Hotel Management November 2011 : Page 1
■ ➔ LOYALTY.. pulse 37.7% 35.2% Percentage who said the loyalty program was very important to hotel choice The Leading Hospitality News Authority Since 1875 HotelManagement.net Vol. 226, No. 14 | November 2011 A Questex Hospitality Group Publication 39.2% Source: Market Metrix SEE PAGE 12 FOR MORE HOTEL STATS SYSTEM SHOCK European debt crisis puts industry at risk Owners, operators and advisory services weigh in on best-and worst-case scenarios By David S. Eisen MANAGING EDITOR N ATIONAL R EPORT –A recent concession by banks holding Greek debt to take a 50-percent loss helped loosen up the fragile European economy and eased the angst of hotel operators and owners still in recovery mode. However, the Greek deal, which only pares the country’s debt from its current level of 180 percent of gross domestic prod-uct down to 120 percent by 2020, is only one part of a full-blown rescue plan to stem Eu-rope’s escalating sovereign debt crisis. While “Contagion” is still playing at the box offi ce, it could be playing out in real life, if Europe’s debt crisis isn’t completely resolved. In late 2007, the U.S. became em-broiled in its own credit crunch, which led to the fall of Lehman Brothers and See European debt crisis | page 46 of the SURVEY 2011 Occupancy is up, RevPAR is up, and fi nally GMs report that ADR beat out occupancy as the lead driver in growing RevPAR in 2011. VOICE ONE-ON-ONE GM SCOTT DURCHSLAG Time for hotels and OTAs to re-think past dissent and start working together | See page 24 EXPEDIA WORLDWIDE’S Page 26 ■ ➔ TRAVEL TRENDS. inside this issue DEVELOPMENT. TECHNOLOGY. Innovations increase fl exibility Using a cloud-based property-management system can save hotels time and bandwidth. PAGE 34. Rewards programs gaining favor Hotel loyalty programs are getting easier to use and more generous, which is making them more popular. PAGE 12. DoubleTree enters L.A. market The brand signs a franchise agreement to convert the Kyoto Grand Hotel by spring 2012. PAGE 16.
News System Shock
David S. Eisen
European debt crisis puts industry at risk<br /> Owners, operators and advisory services weigh in on best- and worst-case scenarios<br /> <br /> National Report–A recent concession by banks holding Greek debt to take a 50-percent loss helped loosen up the fragile European economy and eased the angst of hotel operators and owners still in recovery mode.<br /> However, the Greek deal, which only pares the country’s debt from its current level of 180 percent of gross domestic product down to 120 percent by 2020, is only one part of a full-blown rescue plan to stem Europe’s escalating sovereign debt crisis. <br /> While “Contagion” is still playing at the box office, it could be playing out in real life, if Europe’s debt crisis isn’t completely resolved. <br /> In late 2007, the U.S. became embroiled in its own credit crunch, which led to the fall of Lehman Brothers and an ensuing recession that wreaked havoc on the hotel industry. <br /> While the situation in Europe is still dire at press time, the EU announcement does mitigate some problems, and it soothes anxious hotel operators and owners.<br /> “Assuming an agreement is eventually reached, we feel this will remove some of the volatility in the financial markets, which will decrease their nervousness,” said Laurence Geller, CEO of Strageic Hotels & Resorts, which owns such luxury hotels as The Ritz-Carlton, Laguna Niguel (Calif.) and Fairmont Chicago. “This will gradually lead to an increase in business confidence and a slow but sure ease in the credit markets. <br /> “Assuming all that happens, I would fully expect this to be a good start on the road to steadiness. It is a healthy sign for our industry. Corporate activities will increase and demand will eventually build.”<br /> Though the measure brokered by European lenders is a propitious short-term fix (stocks and the euro climbed following the announcement), it doesn’t mean that the EU is out of the woods, yet; in fact, according to Tom Huffmsith, a principal at hospitality advisory firm Beacon Hospitality Partners, it could have a negative impact. <br /> “With this latest development in Greece, the bondholders are being forced by the government to take a 50-percent loss, and the banks would be required to raise new capital without any certainty for success,” Huffsmith said. “This decision could prolong any recovery and add further uncertainty to the banking industry’s ability to provide debt financing for hotel investments. Until the debt markets recover, hotel values will be dampened despite operating performance.”<br /> That’s the macro story so far. What we know from 2008 is this: When the country finds itself in recession and banks stop lending, the hotel industry falls flat on its face. Rates drop, occupancy flattens and hotel values sink. The industry has been through it before, is now in recovery mode and does not need anything else to muck it up. <br /> “While the global macroeconomic outlook has weakened, U.S. hotel demand continues to grow and hotel values continue to increase,” said Serena Rakhlin, VP of strategic planning and hotel business development for The Trump Organization. <br /> While the euro rallied on the heels of the Greek debt announcement, Bruce Lowrey, managing director of RockBridge Capital’s investment origination group, said any further weakening of European currency could predict a transaction market dry-up. <br /> “The British and Dutch still are the largest foreign property owners in the U.S.,” Lowrey said. “When their currency gets weaker, it means American assets are more expensive for them and that slows down transactions. At the demand level and asset purchase level, there is less capital coming in and that has a slowing effect on transactions."
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