International Hotel Conference

15-17 October 2008

Hilton Cavalieri, Rome

There was a tangible air of resignation at the sixth International Hotel Conference in Rome – less a pessimistic mood, more a shrugging of shoulders in a “seen it all before” sort of way.

In the context of the weeks following the failure of Lehman Brothers et al, the well forecast recession was “hardly new news”, Jamie Chappell, Managing Director of STR Global, providers of hotel market information, reminded the audience of hoteliers, investors, lawyers, and consultants. Showing the decline into negative year-on-year revPAR growth in Europe, Chappell reassuringly explained that the situation was “to be expected in the context of a 7 to 10 year economic cycle.” 

On the back of this were sure signs of cautious optimism amongst several speakers in the plenary sessions who saw the possibilities the crisis offered. Robert Riley, CEO, the Riley Group, saw opportunities to “acquire, reposition and refurbish” whilst Georg Rafael, Managing Director, Rafael Group S.A.M., recognised with the conference’s ‘Hoteliers’ Global Citizen’ award, would be “investing in our products” (assuming funds are available) to ensure better positioning when the upturn comes. Which it inevitably will. Whether this positive outlook is due to the generally optimistic nature of most in the hospitality business, an attempt to put on a brave face or the need for nervous reassurance amongst a peer group only time will tell.

The main tactic for beating the crisis was seen in the consensus of the rallying call for rate maintenance. The message was that the certainty of reduced occupancy need not be compounded by lowering rates. “We need to maintain our value proposition and therefore cannot cut rates as it will take years to get back.” said Wolfgang Neumann, Area-President Europe for Hilton Hotels. Frank Fiskers, President & CEO at Scandic Hotels, echoed this sentiment, saying “We are wiser than we were last time (we had a recession) and business will not be stimulated by rate.”
Andrew Shaw, Development Director UK & Ireland at Accor Hotels, also said his company would not discount: “We will hold out for rate and are prepared to take the hit on occupancy.” Improvements in revenue management techniques have led Chappell to warn, “discounting will not release that pent up demand into the market.”

The conference also comprised of a number of breakout sessions and round table discussions. Looking at both the budget and boutique sectors, the positive talk had a tinge of hope for self-fulfilment. “Budget hotels in Europe are ideally positioned to benefit from the current crisis as travel budgets are cut and travellers trade down tier-by-tier”, explained Mark Dickens, Managing Director, TRI Hospitality Consulting of the resilience of the sector. The sector would benefit from new markets such as hen and stag parties (in and from the UK), visiting friends and family, and people staying over after evening work functions rather than commuting home late at night. Equally the ‘Generation Y’ group are an untapped market unexcited by the current budget offer and are looking at ‘sexier’ products such as CitizenM.

The boutique hotel sector matched the highest chance of failure with great opportunities as more guests are seeking the higher service levels and a more experiential stay that this sort of hotel offers. Blanche van Berckel, Managing Director of Fairquest Hotels, a new boutique hotel management company whose first hotel, the Franklin opens in London in January 2009, will certainly be hoping so. The Franklin will offer a full-service including restaurant and spa at Four Seasons levels with only 40 rooms. When other sectors are struggling to raise finance Van Berckel is confident that her investor market will remain strong; the high net worth individuals making the investments were in fact also her guests. Rafael added that the key to boutique hotel success was in keeping it small and getting “the GM to act like an owner.”

An attitude that neatly aligned with the question of the need for “entrepreneurs or managers” as debated by a panel of students and professors from hotel schools around the world. The students argued for the freedom to operate as they wanted, adding that after graduation the typical management training positions seemed to only set them back. On the other hand it was acknowledged that the ‘apprenticeship years’ were necessary to survive in the GM role even if this did not help drop out rates. Again taking the upbeat side of things, it was agreed that the current financial crisis provided the opportunity to recruit from other industries and there will be less chance of good staff leaving for the real estate / asset management side of the business.

Next year’s International Hotel Conference will take place at the Hilton Molino Stucky in Venice.
www.internationalhotelconference.com

WORDS: GUY DITTRICH