The ALIS Power Panel
CEOs representing some 2 million guestrooms try to offer insights.
By Jeff Weinstein, Editor in Chief -- Hotels, 2/28/2009 11:00:00 PM
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The ALIS CEO panel: (l. to r.) Scott Berman, PricewaterhouseCoopers; Gabriele Burgio, NH Hoteles; Suzanne Mellen, HVS; Andrew Cosslett, IHG; Gerald Lawless, Jumeirah; Gilles Pelisson, Accor; Chris Nassetta, Hilton; and Frits van Paasschen, Starwood. |
A high-powered group of industry leaders took the stage at January’s Americas Lodging Investment Summit in San Diego to share what insights they could. Unfortunately, judging by their comments, it looks like fear may be winning out over hope in the current economic climate.
“Fear is winning out over hope, and it is not much of a race right now,” said Hilton Hotels Corp. CEO Chris Nassetta, in response to how people are reacting to the business climate. He referenced uncertainty and industry metrics that are not improving. He also echoed the voice of almost everyone on the panel, saying business conditions for both operating and financing are going to get worse before they get better.
Starwood Hotels & Resorts Worldwide Inc. CEO Frits van Paaschen said, “Fear versus hope is the wrong question to be asking. We should do a better job of using reason to decide what to do now. What can I control and how do I respond?”
Gilles Pelisson, CEO of Accor, warned about this being a moment in which the industry cuts too much human capital from the equation. Pelisson, thinking ahead to better days, wondered aloud: “If we cut too much, will we be prepared to rebound as quickly as we can?”
At the same time, IHG CEO Andy Cosslett said his company is not just cutting its head count. In fact, he said IHG is increasing its sales system by 30% for corporate account business.
The panel next turned to a discussion about room rates and whether or not the industry was starting to panic with more dramatic discounting. Their overall answer appeared to be, “definitely not.” As Nassetta said, with few exceptions, “In times like this, it is very difficult to induce demand with rate cuts, so why take cash out of owners’ pockets?”
NH Hoteles CEO Gabriele Burgio added that weekend demand in Europe is weak and cutting the rate by €5 is not going to matter one way or another. But Cosslett said IHG is finding some success with weekend packages, if for no reason other than to make sure people remain in the habit of coming to hotels. Finally, van Paasschen chimed in by saying, “Discounting is a terrible way to build brand equity.”
The last topic of discussion among the CEOs was the pipeline. This is usually the moment in the show where it gets a little deep in the room with gaudy expansion claims beyond belief. At this ALIS, however, the tone and chest thumping was quite muted. Pelisson said projects are starting to slow down—even in the BRICs (Brazil, Russia, India and China), and that Accor is stepping in to buy in some places where the projects look too good and they want to help the developers. In Southern Europe, Pelisson sees other buying opportunities as debt service starts to mount for over-leveraged family businesses. While Pelisson said many projects are being postponed or canceled, Accor still has 30,000 rooms on its books for opening in 2009.
The other majors on the stage—Hilton, IHG and Starwood—still have relatively robust pipelines with construction beyond the point of return for many deals financed two and three years ago. Now, however, they are all expecting distress unless the financial scene changes dramatically—and that appears to be a whimsical notion to this crew of execs. It had more than a few whispering, “Where’s our bailout?”
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