could

increase its share up to 49% through future capital

increases. A further five hotels and a shopping

centre were immediately earmarked for the next

phase of growth of the Reit, with the whole

portfolio then being worth EUR421m and having

an annual rent income of EUR45m. The pair have

agreed to share expenses of EUR35m improving

some of the properties immediately.

The hotels put into the Reit are Barcelo’s

properties in Spanish resorts, the Canaries,

Balearics and Andalusia. Most of the properties

are four star, and look set to continue performing

well, as the Spanish tourist market pulls out

of recession.

Commented Hispania board member Concha

Osacar: “Our objective and that of our partner

Barceló, is that the new entity becomes the first

Barcelo builds Latin American presenceSpanish hotel group Barcelo has increased the scale of its presence in Latin America, buying a major stake in hotel group Occidental.



News

CP ousts StayWell to change direction

The landlord sent a notice to StayWell on 8

May, terminating the standing management

agreements, which date from 2013. The five

properties affected are the Park Regis hotels in

Auckland, Picton and Dunedin and Leisure Inns in

Rotorua and Wellington.

StayWell said in a statement: “StayWell has

elected not to seek an injunction stopping

CP Group’s purported termination of the

management agreements but intends instead to

commence legal proceedings to seek to recover

damages from CP Group.”

Incoming director of hotel operations at CP, Terry

Ngan, meanwhile issued a statement explaining

that CP would be taking over management of

all its smaller hotels to run them in-house. “Plans

for the future, some of which have commenced

implementation, include acquiring more hotels,

refurbishment at the hotels, new hotel names,

branding and a new website.” The company

also confirmed it has no plans to touch its larger

properties, which will continue to be managed by

third party chains.

The five properties were previously run as

Mercures, and run by Accor. The deal with StayWell

was to provide a platform for the company to

enter New Zealand, rebranding the properties

under their Park Regis and Leisure Inn brands.

CP Group is owned by the Pandey family and

as New Zealand’s largest private hotel owner, has

around 20 hotel assets in the country.

The company is working closely with Accor,

developing the region’s first So branded hotel in

New Zealand, converting the former New Zealand

Reserve Bank building. And in Wellington, a former

office building is being extended with additional

floors to accommodate a 130 room Sofitel.

CP also has a stake in the 172 room Sofitel, a

Pullman with associated residences in Auckland,

the Mercure Auckland, Park Regis Auckland, and

Ibis Styles in Wellington. The group also owns

hotels in the US, Australia and Fiji.

Local media report that CP has a robust attitude

towards its hotel operations, having previously

fought a high court battle with liquidators over

a judgement relating to the Lakewood Motel in

Rotorua. It has also recently been battling with

authorities in Christchurch, who would like to see

CP at least board up a derelict hotel damaged in

the 2011 earthquake.

StayWell may have had its aspirations to expand

in New Zealand curtailed, but remains in expansive

mood, with 30 hotels under management across

Asia Pacific and the Middle East. Most recently,

the company signed to open its second Park Regis

branded property in Dubai. The group has an

equity interest in around half of the properties it

manages, and runs the Leisure Inn brand as well

as Park Regis.

The New Zealand hotel market is benefiting

from strong visitor numbers, up 7% year on year

to 2.95m, while GDP growth was 3% last year.

Dean Humphries, national director for hotels at

Colliers, says the market is in a “perfect storm”

New Zealand’s largest private hotel owner, CP Group, has indicated it will take a more proactive role in managing and branding its hotel assets. The news comes as CP took back control of five properties being managed for it under an agreement with Australian group StayWell Hospitality.

with historically low levels of new development,

rising occupancy and room rates. Indeed, serviced

apartments are actually being lost to the market

in Auckland, with owner occupiers scooping them

up instead.

Revpar was up 20% in the first quarter of 2015

in Auckland, and ahead 18% in Queenstown.

“The short to medium term outlook continues

to be strong,” he said in the agent’s May 2015

market report, also noting: “Buyer demand is also

at an all-time high with an increasing number of

investors wanting to purchase hotel assets.”

All three asset transactions in the New

Zealand market this year have seen sales to

Singaporean buyers.

HA Perspective [by Chris Bown]: CP appears to

have introduced its new in-house management

strategy in a rather brusque way that will not help

endear it to the brands with whom it needs to do

business. While StayWell fights for compensation

for its untimely departure, surely other brands

running CP-owned properties will be getting their

lawyers to check the small print of their contracts.

Will Accor be the beneficiary of this move by CP?

It is currently unclear whether the new management

have plans to start their own, local hotel brand,

but the French hotelier has recently signed new

properties in Australia, and would doubtless like to

return to hotels it previously flagged.

The challenge for CP in its aspirations to grow

its hotel portfolio will be the current strong local

market pricing for hotel assets, and competition

from foreign investors, notably from Singapore.

Perhaps it ought to focus on rebuilding its damaged

property in Christchurch, as the authorities wish it

to – and consider other development opportunities

as a route to building its hotel portfolio.

listed REIT focused solely on hotel resorts, with a

diversified portfolio in terms of hotel operators,

and a steady income base, through lease contracts

with a strong fixed income component and

enough exposure to the future increase of the

Spanish tourism market. The objective of the

new REIT for Hispania and Barceló, is to become

an instrument with which to attract institutional

capital for the Spanish hotel industry, creating new

sources of capital.”

Barcelo CEO Raul Gonzalez made clear the

attraction for his company: “After this transaction

we will be in a leading position to benefit from

the concentration process that should take place

in the Spanish hotel industry.”

HA Perspective [by Chris Bown]: Barcelo’s return

to the stalled Occidental sale means it walks away

with the spoils. We may find out in due course how

the company felt able to improve on its previous

bid, and by how much – in the process trumping

the major brands to secure the Occidental deal.

This was clearly felt to be a decent enough

portfolio to attract big hitters such as Marriott and

Hyatt. But having paid more, Barcelo will now be

looking for synergies to improve returns.

With these two transactions, Barcelo has turned

its business around fundamentally. Having turned

its resort operations into an asset light operation,

with the hotels moved into the new Hispania

Reit, it is now grabbing a slice of the action in the

buzzing Latin American market, adding scale to its

existing hotels in the region.

The Reit holds the potential to take on

several more of Barcelo’s properties, should the

partnership get off to a good start.

The question will now be what Spanish bank

BBVA does with its stake in Occidental. A new

CEO has declared he will improve the bank’s

profitability, while its Spanish peer Bankia has

declared a “Big Bang” project to dispose of all its

property assets, distressed or not.

Will Barcelo have deep enough pockets to

buy out BBVA? Perhaps it can finesse a deal with

its new best friend Hispania, and reverse the

Occidental properties into the Reit.


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Context

Only 18% of all chain hotels in the 53 countries

of Europe are rooms only hotels. They are the

simplest of hotels with the sole purpose of

renting bedrooms on a short-term basis. They are

exclusively focussed on transient rooms demand

and 89% of the rooms only hotels are in the

economy and budget categories. RevPAR and

its components in these hotels are as effective a

measure of hotel turnover as can be generated.

The problem is that the other 82% of the chain

hotels in Europe have non-rooms facilities and

there is no sense, outside of the individual chains,

of the non-rooms performance of the hotels,

even in terms of turnover. In the Otus Hotel Brand

Database these hotels accommodate 29,000

restaurants and bars, an average of two per hotel.

They have 57,000 meetings and events rooms, an

average of four per hotel. When we add the 2,500

fitness rooms the 4,000 spas, the 4,000 outdoor

leisure facilities, the retail outlets and the casinos

there is around 100,000 non-rooms venues in

chain hotels in Europe, that is the equivalent of

one non-rooms venue for every 20 rooms, and we

are in the dark about their patterns of demand

and their performance.

The hotel affiliation dilemma

In the Otus experience, the crux of the low

frequency of incentive fees paid to management

contractors, mostly, but not entirely the global

major hotel chains, is not due to their inability to

report at least a benign level of RevPAR for the high

margin bedroom business. In general, the global

majors are able to take care of themselves in the

bedrooms market. They have brand infrastructure

to generate demand and can top-up their own

efforts with demand from the OTAs. Rather, the

problem of low frequency of incentive fees paid to

management contractors is a reflection of their so-

so ability to produce effective performance from

the non-rooms facilities, which carry the added

burden of low to negative operating margins.

It is not only management contracting where

there is a problem. The structure of franchise fees,

based as they are on a percentage of bedroom

turnover absolves the franchisor from generating

demand for non-rooms facilities and leaves the

franchisee with the prime responsibility for the

non-rooms facilities in the hotels. In contrast to the

brand infrastructure at the heart of the rationale

of franchisors, there is only minute franchisee

infrastructure to generate non-rooms demand.

Franchisors do generate some non-rooms demand

into franchised hotels through bedroom centric

demand such as bed and breakfast and dinner bed

and breakfast and also from packaged residential

conferences. However, as franchisors earn no fees

for the generation of the non-rooms component

of hotel demand, it rarely rises above a marginal

interest for them.

Another hotel affiliation where the problem

resides is leased hotels. Just as the predominance

of management contracts and franchises are with

the global major chains, so the predominance of

leased hotels are with national chains, each of

which has a hotel portfolio in only one country.

They are the smallest of hotel chains. They are the

slowest growing, they have the least developed

brand infrastructure and they have the biggest

problem with leases. Only 90% of hotels in

national chains have non-rooms facilities and they

have been taken to the cleaners by the lessors. It

is not quite a law of nature, but not far off, that

the more non-rooms facilities in a leased hotel, the

greater the likelihood that the best performance

will be microscopic profits after the rent is paid

and too frequently the post rent performance

is negative. These hotels face the dual dilemma

of an inability to generate and manage effective

non-rooms demand and a lease payment that the

hotel is not configured to sustain.

The hotel restaurant dilemma

In all three cases of management contracts,

franchises and leases there is both a demand

dimension and a supply dimension to the non-

rooms dilemma, which is first seen in hotel

restaurants. Restaurant chains have continued to

expand progressively over the past two decades,

not only in their number of restaurants, but

also in the diversity of their menus and dining

environment. Horizons, the leading tracker of

restaurant brands, identifies that of the 25 largest

casual dining brands in Europe, 15 are from the

UK, seven are from France, two are from Germany

and one is an American brand. Naturally, the driver

of the growth in restaurant brands is demand,

which in turn has been driven by the development

in the microeconomic structure of European

economies and is impacting on the demand and

performance patterns of hotel restaurants.

Over the past two decades, hotel chains have

continued to grow their restaurant and bar

provision to reach 29,000 venues in Europe.

Over the same period there has been a shift in

hotel demand from packaged demand, which is

booked offline, to transient rooms demand, which

predominantly is booked online. The combination

of growth in transient rooms demand and growth

in the number of hotel customers with regular

experience of different restaurant brands has

put an increasingly downward pressure on hotel

restaurant demand from hotel customers. Quite

Otus & Co investigates the supply, demand and performance challenges for non-rooms facilities in hotels

The non-rooms dilemma in chain hotels

The small number of quoted hotel companies severely limits insight into the performance of hotels, particularly since most of the hotels in quoted chains are held on management contract or franchise and no hotel specific metrics are reported except RevPAR, typically for a region, country or brand. The greater problem is that most hotel chains are privately owned and they guardedly avoid providing audited performance data of any granularity. The RevPAR data that is published on a general basis provides scant comfort due to its methodological problems, but the performance issue that we address here is the great unknown about hotels and hotel chains and it relates to the performance of their non-rooms facilities.

Analysis



market to fill them, it is surprising that whereas

there is some supply data about the meeting and

event facilities, there is little demand data and no

performance data generally available.

Demand for hotel meeting and event rooms are

in three forms and for each there are two options:

residential and non-residential, business and social

and domestic and foreign. More complexity is

added because each of the alternatives are not

binary. Some of the attendees can be residential

and others non-residential. Some business events

can have social elements and some social events

can have a business element. Equally, meetings

and events can have a mixture of domestic and

foreign attendees or can be totally domestic or

totally foreign.

The International Congress and Convention

Association exists to represent, “the main

specialists in organising, transporting and

accommodating international meetings and events

and comprises almost 1,000 member companies

and organisations in over 90 countries.” In the

recently published ICCA analysis of international

meetings and events demand for 2014, the largest

countries in Europe are listed in Table 1.

The ICCA analysis is silent on how many

meetings and events occurred in hotels in each

country. The number of participants per meeting

ranged broadly from 400 to 500 indicating that

generally the international events are large. It is

likely that a significant number of the international

events in the ICCA survey did not take place in

hotels, but rather in exhibition centres, at trade

fairs and in convention centres, in which case the

participants staying at hotels would be transient

rooms customers not using the meeting and event

facilities in the hotels.

If we assume that all of the international

events took place in chain hotels in each country,

the number of participants per meeting room

collapses to a range from 22 in the UK to 86

in Italy. It is evident from the ICCA analysis that

international demand would make only a minor

dent in the meeting and event capacity in chain

hotels. Moreover, the UK with substantially more

meeting and event rooms in chain hotels is the

worst performer.

The meeting and events dilemma in the UK is

highlighted by the data collected by the Office of

National Statistics, which collects data periodically

about foreign business visitors to the country.

Table 2 shows the typical data collected.

Analysis

simply, hotel customers have become comfortable

in making the choice to eat outside of the hotel.

The downward pressure on city centre hotels is

not recent. They are confronted with increasing

numbers of casual dining restaurant brands within

easy reach, with more immediately appealing

ambience than hotel restaurants and according

to Horizons, less expensive than hotel restaurants.

Thus, the downward pressure is set to increase.

An exception to this pattern of development

is breakfast in hotel restaurants. Hotels have a

semi-captive market for breakfast and they have

been promoting bed and breakfast packages

at discounted prices on their own websites and

on OTA sites. The relief of downward pressure

on breakfast is transitory. Most casual restaurant

brands have avoided opening for breakfast, but

progressively more restaurant brands are adapting

their offer to open for breakfast and they are

finding a market. Moreover, coffee shops, whose

natural environment is city centres, are expanding

fast and have always had a strong breakfast

offering. Consequently, the downward demand

pressure on breakfast in hotel restaurants is just

starting and in our analysis will become more

acute. It is surprising that there are 3,400 chain

hotels in Europe with more than one restaurant

and one bar and it will be these hotels that will

feel the pressure most. One quirk in the hotel

restaurant market is the 75 chain hotels around

the Mediterranean Costas that have 10 or more

restaurants and bars each. They are kept sustained

by the move to all inclusive packaged holidays

and the limited restaurant provision in the vicinity

of the hotels.

One initiative by hotel chains, particularly

at the luxury and up market levels, to relieve

downward pressure on their restaurants has been

to enter into lease contracts with celebrity chefs or

restaurant brands to rent one of the restaurants

in their hotels. In these cases, the hotel chain has

converted weak performance of their managed

restaurant for regular rent from a celebrity chef

or restaurant brand. There have been few of these

arrangements that have been sustained because

of the reluctance of many celebrity chefs and

restaurant brands to open for breakfast or to take

on the extreme performance risk of room service.

The meetings and events dilemma

In Europe hotel chains have amassed 57,000

meeting and event rooms in their hotels, an

average of four per hotel. They range from one

meeting room in each of 2,000 hotels to 300

hotels with more than 20 meeting and events

rooms in each hotel and a total of 8,000.

For the number of meeting and event rooms,

the level of investment and the complexity of the


Table 1 ICCA: Largest International Meeting & Event Countries in Europe 2014

Participants/ Participants/ M&E rooms in M&E room in Rank Country Participants Meetings meeting chain hotels chain hotels

1 Spain 289,039 578 500 5,895 49

2 Germany 264,156 659 401 8,370 32

3 France 233,075 533 437 5,821 50

4 United Kingdom 199,100 543 367 12,181 22

5 Italy 175,400 452 388 2,719 86

6 Netherlands 133,105 307 434 3,433 58

Source: ICCA 2014 and Otus Analytics

Table 2 Inbound Business Profile to the UK 2012

Visits Nights Spend Average stay Spend/night (000s) (000s) £m days £

Business/Work 5,954 25,642 3,315 4.3 129

Trade Fair 215 875 214 4.1 245

Conference 20+ People 1,069 4,610 862 4.3 187

Source: ONS International Passenger Survey

Table 3 ICCA: Largest International Meeting & Event Cities in Europe 2014

Participants/ Participants/ M&E rooms in M&E room in Rank Country Participants Meetings meeting chain hotels chain hotels

1 Paris 130,516 214 610 1,561 84

2 Barcelona 127,469 182 700 752 170

3 Madrid 91,452 200 457 747 122

4 London 89,969 166 542 2,431 37

5 Vienna 81,902 202 405 454 180

6 Amsterdam 79,356 133 597 588 135

7 Berlin 76,880 193 398 966 80

8 Istanbul 75,864 130 584 610 124

9 Copenhagen 57,551 105 548 274 210

Source: ICCA 2014 and Otus Analytics


We do not have much complaint about the data

the ONS presents about business/work visitors or

trade fair visitors other than to say that given the

spend per night by trade fair visitors we might

have expected more effort by Visit Britain to

attract trade fair demand.

Our irritation is about the data on conferences

of 20 or more people, which appears to us as an

entirely random number given that many of the

meeting rooms in hotels accommodate fewer than

20 people and thus, must have been excluded

from the survey.

The ICCA analysis of the largest cities in Europe

is also revealing as Table 3 illustrates.

As the UK stuck out in the country analysis for

the poorest utilisation of its chain hotel meeting

and event facilities for international occasions,

so in the city analysis London sticks out for the

same reason. London has substantially more

meeting and event capacity in chain hotels than

every other city in Europe, yet it has a miserably

poor performance relative to all of the other cities

if all ICCA recorded events took place in chain

hotels. On this basis London would only achieve

37 participants per meeting against the next worst

performing city, Berlin, with more than double the

London number.

There are two ways we can interpret the

pathetic performance of the chain hotels in the

UK and London. First, there is the supply analysis

that there are just far too many meeting and event

rooms in chain hotels in both the UK and London.

Then there is the demand analysis, which points

the finger at Visit Britain, the body designated

by the government to attract foreign visitors into

the UK. Visit Britain has failed to attract enough

meeting and event demand into the country and

into the chain hotels. Indeed, since the start of the

Great Recession, Visit Britain has had its budget

slashed and has opted to focus its efforts on

attracting leisure visitors rather than meeting and

event visitors. The response by the politicians to

the meeting and event mess in hotels has been to

instruct Visit Britain to re-start its efforts to attract

international meetings and events to the UK,

although no new funds have been made available

for the initiative. Along with the shortcomings

of Visit Britain, the hotel chains are also culpable

in failing to attract enough meeting and event

demand into their hotels in the UK. It is not part

of the task of hotel chains to attract meetings and

events to any particular country. The chains seek

meeting and event demand into their hotels and

are horizontal about the country or city where

those events take place.

The meeting and event dilemma is tough to

resolve either with a supply or demand solution.

Annually, hotel chains continue to open new

hotels with meeting and event facilities, which is

adding to the problem. Additionally, we are not

aware of any new initiatives that will materially

increase meeting and event demand into hotels.

Until both the supply and demand dilemmas are

resolved, the meeting and event facilities in hotel

chains in Europe and in particularly in the UK,

will continue to be lazy assets pulling down the

bedroom performance of the hotels.

The other non-rooms dilemmas

The situation at other non-room facilities in

hotels is not much better than the dilemmas

with restaurants and meeting and event facilities.

Fitness rooms have now found their place as an

amenity for resident customers and all aspirations

that they could become a profit centre are long

gone. Spas have moved in the same direction, but

much worse because of the substantially greater

cost to create them. Initiatives to lease hotel spas

to specialist spa operators has reduced the loss to

the hotel, but has done little for the performance

of the spa operator.

Outdoor leisure facilities stretch from a

swimming pool or tennis court up to golf courses.

The critical feature of outdoor leisure facilities in

chain hotels in Europe is the cost of land. Many

outdoor facilities in chain hotels have become

amenities for resident customers and only golf

courses have had any success in attracting

local demand, tournaments and corporate golf

days to help them deliver any return on the

investment. The balance, which has been difficult

to achieve, is their proximity to sufficiently large

neighbourhoods of golf players willing to join

the hotel club on the one hand and the cost of

the land on the other. Broadly, the closer to large

enough neighbourhoods, the more expensive the

land, which produces a supply challenge. The less

expensive the land, the further it is likely to be from

sufficiently large neighbourhoods, which produces

a demand challenge. It is easier to identify failure

than success. One thinks of the Marriott hotels

in the UK, the real estate of which was sold by

Whitbread in 2005 for circa £1.1 billion. Eleven

of the 42 hotels had golf courses. In 2014, the

Abu Dhabi Investment Authority acquired the real

estate portfolio for circa £640 million.

Less than 10% of chain hotels in Europe have

retail outlets, which invariably are rented to

retailers removing the risk from the hotels. There

are so few retail outlets in European hotels due to

the perennial lease problem of finding any residual

profits after the rent is paid.

The last non-rooms facility to be considered is

casinos in hotels. There are less than 50 casinos

in chain hotels in Europe. There are of two types

of relationship between the hotel and the casino.

Either the casino is in the same building as the

hotel without direct internal access between the

hotel and the casino, which is leased by the hotel

to a casino operator. Alternatively, the casino is

an integral part of the hotel. The first example

is a legal requirement in the UK and the second

is common on the continent. Casinos are not a

high risk for chain hotels in Europe, but neither are

they a strong attraction illustrated by the very few

hotels with casinos.

Conclusions

Non-rooms facilities are the unreported dilemma

for hotel performance. There are far too many

instances when hotel brands have insisted to

hotel owners that extensive non-rooms facilities

are a necessary part of the brand, irrespective of

whether or not there is demand for them. There

are far too many instances of feasibility studies

assuring child bankers that they can lend to

hotels with extensive non-rooms facilities when

their analyses are fictional and the child bankers

are unaware. There are too many hotel general

managers who spend most of their work time

struggling without success to recover unprofitable

non-rooms facilities in hotels and there are too

many hotel chain corporate executives who do not

know what to do about them. Until hotel chains,

hotel owners and hotel lenders pay attention to

the non-rooms dilemmas we will continue to see

more non-rooms facilities built into new hotels

with the same or worse results described above.

Paul Slattery, Otus & Co Ltd

[email protected]

Ian Gamse, Otus & Co Ltd

[email protected]

Analysis


Analysis

increasing signs of recovery, with a number of

deals, including the GBP245m deal between

Barcelo Hotels & Resorts and Hispania, to establish

a hotel REIT focused on holiday resorts.

The new vehicle was launched with the purchase

of EUR421m of property assets, acquiring hotels

from Barcelo Group. An initial 11 hotels and one

shopping centre will be transferred, while there is

an option to acquire a further five hotels and an

additional shopping centre. There is a commitment

to inject a further EUR35m to refurbish and update

some of the hotels.

The pair’s joint venture will result in Hispania

investing EUR339m and holding an 80.5% stake,

while Barcelo will retain a 19.5% share; it also has

an option to grow its stake up to 49%, through

future capital increases.

“Spain is the third most important tourist

destination in the world, preceded only by

France and the US”, said Concha Osácar, board

member of Hispania. “Spain has almost twice

the number of resort keys as the US, as well as a

well-diversified tourist base, with British, German

and French visitors representing more than 50%

of the total.”

The country also saw one of the highest-profile

deals of the period, with the sale of the Hotel

Ritz Madrid for almost GBP93m by Belmond and

Omega Capital to Olayan & Mandarin Oriental. The

167 room hotel is to be run by Mandarin Oriental

under a long term management agreement. The

property will undergo a comprehensive EUR90m

refurbishment in 2017.

Of the struggling PIGS group of European

countries, Italy also proved itself popular, with

the sale of the Una Hotels portfolio for GBP199m

to insurance company Unipol. The new owner is

set to merge them with its Atahotels company,

creating a group with 50 hotels and 8,600 rooms.

The combined group will be a leader in the

Italian hotel sector, with annual revenues of

around EUR170m.

Europe’s downturn would appear to be at

an end.

The March to May period has shown no signs of the Europe-wide transactions frenzy slowing down, with portfolio deals and single asset transactions continuing to draw investors from around the globe. Spain and Italy both saw a resurgence in activity, as their recoveries took firm hold.

Accor continued to dominate the field as it

shook out its portfolio to match new requirements

under its dual positions as owner and operator.

The company sold hotels in the UK, Germany,

France and Ireland, with the biggest single asset

deal being the huge Hotel Nikko in Paris, for

GBP146m. The 764-room hotel, which is branded

as a Novotel, sold for over GBP191,000 per key, to

French investment group MI29 Eurobail.

Accor also sold a portfolio of 469 rooms flagged

under the Ibis brand in the UK and Ireland, for

GBP27m, to Starboard Hotels. The hotels will be

operated by Starboard under the Ibis franchise for

a further 20 years as part of the agreement.

Starboard Hotels’ managing director, Paul

Callingham, said: “These five hotels provided us

with a great opportunity to double the size of

our portfolio and take on a group of established

properties that have excellent trading records and

great people. With our operating and development

experience we will build on this to take the hotels

to the next level.”

The deal was the third purchase within a year

for Starboard, a company which takes its place

in the growing trend of regional owners and

franchisors who have been taking advantage of

the recovery in the provincial market. Like many

of its cohort, the group has hotels under a variety

of brands rather than just the one operator and

has sites under flags including Holiday Inn Express,

Days Inn and Best Western brands.

Outside the UK, Spain has been showing

PIGS feeding investor appetites Property Country Date Sale Price Price per Key No. of Keys Vendor Purchaser

Radisson Blu & Park Inn Hotels, Antewerp (2 Hotels) Belgium Jun-15 £34,782,609 £113,669 306 Elbit Imaging Ltd KKR Asset Management Ltd

Sheraton Congress Hotel Frankfurt Germany May-15 396 Babcock & Brown Grand City Property

Hotel Nikko, Paris France May-15 £146,099,461 £191,230 764 Accor MI29 Eurobail

Accor Portfolio 2015P, London & Regional, Dublin United Kingdom & Ireland

May-15 £27,000,000 £57,569 469 Accor Starboard Hotels Ltd

Arora International, Heathrow, West Drayton United Kingdom May-15 £45,000,000 £128,205 351 Arora Holdings M&L Hospitality

Hilton London Wembley Hotel United Kingdom May-15 £80,000,127 £221,607 361 Quintain Oaktree

Hotel Ritz Madrid Spain May-15 £92,857,143 £556,031 167 JV between Belmond Ltd & Omega Capital S.L

Olayan & Mandarin Oriental

Sheraton Brussels Hotel & Towers Belgium May-15 520 International Real Estate PLC Eaglestone

Height3, Hamburg Germany May-15 £36,524,865 £180,816 202 Hochtief hausInvest europa (CGI)

Ibis Dublin West Ireland May-15 150 Accor Hetherley Developments JV Cannock Group

Mercure am Centro Oberhausen Germany May-15 94 Accor Novum Group

Carlton Hotel, Kinsale Ireland May-15 £4,382,984 £62,614 70 Gamble Holdings

Hotel Ibis Convention, Paris France May-15 48 Accor

Munich lifestyle hotel Germany May-15 £55,517,795 £191,441 290 Liran Wizman CPA:18

Hotel Mercure Bastille, Paris France May-15 34 Extendam

Quality Hotel Malesherbes, Paris France May-15 24 Extendam

Royal Ravintolat Helsinki Portfolio (3 Hotels) Finland May-15 265 Royal Ravintolat Kamp Group

Wombats City Hostel Naschmarkt, Vienna Austria May-15 123

Lotus Therme Heviz Hungary May-15 231 CIB Bank

Hotel Gritti Palace, Venice Italy May-15 £76,086,957 £927,890 82 Starwood Jaidah Holdings

Zuidblok Stadionplein, Amsterdam Netherlands May-15 60 IQNN JV Vink Bouw UMW Holding

Windsor House, Belfast United Kingdom May-15 £6,500,000 n/k n/k NAMA Hastings Hotels Group

Le Meridien Parkhotel, Frankfurt Germany May-15 297 Kildare Partners Art Invest Real Estate

Ramada Hotel Berlin Mitte Germany May-15 145

Lion Hotel, Shrewsbury United Kingdom May-15 59 Duff Phelps FICO Corporation

Novotel Edinburgh Park United Kingdom May-15 £20,000,000 £117,647 170 Benson Elliott Capital Management LLP

Qatar Airways

Hotel Monte Rosa, Zermatt Switzerland May-15 £11,515,178 £245,004 47 CS REF Hospitality Seiler Hotels

Unipol Portfolio (31 Hotels), Italy-wide Italy May-15 £199,106,956 £1,966,773 2,794 Una Hotels Unipol Gruppo Finanziario

Beau-Rivage Palace, Lausanne Switzerland Apr-15 219 Beau-Rivage Palace SA Sandoz Family Foundation

Amstel Tower Hotel, Amsterdam Netherlands Apr-15 £47,877,412 £257,405 186 Provast Bouwinvest

HOAX Liverpool United Kingdom Apr-15 52 Topland Group JV Union Hanover Securities

Euro Hostel

Center Parcs Vienne Grand Ouest, Les Trois-Moutiers France Apr-15 £10,808,688 £203,938 53 Pierre & Vacances La Francaise RE Managers

andels Hotel Berlin Germany Apr-15 557 UBM Realitaetenentwicklung AG

Spanish Hotel Portfolio, Spain-wide Spain Apr-15 £245,225,842 £62,145 3,946 Barcelo Hotels & Resorts Hispania

Courtyard by Marriott Paris Arcueil France Apr-15 £17,591,322 £103,478 170 Marriott International

Ibis Berlin City West Germany Apr-15 136 Provinzial NorthStar Realty Finance

InterCity Hotel Berlin Hauptbahnhof Germany Apr-15 412 Provinzial NorthStar Realty Finance

Oceana Hotels Portfolio (3 Hotels), Bournemouth United Kingdom Apr-15 CONFIDENTIAL CONFIDENTIAL 282 Shone & Taylor Aamer Gul – Broker

Blackstone Portfolio (5 Hotels), Manchester, Leeds, Glasgow, Bristol, Birmingham

United Kingdom Apr-15 £160,000,000 £57,430 2,786 Blackstone Group (UK) Marathon Asset Management

Maybourne Hotel Group (64% share), London United Kingdom Apr-15 c.£1,500,000,000 £2,788,104 538 Barclay & Quinlan Qatar Investment Authority

Travelodge London Hounslow United Kingdom Apr-15 £11,900,000 £92,969 128 Saffron Rage CBRE Investors

Hotel MGallery Cerretani Firenze, Florence Italy Mar-15 £10,370,651 £124,948 83 Generali Immobiliare Italy Event Hotel Group

Hotel Mövenpick Lausanne-Ouchy, Lausanne Switzerland Mar-15 £50,246,781 £149,100 337 Schroders ImmoPlus

Hotel Arosa, Essen Germany Mar-15 87 Marx City Investor GmbH & Co. KG

Carlton Hotel, Sandown United Kingdom Mar-15 119 Whitbread

Premier Inn Wembley Park, London United Kingdom Mar-15 312 Quintain Whitbread

InterContinental Dublin Ireland Mar-15 £36,261,017 £184,066 197 London & Regional John Malone

Swedish Hotel Portfolio (14 Hotels), Sweden-Wide Sweden Mar-15 1,161 Event Holding GmbH

Knight Residence, Edinburgh United Kingdom Mar-15 28

Ace Hotel Shoreditch, London United Kingdom Mar-15 £146,000,000 £553,030 264 Starwood Capital Group Limulus Ltd

Westin Hotel, Dublin Ireland Mar-15 £7,977,424 Irish Life Assurance

Premier West Hotel. London United Kingdom Mar-15 £14,850,000 £353,571 42 Avni Hotels Ltd KSH Holdings JV Heeton Holdings JV Ryobi Kiso Holdings JV Lian Beng Group

Sheraton Skyline Hotel & CC, Hayes United Kingdom Mar-15 350 Qatar Airways

St Ermin's Hotel, London United Kingdom Mar-15 £185,000,000 £558,912 331 Angelo Gordon Sunrider International

Hotel Savigny, Frankfurt Germany Mar-15 155 Accor SaWe

B&B Hotel Portfolio, Germany-wide Germany Mar-15 £92,828,203 £40,875 2,271 Carlyle Group Fonciere des Murs

Quality Hotel Panorama, Gothenburg Sweden Mar-15 £23,306,171 £68,548 340 K/S Panora Hotel KAB Fastigheter AB

Le Meridien Munich Germany Mar-15 £112,857,143 £296,212 381 Kildare Partners & administrator Deka Immobilien

Premier Inn Heathrow Terminal 5, London United Kingdom Mar-15 £82,350,000 £205,875 400 Arora Holdings Legal & General Property


Analysis

Source: Savills Research

Property Country Date Sale Price Price per Key No. of Keys Vendor Purchaser

Radisson Blu & Park Inn Hotels, Antewerp (2 Hotels) Belgium Jun-15 £34,782,609 £113,669 306 Elbit Imaging Ltd KKR Asset Management Ltd

Sheraton Congress Hotel Frankfurt Germany May-15 396 Babcock & Brown Grand City Property

Hotel Nikko, Paris France May-15 £146,099,461 £191,230 764 Accor MI29 Eurobail

Accor Portfolio 2015P, London & Regional, Dublin United Kingdom & Ireland

May-15 £27,000,000 £57,569 469 Accor Starboard Hotels Ltd

Arora International, Heathrow, West Drayton United Kingdom May-15 £45,000,000 £128,205 351 Arora Holdings M&L Hospitality

Hilton London Wembley Hotel United Kingdom May-15 £80,000,127 £221,607 361 Quintain Oaktree

Hotel Ritz Madrid Spain May-15 £92,857,143 £556,031 167 JV between Belmond Ltd & Omega Capital S.L

Olayan & Mandarin Oriental

Sheraton Brussels Hotel & Towers Belgium May-15 520 International Real Estate PLC Eaglestone

Height3, Hamburg Germany May-15 £36,524,865 £180,816 202 Hochtief hausInvest europa (CGI)

Ibis Dublin West Ireland May-15 150 Accor Hetherley Developments JV Cannock Group

Mercure am Centro Oberhausen Germany May-15 94 Accor Novum Group

Carlton Hotel, Kinsale Ireland May-15 £4,382,984 £62,614 70 Gamble Holdings

Hotel Ibis Convention, Paris France May-15 48 Accor

Munich lifestyle hotel Germany May-15 £55,517,795 £191,441 290 Liran Wizman CPA:18

Hotel Mercure Bastille, Paris France May-15 34 Extendam

Quality Hotel Malesherbes, Paris France May-15 24 Extendam

Royal Ravintolat Helsinki Portfolio (3 Hotels) Finland May-15 265 Royal Ravintolat Kamp Group

Wombats City Hostel Naschmarkt, Vienna Austria May-15 123

Lotus Therme Heviz Hungary May-15 231 CIB Bank

Hotel Gritti Palace, Venice Italy May-15 £76,086,957 £927,890 82 Starwood Jaidah Holdings

Zuidblok Stadionplein, Amsterdam Netherlands May-15 60 IQNN JV Vink Bouw UMW Holding

Windsor House, Belfast United Kingdom May-15 £6,500,000 n/k n/k NAMA Hastings Hotels Group

Le Meridien Parkhotel, Frankfurt Germany May-15 297 Kildare Partners Art Invest Real Estate

Ramada Hotel Berlin Mitte Germany May-15 145

Lion Hotel, Shrewsbury United Kingdom May-15 59 Duff Phelps FICO Corporation

Novotel Edinburgh Park United Kingdom May-15 £20,000,000 £117,647 170 Benson Elliott Capital Management LLP

Qatar Airways

Hotel Monte Rosa, Zermatt Switzerland May-15 £11,515,178 £245,004 47 CS REF Hospitality Seiler Hotels

Unipol Portfolio (31 Hotels), Italy-wide Italy May-15 £199,106,956 £1,966,773 2,794 Una Hotels Unipol Gruppo Finanziario

Beau-Rivage Palace, Lausanne Switzerland Apr-15 219 Beau-Rivage Palace SA Sandoz Family Foundation

Amstel Tower Hotel, Amsterdam Netherlands Apr-15 £47,877,412 £257,405 186 Provast Bouwinvest

HOAX Liverpool United Kingdom Apr-15 52 Topland Group JV Union Hanover Securities

Euro Hostel

Center Parcs Vienne Grand Ouest, Les Trois-Moutiers France Apr-15 £10,808,688 £203,938 53 Pierre & Vacances La Francaise RE Managers

andels Hotel Berlin Germany Apr-15 557 UBM Realitaetenentwicklung AG

Spanish Hotel Portfolio, Spain-wide Spain Apr-15 £245,225,842 £62,145 3,946 Barcelo Hotels & Resorts Hispania

Courtyard by Marriott Paris Arcueil France Apr-15 £17,591,322 £103,478 170 Marriott International

Ibis Berlin City West Germany Apr-15 136 Provinzial NorthStar Realty Finance

InterCity Hotel Berlin Hauptbahnhof Germany Apr-15 412 Provinzial NorthStar Realty Finance

Oceana Hotels Portfolio (3 Hotels), Bournemouth United Kingdom Apr-15 CONFIDENTIAL CONFIDENTIAL 282 Shone & Taylor Aamer Gul – Broker

Blackstone Portfolio (5 Hotels), Manchester, Leeds, Glasgow, Bristol, Birmingham

United Kingdom Apr-15 £160,000,000 £57,430 2,786 Blackstone Group (UK) Marathon Asset Management

Maybourne Hotel Group (64% share), London United Kingdom Apr-15 c.£1,500,000,000 £2,788,104 538 Barclay & Quinlan Qatar Investment Authority

Travelodge London Hounslow United Kingdom Apr-15 £11,900,000 £92,969 128 Saffron Rage CBRE Investors

Hotel MGallery Cerretani Firenze, Florence Italy Mar-15 £10,370,651 £124,948 83 Generali Immobiliare Italy Event Hotel Group

Hotel Mövenpick Lausanne-Ouchy, Lausanne Switzerland Mar-15 £50,246,781 £149,100 337 Schroders ImmoPlus

Hotel Arosa, Essen Germany Mar-15 87 Marx City Investor GmbH & Co. KG

Carlton Hotel, Sandown United Kingdom Mar-15 119 Whitbread

Premier Inn Wembley Park, London United Kingdom Mar-15 312 Quintain Whitbread

InterContinental Dublin Ireland Mar-15 £36,261,017 £184,066 197 London & Regional John Malone

Swedish Hotel Portfolio (14 Hotels), Sweden-Wide Sweden Mar-15 1,161 Event Holding GmbH

Knight Residence, Edinburgh United Kingdom Mar-15 28

Ace Hotel Shoreditch, London United Kingdom Mar-15 £146,000,000 £553,030 264 Starwood Capital Group Limulus Ltd

Westin Hotel, Dublin Ireland Mar-15 £7,977,424 Irish Life Assurance

Premier West Hotel. London United Kingdom Mar-15 £14,850,000 £353,571 42 Avni Hotels Ltd KSH Holdings JV Heeton Holdings JV Ryobi Kiso Holdings JV Lian Beng Group

Sheraton Skyline Hotel & CC, Hayes United Kingdom Mar-15 350 Qatar Airways

St Ermin's Hotel, London United Kingdom Mar-15 £185,000,000 £558,912 331 Angelo Gordon Sunrider International

Hotel Savigny, Frankfurt Germany Mar-15 155 Accor SaWe

B&B Hotel Portfolio, Germany-wide Germany Mar-15 £92,828,203 £40,875 2,271 Carlyle Group Fonciere des Murs

Quality Hotel Panorama, Gothenburg Sweden Mar-15 £23,306,171 £68,548 340 K/S Panora Hotel KAB Fastigheter AB

Le Meridien Munich Germany Mar-15 £112,857,143 £296,212 381 Kildare Partners & administrator Deka Immobilien

Premier Inn Heathrow Terminal 5, London United Kingdom Mar-15 £82,350,000 £205,875 400 Arora Holdings Legal & General Property

www.hotelanalyst.co.ukVolume 10 Issue 526

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Not just a new CEO, an M&S CEOThe appointment of Alison Brittain, currently

the group director of the retail division at Lloyds

Banking Group, to replace Andy Harrison at

Whitbread, caused a certain amount of confusion

amongst industry observers.

The spate of ‘outsiders’ being hired into the

sector died a death with Frits van Paasschen.

The only possible link between Lloyds and hotels

could be the unholy amount of time customers

have spent at the counter trying to explain that

sometimes their signature changes when drunk.

So far, so all hail chip’n’pin. But Brittain is not

the hotel debutante she may appear, having served

time at the happy hunting ground of many a sector

employee – M&S. She is currently a non-executive

director, where she serves alongside Richard

Solomons, CEO of InterContinental Hotels Group,

who was appointed to the board in April this year.

Brittain may not have had long to pick up

any tips from Solomons, but having joined the

retailer in 2013, she will have stepped into the

still-warm seat of David Michels, former Hilton

Group CEO, who left M&S in 2012 after six

years and was at one point tipped to take over

as chairman.

What hotel tips might he have shared with

the board? As one of the brains behind the

reunification of the Hiltons, there could be scope

for world domination, although, with Whitbread

being more linked to rumours that Costa or

Premier Inn could be spun off, she could be

presiding over a smaller, rather than larger group.

Premier Inn customers would be happier if she

came with a discount for those nice pulled pork

sandwiches. And maybe spare pants for those

who have seen theirs go astray overnight.

Conrad sticks up for itself Hotels at their best are there to make you feel

better about yourself. Like a long-lost friend at

check-in. The recipient of the fatted calf at dinner

time. Tucked up in bed like a weary child after a

birthday party, with a favourite bear and a story. It

pretty much never happens.

But the Conrad London St James is making the

effort to bolster its guests’ egos at least a little bit,

adding selfie sticks to its minibars (branded ones,

they’re not total idiots – you need some payback

for the risk of getting side-swiped in the corridors).

The hotel’s hope is for that Holy Grail of promotion

– user-generated content, with guests plastering

images of themselves at the hotel all over social

media, with appropriate tagging, of course.

The hotel is striking while the iron is hot, as the

tide is rapidly turning against selfie sticks and their

users, particularly in the global capitals. Earlier this

year the National Gallery banned them, following

bans in galleries in France and America – including

the Palace of Versailles and the Museum of

Modern Art in New York.

Esther Saunders-Deutsch, spokesman for the

National Gallery, said: “Our staff are fully briefed

and instructed to ensure we are striking the

correct balance between visitor experience and

the security and safety of works on display.”

The hotel’s guests may soon find the only

place they can use the sticks is within the hotel

itself. Not, the hotel must be thinking, the

worst thing.

The price of these selfie sticks? GBP12. In some

hotel mini bars that will barely buy you a coke.

Cheap for an ego massage.

Bud and breakfastDespite the campaigns showing comedians tucked

up in bed at Kings Cross, hotel beds are not always

the scene of the most restful night’s sleep. Blame

jet lag, blame the siting of your room next to the

motorway, blame being suffocated by the 16

different types of pillow, hotel beds are more likely

to see eight hours of tossing and turning than a

beautifying slumber.

Until now, where, from the beginning of

July, guests at the world’s first cannabis camp

can presumably keel face-first into bed with

a warm and fuzzy feeling and a stomach full

of Hob Nobs.

But before you think this alternative spa is just

about biscuits, giggling and getting a solid 12

hours, think again. The 40-bed resort comes with

an extensive menu, as well as activities including

cooking with cannabis, cannabis education classes,

‘cannabis and canvas’ and cannabis yoga – where

“consuming small doses before participating in

one of our yoga classes melts away nerves and

inhibitions, and makes you more receptive to the

poses and music”.

Don’t expect to find the place infested with

patchouli-reeking hippies sporting homemade

tattoos – prices starts at USD395 per night. There

will be no risk of passing out and burning the

bed down – the nine luxury cabins on the site are

smoke-free, leaving guests to ponder nature in all

its majesty from the properties’ smoking porches.

The resort adds that: “As with all of our

activities, we encourage guests to partake in

cannabis responsibly.” So no phoning up your

mother pretending to be the pet dog then.

volume 10 issue 5 – may-june 2015 hotelanalyst€¦ · of starwood hotels & resorts, driven...

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