Dear Industry Partners
Wednesday 5th March was quite an eventful day, it started with snow falls in the morning and then followed by a labour strike involving transport workers across all sectors including the airlines, buses, trains – Berlin came to a standstill and Lufthansa along with other airlines had to cancel many of their flights. It’s a dispute over salaries and wages by Unions.
This was the last day of the 2008 International Hotel Investment Forum (IHIF). As expected the conference ended on a high note with three significant items on the programme.
First, it was an interview in the morning session moderated by Arthur de Haast, Global CEO of Jones Lang LaSalle Hotels on the topic – Hoteliers Doing Things Differently. A very interesting topic with heads of hotel companies who are going against the traditional way of doing business in the global hospitality sector.
The panel consisted of Trevor Horwell, Chief Hotel Officer of the Hard Rock Hotels and Residences. Whilst many South Africans may know and have good memories about the Hard Rock cafes and restaurants, I doubt if many know that the company has now branched into the hospitality sector - using their experience in entertainment and dining to bring a new type of hospitality to the sector. In his own words, Trevor said their approach is to bring the “Y” factor into their hotels – that they don’t put a lot of emphasis on design in their hotels but on personality and energy of the Hard Rock brand.
What does hard rock do differently?
In addition to pure hotels, casinos and live entertainment, Hard Rock hotels also offers mixed use options covering condo-hotel, residences and serviced apartments within five star luxury mixed use developments attracting celebrities, third party restaurateurs such as Nobu – positioned as the “place to go and be seen”
Their formula for success is about creating an atmosphere that is not passive but responsive, energetic with an achiever mentality. Since they are currently consolidating their brand presence amongst corporate America, they want to take the brand internationally over the next three to five years - taking the entertainment and fun model of the Hard Rock into the Middle East (Dubai), India, China, Macau and Singapore.
In their expansion plan, location is placed high on the scale. One need only see this group’s winning concept, what they have already achieved in the USA market and to see their expansion approach – designs and property models – it’s something to really be admired.
The interview also focused on Johnny Sandelson, founder & CEO of GuestInvest Group. This is a company that has entered the hospitality market with a different concept which is more like the “Young Designer Emporium” concept. This is the UK’s first hotel-room investment company and has so far built it into a rapidly expanding business. Under the GuestInvest concept, investors buy their own fully maintained room, stay there for up to 52 nights a year for free, and receive 50 % of the room’s income, which is let out by the hotel on their behalf throughout the year. Their expansion plans is focused on consolidating their brand and position in the UK over the next 12 months before they venture into other markets of Eurozone or the USA.
Then it was over to another exciting innovation – the interview with Gerard Greene, CEO of Yotel Hotel Group who founded the group as a mission to revolutionise the hotel industry to save consumers from expensive and boring hotels. The vision of the brand is to provide first class hotel experience at an affordable price tag. Yotel adds a new dimension to the hotel market with the signature YO! formula of innovation and entertainment.
What does YOTEL do differently? They build their hotels within the airport terminal building precinct in spaces that airport retailers don’t want and offers accommodation in 10 square metres from £25. The hotel room is based on the Airbus prototype by Priestman Goode with features such as moving double beds, sophisticated lighting, pull down desks, monsoon shower, flat screen TV and Wi-Fi access. Rooms or cabins are bookable for a minimum of four hours, enabling delayed and transit passengers to relax privately in a hotel environment. Yotel is now open inside London Gatwick airport’s South terminal. A Yotel has opened in Heathrow airport’s terminal four. Worldwide expansion is unfolding with the next opening scheduled for Schipol airport in Amsterdam, Netherlands.
The second part of the morning was devoted to “IHIF Deals of 2008 & ISHC Pioneer Award – Europe. This is the part where the European hotel players pay tribute to deal makers in three categories and the winners were as follows:-
The IHIF Deal of the Year Award for 2008 in two categories
Single Asset – winner is Fairmont Monte Carlo at €300 million
New Deal of the Year 2008 - the winner is Haymarket hotel in London (£ 32 million. The nominees were – Charles Hotel in Munich; Haymarket hotel in London; and Yotel hotel in London Gatwick
Portfolio Deal of the Year 2008 – the winner is ACCOR with various asset disposals at € 1,574 million.
The nominees were The Black Stone Group by Aereal and Deutshe Bank and EQT at € 833 million.
The ISHC Pioneer Award – Europe (International Society of Hospitality Consultants)
The winner is Gabriel Peres, President and CEO of Movenpick Hotel Group
The third part of the day’s events focused again on the Global capital markets – shifting gear and headed where? This session was moderated by Struan Robertson, Co-Head Global Real Estate Banking at Morgan Stanley. The focus of the session was on finding out where the global capital markets are heading and how will Europe respond especially on the hospitality sector. The penal had a vigorous discussion and in the end their conclusions were in the same line as the advisory given by Roger Bootle on day 2 of the IHIF. The conclusion is as follows:-
That the hotel sector like other property sectors should not buckle with the current credit crisis, instead they should focus on what they do best – looking after their operations – delivering the promised offering and experience to their guests - showing returns which investors cannot ignore
The panel outlined the key risks to watch for as follows:-
The threat of inflation, exchange rates (forex) and the effect of time/time lags
Falling yields in the sector
Access to capital with debts markets ever showing up and the need for investors to reprioritise
The final verdict is that things will get worse before they get better in the USA – they will get better as it’s always been. In the Eurozone, the effect will be less simply because the savings levels are higher compared to spending, and the effect of the emerging markets of Eastern Europe – the so called CIS countries. This will bear fruit if the European Central Bank eases the pressure on the high valued euro.
The conference moved into the break-out sessions with the following topics:-
New Owners and New Perspectives moderated by Mark Wynne-Smith – CEO of Jones Lang LaSalle Hotels for Europe, Middle East & Africa. The panellists were Harriet Durbin - Director Vision Hospitality Asset Management, Peter Henley - Vice President, Banking Morgan Stanley Properties UK, Niels Nielsen - Head of Hotel Investment & Asset Management Union Investment Real Estate AG, and Dr Edward O. Wojakovski - Group Chief Executive Tonstate.
Risks and rewards in management, franchise and lease agreements moderated by John Sipling - Partner at Berwin Leighton Paisner other panel members included Bart Carnahan - SVP Acquisitions & Development EAME Region, Starwood Hotels & Resorts Worldwide, Inc. - Puneet Chhatwal, Senior Vice President & Chief Development Officer The Rezidor Hotel Group, Tim Helliwell - Head of Hotel Finance Barclays Bank plc, Jeremy Robson – Director Robson Asset Management Ltd
The Key Stakeholder Issues in the mixed Use Development moderated by Philip Bacon – MD of HVS in Madrid, he was flanked by a panel that included Ramon Carulla - Product Manager MedGroup, Michael E. Feldman - Partner / Co-head Lodging & Gaming Practice Group Proskauer Rose, Richard F. Ross Chairman - Global Hotel Practice Sonnenschein Nath & Rosenthal LLP, Peter Zenneck - Vice President Development Europe & Africa Jumeirah Group
Going it alone or Going with a Brand moderated by Paul M. McManus – President & CEO of The Leading Hotels of the World. Other panel members were John C. Boettger - Managing Director Hospitality Europe Services Ltd, David Munns - Chief Financial Officer The Rocco Forte Collection, Antonio Sersale - Owner & Manager Le Sirenuse, Desmond Taljaard - Chief Operating Officer Europe Starwood Capital Europe Ltd
Morocco – Exotic, Mysterious, Spicy and Bustling – moderated by Philip Camble, Director at Cushman & Wakefield Hospitality. The panel members comprised of HE Mohamed Boussaid - Ministre du Tourisme The Kingdom of Morocco, Philippe A. Phaneuf – Associate Greenberg Traurig Abel Damoussi Entrepreneur & Owner Kasbah Agafay, Marrakech, Robert Day - Vice President and Director of Planning WATG, Tony Potter - Chief Executive Officer Corinthia Hotels International
Improving the Odds for a Successful Transaction – moderated by Daniel Braham, vice president of Legal Department for Europe, Africa and Middle East for Starwood Hotels & Resorts Worldwide. The panel consisted of Shai N. Halbe Partner Heller Ehrman, Tom Hawley Director Joint Ventures Bank of Scotland and Tim Stoyle Director Savills
The IHIG ended with a lunch time function with veteran BBC World Affairs Editor on an interesting topic of – Is the World a More Dangerous Place? In his jovial and humorous style, John Simpson did not disappoint. He almost took the angle of telling his life story as a journalist spending most of his time travelling to far flung corners of the world staying in HOTELS of varying offerings and experiences. In this way, he paid tribute to the hospitality industry for the role they play in society and in his career as a journalist. He paid tribute to hoteliers from Kinshasa, Germany, Rio de Janeiro, Sarajevo, Libya, Moscow to Tunisia. An interesting and reverting way to conclude what has been an inspirational and learning experience at the 11th International Hotel Investment Forum.
What stands out about this event is four things;-
The level of commitment by major global players in the hospitality sector to stand in front of their colleagues from across the globe to share their experiences and knowledge. This they do in the name of contributing towards making this to be a winning and leading sector across the globe. In speaking to some of the leaders who were in attendance, this was their reason for supporting the IHIF with sponsorship and attendance in their numbers. To give a few examples, there was approximately 50 delegates who were in attendance from Starwood, 35 from Marriott, 15 from Rezidor; 16 from Accor; 24 from Christie + Co; 37 from CB Richard Ellis hotels; 20 from IHG; 30 from Hilton; 24 from Ernest & Young; 25 from Jones Lang LaSalle Hotels; and 27 from HVS.
The high calibre of speakers, their presentations/discussions and delegates at the conference including presidents and CEO of major global hotel chain groups. These people were openly sharing their views, activities and plans and willing to engage during the conference breaks making the entire conference a worthwhile exercise.
The hotel operators, investors and go-betweeners (lawyers and advisors) who were in attendance showed a great level of commitment to their course and to see the sector flourish in Europe. They are all taking about emerging markets of eastern Europe. China, India, middle east and north Africa as their “next focus” – where is the rest of Africa featuring?
On the other hand, some encouraging news from seasoned global operators and investors who are already looking down south – Rezidor, Starwood, Marriott, Accord, Wyndam which has brands such as Days Inn and Ramada; Kingdom Investments; and financiers cum hotel owners/operators such as Morgan Stanley (Panaroma), Colliers International. All eyes are now on the upcoming Arabian Hotel Investment Conference (AHIC) which takes place in Dubai from 3rd to 5th May 2008; Hospitality Investment Conference Africa (HICA) from 28th to 30th September 2008 in South Africa; and finally the Russian & CIS Hotel Investment Conference from 21st to 22nd October 2008 in Moscow!
IHIF was a real eye-opener – we have a lot to catch-up with the rest of the world but take heart – we are not far off the mark.
Next Update will be about ITB 2008.
Greetings from Berlin – Mmatšatši Marobe, CEO TBCSA
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