Worldwide Economic Downturn Is Top of Mind Among Panelists at 2008 International Hotel Conference (Italy)
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Worldwide Economic Downturn Is Top of Mind Among Panelists at 2008 International Hotel Conference (Italy)
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Category: Europe - Italy - Industry economy
- Trends / Expert's advice
This is a press release selected by our editorial committee and published online for free on 2008-11-06
The impact on the hotel industry of an economic slump exacerbated by a worldwide tightening of credit markets was very much on the minds of panelists during discussions at the 2008 International Hotel Conference, held recently at the Hilton Cavalieri in Rome, Italy.
Morris Lasky, conference chairman and president of Lodging Unlimited Inc., opened the three-day gathering by noting that while he is optimistic long-term, the current down cycle is the most severe of seven he has experienced in the hotel industry. “We’re into something now that none of us has seen before, essentially a world crisis within the hotel industry,” Lasky said. “I can also tell you from past experience we will come out at the other end, we will turn around.”
In an opening session entitled “Demand and Supply Trends in Europe,” James Chappell, managing director, STR Global, noted that the market in Europe is dropping, while business in Asia Pacific, the Middle East, Africa and China is doing much better. He added that corporate travel will slow down during the rest of 2008 and first part of 2009.
“The financial market uncertainty will cause ‘09 to be worse than we previously thought, which will probably mean the downturn will last longer and be more severe than expected,” said James Chappell. “The news is not good, but the U.S. and European markets are in the correct place for the current cycle.”
Hotel development in Europe was reported at levels far below development in the United States. “In 2006 and ‘07 you had very good times in the lodging industry, and we had not had a single hotel problem,” said Bruce Ford, senior vice president, director of business development, Lodging Econometrics. “Currently, the hotel cycle has been cut short by roughly 18 months as a result of the housing problem that turned into an economy problem. It has now turned into a hotel industry problem.”
With that overview, panel discussion moderator Martin Armitstead, director and head of hospitality, EMEA DTZ International, questioned four industry veterans—Paul Brown, president, Expedia North America and president of Partner Services Group, Expedia Inc.; Andrew Katz, managing director Axios Hospitality Real Estate/The Blackstone Group; Wolfgang Neumann, area president - Europe, Hilton Hotels; and Georg Rafael, managing director, Rafael Group S.A.M. —about the current issues facing the hospitality business. Some of these included:
• Should room rates be held steady or should hoteliers go for higher occupancy by lowering rates?
“It is easy to drop rates, but it takes years to get them back,” said Wolfgang Neumann. “It is very important for hotels to maintain their rates and maintain the value proposition to the customer in accordance with the hotel brand.”
Neumann added that contrary to a prevailing view, there are funds available for hotel development projects. “The perception is that there isn’t money out there,” he said. “On the contrary, money’s still out there. There’s lots of cash. Pension funds have to continue to invest.
Development projects will take, are taking longer to come on stream. Our pipeline is bigger this year than last year despite the credit crisis that started a year ago.”
• What are current hotel values?
“I have to refer to my most recent experience with...express hotels,” said Georg Rafael. “If I look at what’s happened on the stock market there’s no correlation whatsoever to the value of our properties. We own our hotels. We have trophy assets. We have icons. So these values will remain.”
• Faced with a worsening financial situation, what should be done in the next 12 to 24 months?
“The advice is to maintain a tremendous amount of flexibility in your decision-making process and business model, flexibility in your cost structure...flexibility in your revenue management and pricing structure,” said Paul Brown.
“Speaking purely as an asset manager and an owner, you need to work with your operators. You need to push them to get out of them what you’re paying them to deliver,” said Andrew Katz. “Make sure you keep good teams in place and not allow a lot of turnover in your managers. We’ll get through it, but clearly, we’ve got a tough year ahead of us.”
John Koys is a freelance writer living in a Chicago suburb. He has more than 20 years experience writing for newspapers.
The International Hotel Conference is the premier annual gathering of senior level hospitality executives, including owners, operators, brands, leading institutions, bankers, architects/designers, attorneys, brokers and other members of the hotel and related communities.
Next year’s conference will be held in Venice, Italy at the Hilton Molino Stucky, 21-23 October, 2009.
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