Sol Meliá Acquire Tryp, Intensifies Domestic Presence
Edited and written by Cherie Hensdill, -- HOTELS Magazine, 9/1/2000
- A Really Big Boat
- Orbis Deal May Preview More For Accor
- Lodgian Sees Downside of Mergers
- Shouldering The Sydney Olympics
- Chandris Repositions
- The Portman Ritz-Carlton Don Asian Elegance
- World Watch
- Hoteliers
- Gostelow Report
Sol Meliá Acquire Tryp, Intensifies Domestic Presence
SPAIN Sol Meliá temporarily diffused speculation about its link-up with any of a number of international operators with a late-July announcement of its plans to acquire domestic rival, Tryp Hotels, Madrid. The price of the deal, which involved cash and shares, is estimated between US$216-US$243 million.
Sol Meliá’s name had been grist for the rumor mill for most of the summer. Much of the talk centered on a possible deal with UK-based Hilton International. Sol Meliá offered Hilton access to the booming Spanish market. A deal with Sol Meliá would have bought not only a presence in strategic urban markets but instantaneous critical mass in the resort sector—a nice complement to Hilton’s portfolio primarily comprised of business hotels. Speculation indicated that several large U.S.-based chains, hungry for a major presence in Latin markets, were eyeing a deal with Sol Meliá as well.
Though some analysts had let it be known they would look more favorably on a deal that enhanced Sol Meliá’s international presence, Sol’s leadership decided not to pass on the clear opportunity at hand—Tryp. The 60-property Tryp chain had been in play for some time. While the addition of a chain made up largely of business-class hotels would not have made sense for some groups, this move fits hand-in-glove with Sol Meliá’s recent efforts to put more emphasis on urban locations. The deal will add 17 former Tryp hotels in Madrid alone as well as properties in Barcelona and other key Spanish cities. But, Tryp did not have all of its eggs in an urban basket. Tryp also brought to the table its resort properties, some of which give Sol Meliá distribution in skiing destinations.
“This deal solidifies Sol Meliá’s presence in its home market,” says Daniel Larkin, leader, hospitality and leisure advisory, PricewaterhouseCoopers, London. “It enables Sol Meliá to be strong on the business side as well as the leisure side in Spain.”
Larkin points out that Sol Meliá is just the latest of a list of European hotel giants moving to strengthen its grip on its domestic market. Hilton International’s acquisition of Stakis and Accor’s participation with Blackstone and Colony Capital in the Vivendi deal indicate how pervasive this strategy is becoming.
“Staying strong in your home base adds more strength and flexibility to a company,” says Larkin. “But you can’t forget that Sol Meliá also has recently done deals for hotel properties in France and the U.K. Both were major moves outside of its Latin base. Sol Meliá is a contender to become a true global player.”
KUWAIT The 200-room Radisson Hotel Kuwait inaugurated earlier this year one of the world’s most unique conference centers, which also just happens to be the world’s largest wooden dhow. Weighing more than 2,500 tons and costing more than US$25 million, the Al Hashemi II was built using time-honored methods of traditional design and authentic detail. Approximately 300 ship builders worked 1,000 days assembling 3,700 sq. m (1,428.58 sq. miles) of the fine African teak and 100 tons of metal, including 80 tons of hand-made nails and 18 km (11.18 miles) of 24K gold leaf rolls. “Some 6,000 sq. m (64,583 sq. ft.) of land were reclaimed from the sea for this magnificent project,” says Heimo Leitgeb, general manager, Radisson SAS Hotel Kuwait. “Al Hashemi II is a prestigious air-conditioned meeting and function facility for up to 1,000 guests. It’s a setting hard to beat, with state-of-the-art technology monitoring temperature and lighting.” The hotel also operates its Al Boom Steak and Seafood Restaurant out of another wooden dhow called the Mohammedi II, which required only 8.8 tons of hand-made nails.
Orbis Deal May Preview More For Accor
PARIS Accor’s purchase of a 20% stake in Poland’s largest hotel group, Orbis Hotels, seems on the surface a straightforward, pragmatic deal. After all, it falls in line with the ongoing Polish privatization program and ends months of speculation over the two parties executing such a deal.
But Nicolas Gauthey, analyst with Credit Lyonnais Securities Europe in London, says with the number of branded rooms in Europe still only 20%, the regional markets are ripe for alliances similar to the one being formed by Accor and Orbis.
Essentially, the 20% stake held by Accor represents its share in a consortium it led to acquire 35.37% of Orbis’ total share capital. The other members of the consortium include, in addition to Accor, FIC Globe LLC, American investment fund, a subsidiary of Deutsche Bank, and Globe Trade Center, a Polish real estate development company.
As Poland’s leading hotel group, Orbis operates 55 hotels in 26 cities and holds a 42% market share in the 3-, 4- and 5-star hotel segments, with mostly a business customer base.
The prestige hotels in the Orbis collection include the 330-room Victoria, the 230-room Europejski and the 730-room Forum, all in Warsaw, and the 300-room Continental and 275-room Forum in Krakow.
Accor has indicated it will renovate the Orbis city center hotels and operate them under the Sofitel, Novotel, Mercure, Ibis and Etap hotel brands. Accor also has committed to aligning its development strategy in Poland with Orbis.
But Gauthey continues to term as “very conceivable” a much bigger deal that awaits Accor, a merger with Bass Hotels & Resorts. “It would be to the advantage of both Accor and Bass.” He says although senior management would object to such a deal, “it would create value for shareholders on both sides.”
Gauthey concedes, however, that even in the context of an ongoing brand consolidation, “there is limited chance any of the big players are going to get together for the simple question of brand or geography or product mix.”
Lodgian Sees Downside of Mergers
ATLANTA Overdue financial reporting, drooping share prices and public jousting with disgruntled investors are usually signs of a public company in trouble, and Lodgian, based here, looks to be no exception.
It was August before the Atlanta-based hotel owner/operator released its fourth-quarter 1999 results, showing a loss of US$67.4 million or US$2.42 per share—worse than was projected. “This did not surprise us or anyone in the market,” says Lodgian CEO Robert Cole.
Lodgian, created in 1998 through the merger of two U.S. management companies, Servico and Impac Hotel Group, has been trying to reduce debt and control its costs. Its loss for all of 1999 was US$60.7 million, versus a loss of US$5.2 million for the previous year. Revenue for 1999 was up to US$592.4 million, compared with US$395.2 million in 1998. Lodgian owns or operates 128 hotels (24,000 rooms) but recently agreed to sell 10 hotels. Brand affiliations include Holiday Inn, Crowne Plaza, Marriott, Sheraton, Hilton, Doubletree and Westin.
Cost of debt is one of the primary hurdles Lodgian has faced. “People are expecting higher returns today, and higher interest rates don’t help,” Cole says. He also acknowledges that “bigger is not necessarily better; we have found out that some things get in the way of efficiency.”
Cole says Lodgian was hurt by accounting integration and systems integration. “It slowed us down in terms of financial reporting; it’s hard to merge companies that have different cultures and organizational philosophies,” he says. “It does make it more difficult than what you might think, but that’s secondary to the cost of capital issue.”
The company still faces the challenge of appeasing its largest shareholder, William Yung, president of Casuarina Cayman Holdings, Ft. Mitchell, Kentucky. Yung controlled a 14.5% stake in the company at the end of 1999 and has offered to buy Lodgian. Yung owns 50 hotels himself.
Shouldering The Sydney Olympics
SYDNEY Between the Olympics, aggressively priced airfares and a weak Australian dollar, the land down under is on its way to achieving a record tourism target of 4.7 million international visitors for the year. The 2000 Olympic Games, to be held here from September 15 to October 1, is expected to generate 1.6 million arrivals to the country, according to Australia’s Tourism Forecasting Council. While such statistics bode well for Sydney’s 100 hotels, 23 of which have opened since 1997, concerns about filling those hotels do abound.
Although the Olympics have been known to open up international tourism to some host cities, such as Seoul in 1988, the long-term impact of such a global event is highly unpredictable. Gross overbuilding in Barcelona for the ‘92 games, coupled with a contraction in visitors that year, led to a drop in RevPAR from an index of 105 during the Olympic year to 51 and 45 for the two years following, reports Jones Lang LaSalle Hotels, Sydney. Will this year’s host city experience a similar fate?
Research by PricewaterhouseCoopers shows that apart from the three-week competition period, Sydney hotel bookings as of July are lower than expected. The concentrated booking pattern is a result of “aversion affect,” whereby tourists stay away from a destination because of perceived congestion. And although Australia’s tourist arrivals are on target for the year, there is concern that Sydney itself will suffer a bit during the Olympic shoulder periods. To help mitigate that concern, the country’s Federal Government has established a number of initiatives, one being the US$3-million “Meet in Australia 2001 Campaign.” The program aims to generate an additional 20,000 business visitors during 2001, which will inject an estimated US$58 million into the economy.
Proactive Strategies
Despite government efforts, at least a few hoteliers are taking matters into their own hands. Paris-based Accor, with 92 hotels in Australia—23 of which are located in Sydney and 60 of which the company expects to be directly impacted by the Games—is offering a 30% discount on rates prior to the Olympics and has created a variety of packages and promotions to help boost occupancies during August and October. The biggest of these is a series of tours out of France, which are designed around a five-night stay comprising flights, accommodations and tours in Cairns and then accommodations, tours and Olympic tickets in Sydney. As of July, Accor has organized 80 such packages (eight groups of 10 people each) priced between US$6,000 and US$8,000 per package. Other Accor discounts are being offered through wholesalers.
With four hotels and 1,723 rooms in the host city, Starwood Hotels & Resorts Worldwide, White Plains, New York, is offering Super Sydney Packages, which are valid only during the shoulder periods of the Games. Prices start at US$1,028 for dates July 1 to August 23, jump to US$1,594 for the 11-day period of August 24 to September 3, and then drop back to a starting price of US$1,316 for the month of October.
Following the Games, Roderick Lowe, general manager of the 581-room Sydney Renaissance, expects occupancies at his hotel to drop between five and 10 percentage points, despite efforts to boost group bookings. Nevertheless, he says October and November occupancies are looking reasonable at between 70% and 80%. And although he believes the lingering affects of the Olympics will benefit both Sydney and Australia through the next five years, he predicts some smaller hotels might not survive that long. “The problem is that too many hotels are coming on-line, diluting occupancies, RevPAR and rates,” he says. “So after the Games, I imagine we’ll see some small properties fall out of the market as a result.”
ATHENS The June repositioning of the Athens Chandris as the 5-star Metropolitan Athens heralds the rebirth of Chandris Hotels. Company operators expect the US$14.3-million renovation of the 364-room property to generate a 23% increase in RevPAR. If the company benefits as well as the hotel, perhaps Chandris will finally make a name for itself in the industry.
Trading On A Name
Eugenia Chandris is the mind behind Chandris Hotels (Hellas) SA, a wholly owned subsidiary of Panama-registered Chandris Hotels SA. Both privately held companies were started by Eugenia’s late father, Dimitris Chandris, in 1969 (neither has any business connection with the Chandris shipping operation.). And today, Chandris owns and operates four properties in Greece. The 139-room Chios Chandris opened in 1972. A partially reconstructed 251-room hotel on Corfu opened as the Dassia Chandris in 1973, which was followed by a neighboring new-build, the 205-room Corfu Chandris. And what is today the company’s flagship property, the 364-room Metropolitan Athens, opened as the Athens Chandris in 1997.
Eugenia Chandris, who is perhaps better known for writing The Venus Syndrome, which was published when she was 23, and giving birth to triplets in 1997 at the age of 40, undoubtedly was far more recognizable than her Athens property at the time of its purchase. Always high profile, she dropped out of Oxford University to research Maria Callas for Arianna Stassinopolous Huffington’s biography. Then her friend Lord Forte put her through his management training program. And at age 22, Eugenia assumed responsibility for the family hotels.
Although the name Chandris is as well known in Greece as that of Kennedy or Rockefeller in the United States, it did not bring acclaim to the Athens property. Despite its owner’s fame, the Athens Chandris, up until its repositioning this year, lacked the aura of the city’s infamous Hotel Grande Bretagne and was regarded with indifference by focus groups. Thus, Eugenia Chandris, with full consent of the company’s board members, decided to invest US$25.4 in refurbishment to bring the Athens hotel up to 5-star status and to bring the remaining Chandris hotels up to the new company motto, “where choice meets quality.”
Repositioned Prospects
The Athens Chandris was allocated US$14.3 million and given a new name to add personality and energy to the structure. Eugenia much admired how BS and Christina Ong had transformed the Londonderry, in London, to the Metropolitan. Thus, the Athens Chandris would become the Athens’ Metropolitan.
The official renaming of the hotel took place on June 28-29, and at the grand opening, Athens’ elite discovered sleek exteriors and interiors designed by Greek-American Stelios Demou. The lobby now looks out onto a courtyard with a multi-level, illuminated waterfall. The main restaurant is complemented by a summer-only Tuscan outlet on the 8th floor rooftop terrace next to the pool. The basement health club is run by one of Greece’s well-known personal trainers. And to cope with the massive repositioning, all of the hotel’s 240 staff members have been retrained.
The renovation also transformed the property’s performance figures. The Metropolitan’s occupancy rates for 2000 should close at 74.2%, with an ADR of US$100 and RevPAR of US$74. Those are compared with 1999 figures of 67.1%, US$88 and US$60, respectively. Most of the hotel’s business is top commercial, with 50% coming from Greece.
Now that Eugenia Chandris has created her Metropolitan, she is eager for expansion. The family owns a site on Rhodes, but she seems to hunger more after city-center 5-stars. Many major brands are already interested in selling franchises. “I know size matters,” Chandris says, “and I am sure we will find a financial partner. But it is also possible that Chandris Hotels (Hellas) SA will float on the Athens Stock Exchange.”
The Portman Ritz-Carlton Dons Asian Elegance
SHANGHAI Before its US$30-million renovation, The Portman Ritz-Carlton Shanghai had a sterile and drab outdated 1970s décor that was showing the weary signs of eight years of high occupancies. Today, the hotel is dressed in contemporary Asian elegance, transforming it into “one of the most visually compelling and welcoming hotels in China,” says General Manager Mark DeConcinis, which in turn has transformed the property into a more lucrative asset.
Before the renovation, the 564-room hotel was averaging a respectable 65% occupancy rate and a RevPAR of US$72. After the renovation, which was unveiled in March, those figures jumped 15% and 12.5%, respectively, to a 75% occupancy rate and a RevPAR of US$81. Before the renovation, the hotel commanded a 28% customer return rate. After, that figure grew by 7%, proving the extensive modification was well worth the investment.
The lobby lounge proved to be the single largest and most complicated area to renovate. Priced at nearly US$10 million, or 1/3 the cost of the entire project, the 1,370-sq.-m (14,747-sq.-ft.) area was completely demolished and rebuilt from scratch. All of the old furnishings were removed and replaced with more contemporary items. Massive Indonesian ebony columns, polished chrome, Italian and Chinese black marble, and Italian limestone walls form the foundation for the lobby atrium, which are complemented by deep jewel-toned furnishings. And accentuating the rich color tones is the maroon-and-gold “Lucky Cloud” design carpeting, crafted especially for the hotel. Working with combinations of light and color, interior design firm Bilkey Llinas Design, West Palm Beach, Florida, created a subtle impression of movement in the space.
The focal point of the lobby is a spectacular 3,000-lb (1,361-kg), 7-m-high (22-ft.-high) “moongate” of laminated stacked glass created by internationally acclaimed design firm Steve Gornley & Associates of Thailand. The icon combines traditional feng shui symbolism with modern art to create an image of money flowing through an open porthole, which is appropriate not only to the hotel but also to the interests of its majority of business travelers. The moongate’s glass-enclosed fiber optic threads are capable of projecting a variety of color and movement, and is the first of its kind used in Asian hotel design. The affect is repeated in the glass-encased overhead beams behind the front desk and in the bar.
The formerly separate check-in and check-out desks in the lobby were combined into one, creating a more convenient reception area. And the old check-out space was turned into The Library Lounge, which includes ebony-backed cabinetry holding Chinese artifacts and literary classics, gold-and-maroon carpeting, a Steinway baby grand piano, and coffered ceiling lighting.
EUROPE
A report commissioned by the UK’s Joint Hospitality Industry Congress and Barclays Bank concludes leisure spending is becoming a more essential part of spending patterns and even if there were an economic downturn, the effects on the sector should be less marked than previously seen...
Pannell Kerr Forster’s City Survey 2000 reveals Paris and London topped the European charts for rooms yield improvement, but there were nine cities showing an increase in excess of 10%. Barcelona, Berlin, Madrid, Geneva and Copenhagen all moved up while Moscow, St. Petersburg, Istanbul and Lisbon slumped...
Germany’s hotel industry is on an upswing at present with the most recent yield increase being measured at 10.8% over last year.
ASIA
The last hotel opening prior to the Sydney 2000 Olympics took place in July. The US$150 million Radisson Plaza Hotel occupies a prime position in the heart of Sydney’s central business district and features the unique ABX, a bar concept based on the stock exchange, where drink pricing fluctuates throughout trading hours according to demand...
Speculation surrounds the Sydney hotel market post-Olympics, with one property, the Sebel Townhouse at Elizabeth Bay, Sydney, scheduled to close and, perhaps, convert to residential use. Property developer Mirvac will seek a new home for the Sebel brand in Sydney...
George Bedwani has been appointed GM of the Hotel Inter-Continental, Sydney. Bedwani joins Bass Hotels Resorts from rival hotel group Accor Asia Pacific and is taking over from Richard Hawkes who has been promoted to director of operations and GM for Malaysia. He will be based at the Parkroyal Kuala Lumpur and be responsible for the management of 13 hotels under the Crowne Plaza, Parkroyal, Holiday Inn and Centra brands...
John Schaap of Thakral Holdings is the new CEO at Burswood Casino, Perth. He will oversee a US$75-million expansion, the biggest development project since the casino’s commencement in 1985.
THE MIDDLE EAST
The Sheikh Zayed Road—notably the stretch of road between the vicinity of the World Trade Centre and the Defence roundabout—is set to become Dubai’s new business center, as the city center continues its migration toward Jebel Ali. Increases in hotel supply are planned, together with further growth in office, commercial and residential development. Cutting edge development projects beyond the main strip include Dubai Internet City, the Westside Marina, Emirates Lakes and Emirates Hills. Only four quality hotels (1,218 rooms) previously serviced the Sheikh Zayed strip, but the number is expected to more than double by the end of 2001 with the addition of the recently opened 400-room Emirates Towers Hotel, the 400-room Towers Rotana, the 321-room Dusit Dubai and the 393-room Sheraton Plaza. By the end of 2002, a further 412 rooms and furnished apartments are planned with the addition of a Shangri-La property. Occupancy levels at Sheikh Zayed Road hotels in 1999 were 63.1%, compared with 64.7% for city centre hotels. Average room rates were slightly behind that of the city center hotels at US$93, versus US$102. Results for the first quarter of 2000 reveal hotels along the Sheikh Zayed Road recorded a rooms-yield growth of 16%, compared with last year.
LATIN AMERICA
After the first spade enters the ground in Costa Rica’s master-planned Guanacaste region, hotel and tourism development likely will increase exponentially. Occidental Hotels has been very busy purchasing the existing Costa Smeralda. The property is expected to re-open with a refurbished guestroom inventory of 470 units by November 2001. The company also bought a partially constructed hotel from Walsh Bishop Associates, a site that was originally part of the Ecodesarollo Papagayo (now known as Peninsula Papagayo), where 300 hotel rooms will be built in two phases. Occidental also purchased the Allegro Hotels & Resorts chain, which will increase their exposure in Costa Rica to include yet another 300-room, all-inclusive resort...
The Peninsula Papagayo is the largest and most aggressive project programmed for the region. It is also the one that is the furthest along in the development process. Infrastructure improvements are underway, and the first two of nine hotel sites have been committed. A 170-room Four Seasons hotel is being developed by a group that includes some of the same partners responsible for the Marriott Los Sueños and Costa Rica Marriott. And a 250-room Renaissance resort is being developed by Control & Estrategia...
Playa Conchal, a 930-hectare (2,298-acre) master-planned resort property owned by Desarollos Hoteleros Guanacaste S.A., is partially developed with the 308-suite Melia Playa Conchal hotel, a Garra de Leon 18-hole golf course, and a resort residential village (currently under construction). Owners are seeking partners to participate in the remaining development, which includes plans for four additional hotels and a commercial retail center...
Monte del Barco is another planned resort residential community in Guanacaste.
- La Quinta Inns, Dallas, appointed David L. Rea CFO and Stephen T. Parker senior vice president (VP) of marketing ...
- Radisson Hotels & Resorts Worldwide, Minneapolis, appointed Michael Poynter VP of operations for the Managed Hotel Services group...
- Coakley Williams Hotel Management Company, Washington, D.C., appointed Jim O’Neill director of operations...
- Summit Hotels & Resorts, London, named Marcelo D. Vazquez area VP for the Americas. Summit is a hotel brand and marketing service of Pegasus Solutions, Dallas...
- Ralph Taylor, CEO and chairman of Almond Beach Resorts, Barbados, assumed the presidency of the Caribbean Hotel Association (CHA)...
- Michael Cottan, general manager (GM) of the 637-room Pudong Shangri-La, Shanghai, was promoted to area manager...
- Anthony O’Neill named GM of the 248-room Marco Polo’s Omni Saigon Hotel, Vietnam...
- Michel Bourbeillon named GM of the 459-room Renaissance Montreal Hotel...
- Keith E. Wolling appointed GM of the 1,102-room Sheraton World Resort, Orlando, Florida...
- Benjamin Perez-Palacio named GM of the 185-room Meliá Lima Hotel, Peru...
- Patricia Clairmont named managing director of 340-room Loews Santa Monica Beach Hotel, California...
- Mario Davila named GM of the 139-room Coral Princess Hotel, Cozumel, Mexico.
Glasgow was where Ken McCulloch launched Malmaison. Now two young Glaswegians are striving to out-Schrager Ian Schrager. On September 30, branding specialist John Brennan and his model wife, Bridget, open the first of a planned series of Langs “hotels for the future.” The 100-room new-build is aimed at trendy dot.commers and the young-at-heart business traveler. As well as expanding the Langs concept, the Brennans plan to spin off three of its integral elements. The Californian-style restaurant, Las Brisas; the B Bar; and Oshi, an Aveda spa lifestyle center designed by a local company, Curious Oranji, will all be duplicated elsewhere. The Brennans will not reveal which locations come next.
Watch for more airport hotel openings. Hilton International has a 400-room Kastrup hotel on its future books, owned by Copenhagen Airports A/S. And in Malaysia, the 503-room Seremban Hilton, opening in October, will provide check-in facilities for Kuala Lumpur International Airport 30 minutes away. This development will be adjacent to a 423-room Le Méridien.
Mark Yeoh, executive director of Kuala Lumpur-based YTL Corp. Berhad, is in charge of the company’s hotel collection, which includes The Ritz-Carlton, Kuala Lumpur. Yeoh says YTL has exclusivity for the brand throughout Malaysia, and he is looking at opportunities for expansion. Fortunately YTL owns 3.5 acres of land next to the E&O Hotel, Penang, which might be suitable for a Ritz-Carlton.
Bass Hotels & Resorts, London, already has a planned 130-room Inter-Continental for Thessaloniki, which is growing in importance as the port gateway to the Balkans. Campbell Black, GM of the Athenaeum Inter-Continental, Athens, and regional vice president, Greece, Turkey, Italy and Israel, is searching for a second site in Athens. He wants a location in the northern suburbs—an area everyone else seems to be looking at, too.
Reports that Bass Hotels & Resorts, under Singapore-based managing director for Asia Pacific Richard Hartman, is about to go into North Korea are exaggerated. Hartman says there have been preliminary talks, but nothing is happening yet.
In Lebanon, Solidere, which was launched in 1994 by former prime minister (and lead shareholder) Rafik Hariri in an effort to rebuild the city after the civil war, is including 5,000 hotel rooms in its planned development of the Beirut Central District. Director of Marketing Toufic Zeidan says Solidere probably will not be involved in hotel management.
German hoteliers have been eyeing Iran for some time, and tour operators are certainly interested in the destination. Will Allson, now 70% owned by the Malay-Chinese development group Sunway Holdings, under its chairman Tan Sri Dato’ Seri Dr. Jeffrey Cheah, be one of the first foreign companies with presence? Allson development director Jean-Marc Lafosse certainly has been looking around.
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