The first International Hotel Conference took place at the Le M‚ridien Beach Plaza hotel in Monaco last week. The event, attended by 250 people from hotel group chief executives to consultants and bankers, looked at a range of issues affecting the industry. Samantha McClary was there to report on its findings...
Hotels face a three-year wait for total recovery
Hotel room rates across Europe will remain depressed for the next three to five years, according to experts at the International Hotel Conference in Monaco last week.
Russell Kett, managing director of consultants HVS International, said the global economic slowdown, 11 September attacks, war in Iraq, Sars epidemic and growth of the internet had all put huge pressure on room rates, and he predicted that some of Europe's major cities would not be able to recover rate for some time.
"Room rates have been so hard hit that it will take time to restore them. It could take five years in certain markets," said Kett.
He added that while some areas could recover over the next two years, other European cities might never be able to reach pre-2001 levels of room rate.
Melvin Gold, managing director of hotel consultancy services at PKF, said that so far in 2003 every market had shown a decline in revenue per available room (revpar).
"Average room rate is now really showing signs of distress," said Gold. "We are going to need to see the occupancy situation turn around before people get the confidence to turn rate around."
He added: "2004 will be better, but it will be a slow year. Occupancy will pick up, but rates will be under pressure. They will show improvement but will still be poor by historic standards."
Gold predicted that room rates would not get back to 2000 levels until after 2006, but said the industry would soon start to regain its confidence.
It was not all doom and gloom at the two-day conference. Kett said there were still plenty of investors who wanted to buy in to the industry, although it might be at the bottom end of the market.
Paul Slattery, director of Otus & Company Advisory, said he expected some 700,000 more hotel bedrooms to come on line in Europe over the next 10 years, at a cost of €8b (£5.6b), but he added that the prediction was muted because of difficulty in funding the expansion.
Joint efforts will ease fear factor
Hoteliers need to come together to market the destinations they operate in as safe places to be, if they want people to visit them.
Melvin Gold, managing director of hotel consultancy services at PKF, said a bomb going off at a single hotel in London would have little effect on that hotel brand but would have wider implications for the city as a whole.
Charles Bourdin, general manager of Hôtel Balzac in Paris, agreed. He said that when he worked at the Hôtel Martinez in Cannes all the top hotels and the city's mayor got together to market the destination as a safe place during the film festival."
It was not about hotels saying, 'I'm the safest'; it was about the city being safe," said Bourdin.
Disagreement over 'next big thing'
Spas and the conversion of cruise ships into floating hotels were heralded by many at the conference as the "next big things" to hit the hotel industry.
Sumner Baye, president of Caribbean Clubs International, said: "The spa industry is one of the hot markets in our industry right now. You can't have an outstanding resort without a spa."
Michael Flaxman, managing director of northern, central and eastern Europe for Accor Hotels, said his company had been "scratching its head about spas".
"Five-star hotels really need a spa," he said.
The conversion of old cruise ships into static floating hotels was also mooted as the next big thing by some, but did not receive as great enthusiasm from others.
Jan Roersma, managing director of consultancy Hospitality Support Group, said: "We are seeing a lot of cruise ships coming out of active service and getting turned into hotels."
Roersma said his company had just started work on one conversion and believed there was potential for several more.
Flaxman disagreed. "I don't believe in them. I think they are just a bit too quirky at the moment. If you had to choose between a conventional hotel and a boat hotel, you would probably choose conventional."
"The novelty factor does not sustain business," he added.
China was the main growth destination for hoteliers, with many companies expanding their presence in the area over the next few years.
Experts added that there was also potential for the growth of branded hotel groups in Continental Europe, with only 30% of hotels currently being operated by a chain.
Boutiques bashed
The boutique hotel sector came under attack at the conference when one designer said the market was overcrowded and would only survive if hotels went back to being small and comfortable.
Bob DiLeonardo, president of design company DiLeonardo, said New York hotelier Ian Schrager had taken the comfort element out and had replaced it with fashion and design, which was now flooding the market.
"Boutique is all over the place right now and we are going to see it cave. Too many people are doing it," said Di Leonardo.
He added: "In Manhattan today there are probably 10 boutique hotels coming up. There is a place for them, but it's limited. It's just too crowded."