HotelNewsNow.com each week features a news roundup from a different region of the world. Today’s review covers Europe.
The ongoing debt crisis continued to play out this month, with various sources and reports noting the considerable toll taken on hotels throughout the eurozone.
In Greece, nearly 11% fewer visitors came between January and May compared to a year earlier, according to the latest figures from the Bank of Greece. Many analysts feel the answer to the country’s hotel struggles lies not in visitors from its traditional visitor base in Northern Europe but from the ever-increasing numbers of tourists from Brazil, Russia, India and China—the BRIC countries. Greece saw a 56% increase in tourists from Russia in 2011 and a 50% increase during the first quarter of 2012, according to the Association of Greek Tourism Enterprises, more commonly known as SETE.
Meanwhile, chain executives, analysts and operators say Spain’s sovereign debt crisis has impacted the industry’s access to credit, deeply affecting the market, while at least one major chain is planning to shutter less profitable domestic properties. At the same time, cash-strapped Spaniards are curtailing vacation plans for the vital summer season as the revenue-starved government raises the sales tax on hotel rooms.
After collecting more than $2.2 billion in hotel revenues during 2011, Italy’s hotel industry will not bring in as much money in 2012, according to research from Euromonitor International. “The demand for hotel beds declined by 5% for the year based on preliminary estimates from the Bank of Italy,” said Michelle Grant, travel and tourism analyst for Euromonitor International.
France might also see some declines, Grant said. “In general, I think a lot of people are concerned about the state of the euro and (whether that) economic … union will survive.”
London Olympic performance data
London hotels reported increases in average daily rate and revenue per available room during the 2012 Olympic Games, according to STR Global, sister company of HotelNewsNow.com. The games started with the opening ceremony Friday, 27 July 2012 and ended Sunday, 12 August 2012.
Hoteliers across London reported average occupancy of 88.5% and ADR of £212.22 ($333). This represents an increase of 4.8% and 86.1%, respectively, compared to the same days the year prior. STR Global tracks daily performance from more than 390 hotels in London and 2,400 hotels across the United Kingdom overall.
British-based budget hotel operator Travelodge agreed to a financial restructuring that saw its transition of ownership from Dubai International Capital to its three key investors, GoldenTree Asset Management, Avenue Capital Group and Goldman Sachs.
The key terms of the financial restructuring are as follows:
• At least £75 million ($118 million) of new money will be injected into Travelodge.
• An investment of £55 million ($86 million) will be used for a major refurbishment program across the estate, covering more than 11,000 rooms and 175 hotels. The program will commence in early 2013 and continue to summer 2014.
• Bank debt of £235 million ($369 million) will be written off and £71 million ($112 million) repaid, reducing total bank debt from £635 million ($998 million) to £329 million ($517 million).
• The repayment date of the remaining debt extended to 2017 and cash pay interest reduced significantly to a rate of 0.25% above Libor through to the end of 2014.
In connection with the financial restructuring, Travelodge has initiated a company voluntary arrangement—a type of reorganization allowing companies to renegotiate rents and leases—with 109 hotels (22% of the estate) that will be subject to rent reductions. And 49 more hotels (8%) will be removed from the system.
Investor interest shifts to London’s secondary markets
London’s hotel market is spilling outside its established core zone, expanding into virgin areas, according to Horwath HTL senior consultant and HotelNewsNow.com columnist Alexandra van Pelt. This expansion has been influenced by many factors, including:
• the city’s evolution itself, which has developed considerably during the past 20 years and has created new demand markets. The most striking example of this is Canary Wharf, which replaced the obsolete docks in the early 1990s with a vast swathe of office space and necessitated the development of hotels to meet the needs of business travelers to this area;
• the scarcity of available sites in the premium West End, which forced developers to look at less obvious locations, pushing the boundaries for London hotel development;
• the facilitation of global travel, which has had a major impact with passenger movements at Heathrow growing from 39.6 million in 1989 to a peak of 69.4 million in 2010; supply has expanded to meet the demand growth;
• the arrival of budget airlines, which influenced demand with an influx of many more cost-conscious tourists to the city, altering the underlying demand pattern;
• the advancement of construction practices and availability of buildings for conversion. The conversion of existing buildings to hotels is now more common, with certain buildings no longer deemed fit for their current use, which allowed the London hotel market to expand into new areas. Technological advances mean this can be done cost effectively.
Deals and developments …
• InterContinental Hotels Group opened 16 Holiday Inn and Holiday Inn Express hotels across Europe and signed 10 during the first half of 2012. Holiday Inn hotels were opened in United Kingdom, Germany, France, Spain, Turkey, Ukraine and Poland. IHG also signed Holiday Inn hotels in the U.K., Algeria and Azerbaijan. Holiday Inn Express hotels were opened in the U.K., France, the Netherlands, Turkey and Portugal. And IHG signed Holiday Inn Express hotels in the U.K., Turkey and the Netherlands.
• IHG also signed the Hotel Indigo Düsseldorf-Victoriaplatz following two successful openings in Berlin earlier this year. The 126-room property will operate under a franchise agreement with LFPI Hotels Management Germany GmbH and is scheduled to open in 2013.
• Hilton Worldwide signed a franchise agreement with Municipal Annex Limited to open the first DoubleTree by Hilton in Liverpool, U.K. The 87-room hotel will join recently added properties in locations such as Leeds, Manchester and London. Sanguine Hospitality will manage the hotel.
• De Vere Group has secured a management contract to operate The Belfry, the iconic golf resort in the West Midlands in the U.K. The management contract follows the acquisition of The Belfry by an affiliate of KSL Capital Partners LLC. The 324-room hotel was previously owned by De Vere prior to its sale in 2005.
• Steigenberger Hotel Group is set to take over a 440-room, 4-star hotel at Airport Schiphol in Amsterdam, effective 1 September. The Frankfurt-based company will open another Steigenberger Airport Hotel at the new airport in Berlin.
• CapitaLand’s wholly-owned serviced residence business unit, The Ascott Limited, has signed an agreement to acquire a prime hotel operating in London for £158.8 million ($311 million). Ascott will manage the 230-unit hotel, The Cavendish London, in the fourth quarter of 2012. The hotel, which has a rich heritage dating back to the 1960s, will be subsequently transformed into a luxurious serviced residence under the premier Ascott The Residence brand and will be named Ascott St James London.
Compiled by Patrick Mayock.