European Empires
Hotel companies continue to consolidate across the continent, even as trading performance falters.
By Joan Marsan, Managing Editor -- HOTELS Magazine, 6/1/2001
|
While for most hoteliers unparalleled celebrations inaugurated the year 2000 and paramount successes followed, this year immediately presented external challenges to European hotels, in the form of the impacts of a rocky U.S. economy and the scourge of foot-and-mouth disease threatening to damage the UK tourism industry. Following one of the strongest years ever, RevPAR growth, forecasted at 4.9% (up from 4.5% in 2000) in Britain this year, now is expected to slip in 2002 to 2.7%, according to Pricewaterhouse- Coopers (PwC). PwC expects average room occupancy in 2002 will be flat at 76%. London hotels already have seen the drop-off of some U.S. business-oriented travel, but TRI Hospitality Consulting's London-based Joint Managing Director Trevor Ward notes that a strong dollar June make the United Kingdom and Europe attractive summer vacation destinations for U.S. travelers, who might replace some of the lost income.
Elsewhere in Europe, performance trading rates are demonstrating drop-offs, with occupancies in last year's star performer, Amsterdam, falling 8% from almost 85% during the January to March period in 2000 to 77.7% during the same period in 2001. Lisbon experienced an 11.4% drop in occupancy, down to 70.8% during January to March of 2001 from 80% during those same months in 2000. Throughout the continent, occupancy performance is largely flat in 2001 compared against the first three months of 2000.
Still, basking in the aftermath of a banner year, hoteliers insist they are unfazed by reports of a wobbly U.S. economy, noting that consumer confidence in the United States reportedly remains high, and interest rates are dropping steadily. "In the booking patterns, we have not yet seen that there is any downturn," Brussels-based Radisson SAS CEO Kurt Ritter says. Marcello Pigozzo, executive vice president, Europe, the Middle East and Africa, Sol Meliá, agrees. "For the moment, we have not felt it," he says. The European economy, after all, remains strong, and Europeans, wealthier than ever, are traveling at unprecedented rates.
Even foot-and-mouth disease has failed to frighten some industry professionals. "There are many cases of serious, individual tragedies," says Ward. "But the economic impact of foot-and-mouth in the U.K. is actually very small. Some urban destinations and the seaside have benefited, with people staying in the city and spending their money there."
Consolidation Continues
Neither scourge nor economic uncertainty, after all, has halted the process of consolidation that is continuing to change the face of the European hotel market. Continental Europe experienced a surge of investment volume growth in 2000, with the number of deals over e10 million (US$8.9 million) increasing 20%, according to Jones Lang LaSalle Hotels' Digest Europe. There was a marked shift in liquidity from the UK to Continental Europe, Jones Lang LaSalle reported, with Continental markets experiencing a 96% increase in volume while the UK saw a 44% decline, largely due to a quieter year in London-the result of a lack of available product more than waning investor interest. NH Hoteles took Krasnapolsky. Sol Meliá acquired Tryp. Accor secured a stake in Orbis. Radisson SAS, along with Marylebone Warwick Balfour, won Malmaison.
The deals have continued to transpire into 2001, and most of the focus, with the breakup of Granada Compass' Posthouse, Heritage and Le Méridien brands, is back on the UK. "'Granada Compass breaking up, is that consolidation?' some June ask," Ward says. But the pieces are boosting the portfolios of other brands, increasing their presence in territories where they deem themselves under-represented, a key feature of many of this era's biggest deals.
Bass' £810-million (US$1.2-billion) Posthouse acquisition brings 78 UK hotels into the Bass portfolio, the majority of which will be upgraded into Holiday Inn hotels, growing that brand's presence there. For £240 million (US$342 million), Scottish Macdonald Hotels purchased the Heritage chain, a deal that will triple Macdonald's size and take the Northern-UK focused company into the southern reaches of England. Nomura, the only remaining bidder on Le Méridien at press time, in the event of a successful acquisition, will have amassed a remarkable global portfolio. Guy Hands will have Jurgen Bartels as CEO and will keep Lambert to run Méridien, according to HVS Hospitality, London. And like Nomura, Singapore-based Raffles, with its European deal, the purchase of the 39-hotel Swissôtel portfolio, will gain access to new markets extending as far as the United States and the Middle East.
Capital Rewards
The lowering of bids that occurred during the Granada Compass sell-off, with Marriott dropping its last April offer below the £2 billion (US$2.9 billion) target price for Le Méridien, suggests a slowing economy June reduce the prices investors are willing to pay for expansion. But the entry of new buyers into the European marketplace June mitigate these effects. Traditionally, Europe has been the realm of the owner operator. But the type of investor has changed, says Jones Lang LaSalle's London-based Arthur de Haast, managing director, Europe. More than 40% of transactions last year remained owner-operator deals, but that is a significant drop from previous years. Property companies are entering the market, and pension funds are buying hotel real estate in arrangements similar to U.S. real estate investment trusts (REITs).
"For the operators, it means the increasing ability to offset, to get leases off their operating sheets," de Haast says. "In Europe business has been very capital-hungry, and this helps." Hilton International Group, UK, for instance, did a sale and leaseback of properties in the UK, helping to finance their April 2001 acquisition of Scandic. "This will be a continuing trend for European hotel companies with assets on their balance sheets," de Haast says, and this trend will further fuel the ongoing consolidation in Europe.
Strategic Growth
Hilton's £460 million (US$660 million) leaseback-assisted acquisition of Scandic, a company which itself, coincidentally, maintains minimal ownership status by mainly leasing or managing properties, offers Hilton secure footing on which to take part in the consolidation of the European hotel industry. The buy is a perfect strategic fit for Hilton, says David Michels, chief executive. Like many companies, Hilton's strategy is to achieve dominance in regional markets, and the Scandic portfolio brings Hilton 133 hotels in the Nordic region and 21 hotels in Northern Europe. Plans that would exponentially increase Hilton's presence in these regions call for the rebranding of 55 of the Scandic hotels to Hiltons and the eventual replacement of the Scandic brand with a Hilton Hotels Corp. brand, such as Doubletree or Hampton Inn.
Hilton's Scandinavian growth spurt makes the company formidable competition for Bass, which also focuses on growth in key markets, and is specifically aiming for a wider footprint in Northern Europe. "A few years ago, we focused on launching the Holiday Inn Express brand in the UK," says Harris. "We had zero four years ago. Now we have 62." While Harris expects the brand to expand to 120 units in the UK market within three to five years, the focus now is to get the Express brand into Germany and Spain, and he anticipates growing it to 80 hotels in Germany by 2005. "To make brand presence in a country, you have to make sure to achieve critical mass," Harris says, and acquisitions, he notes, are a fast way to get there. One week before this story went to press, Bass was rumored to be interested in acquiring Radisson SAS, notable for its strength in Germany and Scandinavia. While parent SAS Airlines denies the rumor, its hotel company's recent outstanding performance makes it a target for acquisition.
Germany, despite what some describe as a consistent oversupply situation, has, in fact, been the focus of great development interest for many hoteliers. "In terms of performance, Germany is the great success story," says Tim Hansing, development director, Mövenpick, Zurich. The German economy is growing in a stable manner, having recovered from the recession that struck following reunification. "The only problem is it's a very low-rated market," Hansing says. "That's a function of financing. It's mostly the operators that feel the pain."
First Resorts
While Hansing hails the strength of the German market, he does not intend to concentrate Mövenpick's development there. Some brands build region by region, but Mövenpick focuses on building brand awareness in capital cities and business centers. "The prime directive is so that we don't duplicate geographically," Hansing says. To do this, he says, "We're looking to acquire a hotel company our size or slightly smaller. A deal in Spain or the UK would be great."
Similarly to Mövenpick, Marriott touts its gateway city approach, building its presence first in capitals and major trade centers, then moving into secondary and tertiary markets. And like Hansing, Ed Fuller, president, international operations, Marriott International, Washington, D.C. expresses interest in Spain, a country with a dearth of international branded supply, being dominated by independent properties and Spanish Sol Meliá.
"There are target cities we haven't tackled yet," Fuller says. But he anticipates 27 Marriott openings in Europe by 2002. Madrid and Brussels properties will come online by 2003. With a gateway city approach, Marriott feels the pinch of Western Europe's limited opportunities for new development, opportunities restricted by tightly controlled access to sites, many of which are historic. Still, "We've been able to deal in the environment we're in," Fuller says, noting Marriott has 162 hotels open or under construction in EMEA.
The lack of suitable urban supply has driven hoteliers outward. SAS CEO Ritter, long a proponent of city center hotels, is planning a strong expansion into the resort arena. Besides offering new real estate opportunities, a resort emphasis helps grow the customer base. "We've been a businessman's hotel, but the business that derives from businessmen is not growing in a meaningful way," he says. "The growth is in the leisure business. We cannot afford not to be in the leisure segment."
Resorts, more than other segments in Europe, have long been dominated by individual owner-operators, Jones Lang LaSalle's de Haast says. "A lot of those hotels now need major capital investments because they offer an out-of-date product," de Haast says. "There is a more sophisticated resort guest. But these hotels don't have the capital, so they are selling out." This means, more and more, international operators are finding opportunities to grow in the key Mediterranean tourist destinations of Spain and Italy. Italy, in particular, has attracted investor and operator interest, having achieved an overall 13% increase in ADRs in 2000 to e140 (US$125) and a 4% increase in occupancies and offering exactly the type of leisure and corporate crossover business operators are seeking for growth. This makes the Ciga Hotels portfolio of former royal palaces, such as the Hotel Gritti Palace in Venice, an attractive acquisition target for a company like Bass, which plans to quadruple its hotel supply in Italy. However, with the market sliding, it is uncertain whether a price offer attractive to buyer and seller will emerge.
Eastward Bound
Soaring occupancy rates demonstrated by Prague hotels have encouraged European hoteliers to direct their attention eastward. Marriott opened Eastern Europe's first managed chain hotel in 1989 in Warsaw, followed by an opening in Budapest. Now Marriott holds three properties in Prague, four in Moscow and hotels opening in Armenia and Georgia. SAS boasts properties in all the Baltic capitals. "We believe a lot in Eastern Europe, not just as a destination for people there," Ritter says.
The analysts aren't so certain. "There are now at least two Eastern Europes," says TRI's Ward. "Those countries that are doing well enjoy proximity to rich neighbors. And outside of those few main countries, Eastern Europe has been very slow to develop. It's difficult to make up a case given the country risk."
Echoing Ward's sentiment, Bass' Harris takes a more cautious view. "We don't see at this stage a mass opportunity for large-scale development," he says. Only in Poland does he see opportunities for positive growth in secondary markets, mainly of the Holiday Inn and Express brands. Poland is a huge country in which domestic travelers, both leisure and business, must travel long distances. While the economy is growing quickly and feeding this travel market, it is starting at a low base, so budget brands are the ones most likely to gain a foothold and spread throughout the country. Full-service properties June find much to gain in Poland, too, though, with the country's impending European Union affiliation boosting business travel to the capital and beyond.
Like Bass, Accor sees ideal growth opportunities in Poland and purchased a 20% stake in Warsaw-based Orbis SA, part of a deal that provided for the application of the Ibis, Mercure, Novotel, Sofitel, ETAP Hotel and Formule 1 brands by Accor Polska to 29 Orbis hotels. The deal June favor Accor in investment terms as well as in terms of brand proliferation, as analysts estimate Orbis' book value could be as much as 50% more than listed in January 2001 after goodwill tax considerations granting the difference between the value of assets and higher prices paid are taken into account.
Accor's investment into Orbis suggests the consolidation that has been changing the face of the European market will spread to all corners of the continent, despite the fact that consolidation was anathema to the industry well into the last decade, when more than 70% of Europe's hotels were independently owned and operated. But consolidation has driven the development of industries in Europe at least since the Roman Empire built its first aqueduct centuries ago. And so it will characterize the growth of hotel companies building brand empires.
"You'll always get smaller companies emerging, starting to build a momentum, filling niches," Jones Lang LaSalle's de Haast says. In a never-ending cycle, those that are successful will capture the attention of their larger rivals, often becoming acquisition targets. "We will end up with a few giants," de Haast says, in Europe and the world over. "They'll get bigger and more powerful. That trend will continue."
Against a backdrop of uncertainty and volatility, international operators are determined to grow their presence in the Middle East and Africa
Despite the risks inherent in a region where performance is tied to a volatile oil market and Peace Process, hoteliers are intent upon expansion in the Middle East. Occupancies throughout Israel dropped to 45% in the first quarter of 2001 after the Peace Process collapsed, down by 25% from the previous year. And arrivals to neighboring countries such as Egypt and Jordan felt the effects, as well. But hoteliers still consider the Middle East to be prime growth territory and an important feeder market to destinations around the globe.
"The reality behind the situation on the ground is there is a lot of business happening there," says Tim Hansing, development director, Mövenpick, Zurich. It is worth noting that while overall occupancies in the first quarter in Israel fell, the drop was attributable to a 62% decline in overnight stays in March, compared against March 2000, by foreign travelers. Simultaneously, Israelis logged a 31% increase in room nights, evidence of the consistent growth of the domestic market. And in 2000, Israel had logged a 17% gain in occupancy over the previous year. "We're great believers that this region is going to be very successful one day. There's huge potential there." Intending to capitalize on that potential, Mövenpick has signed deals to operate properties in Bethlehem, Ramallah, Gaza, Arab East Jerusalem and Tel Aviv.
"From the point of view of a hotel management company, I see this as an opportunity to get into the market at a low point and grow with the market," says Yossi Fischer, managing director, Marketing Vision Ltd/TRI Hospitality Consulting, Israel, and director of development, Maritim Hotels, Bad Salzuflen, Germany. For when the memories of violence fade, tourism returns. And building relationships in troubled regions now will help operators to turn a profit later when the market bounces back.
And outside certain hot spots, development in the Middle East does not necessitate direct exposure to conflict. "There are parts of the Middle East that are very ready to grow despite conflict in other places," says Marcello Pigozzo, executive vice president, Mediterranean, the Middle East and Africa, Sol Meliá. "Oman is an example. Egypt is an example." Egypt lost an estimated 45% of its tourism revenues following the murder of 58 tourists in Luxor in 1997 by radical gunmen. But the country collected record tourism revenues in 2000, and now is a hot development spot for international companies, like Marriott International, which increasingly see the value of cultivating business in and from countries throughout the Middle East.
Straight To The Source
"The Middle Eastern traveler enjoys a lot of our key markets as both a business traveler and a tourist," says Ed Fuller, president, international operations, Marriott International, Washington, D.C., which operates 21 properties in the Middle East and Africa, with at least 10 more in the pipeline. "This is a very unique niche source market for us. It's not large, but it's very important."
Similarly, Bass, which operates 111 hotels in the Middle East and Africa, has another 25 hotels under construction in the region. Hilton will have 29 hotels under management in the Middle East by the end of 2001 and aims to have a hotel in each of the region's capitals. And it's not just the giants. Rapidly growing companies such as Le Méridien, Mövenpick and Maritim are looking south and east, as well, hoping to capitalize on the booming European travel market. And all of these entities face stiff competition from prominent regional operators, such as Jumeirah International and Rotana Hotels & Resorts, who have their fingers firmly on the pulse of their local markets.
"Bahrain and Dubai offer the critical things: sun, sand and sea, and they're very safe," says Mövenpick's Hansing. "And they're a four-hour plane ride from most of Europe. So for European tourists, they're the perfect destinations. Plus, these are world-class hotels there. We're seeing 70 to 80 percent occupancies and supply-led development."
More Than Safaris
While Mövenpick searches the Persian Gulf for sunny resort sites, Marriott is eyeing North Africa for additional leisure markets along the Mediterranean, a niche in which Marriott wishes to expand. The company is opening a property in Tunisia in 2002 and has its sight set on Morocco. South Africa's Johannesburg and Cape Town are key gateway markets, as well.
Like the Middle East, Africa is plagued with bouts of political instability, and international operators have, until recently, been reluctant to foray into the continent. But signs of increased stability and an improved economic picture have encouraged investors somewhat. The emergence of high-class resorts is likely to increase the viability of tourism development efforts throughout North and East Africa.
The East African tourism industry, and Kenya in particular, is recovering from a deep recession, says Ian Taplin, operations manager, Africa, Rex Safaris, a group that manages three East African properties. Occupancies at the group's 3- to 4-star resort, the Rex Papillon Lagoon Reef Hotel, have reached 100% during parts of the high and shoulder seasons, averaging 70% for the year. "The future for Kenya and Tanzania is looking much more optimistic," Taplin says. "Kenya has re-invented itself as a more up-market and classy destination offering much more than just minibus-style safaris, and this has helped the region's tourism industry to recover from the brink of disaster."
European Markets At-A-Glance
AMSTERDAM Strong economic growth and investment in the city has reinforced Amsterdam's position as a commercial, leisure and transportation hub for Continental Europe. The number of tourists to Amsterdam is forecast to grow annually by approximately 5% for the next few years. There is a scant number of sites available in the city center, and a larger proportion of developments are located close to the airport, partly a result of City Council restrictions limiting new hotel supply in the city since the mid-1980s. Hotels in the city have achieved occupancy rates of around 84% for the past few years. This is particularly apparent in the upper scale hotel market. Increasing demand has allowed hotels in Amsterdam to push up room rates by 21% during 2000.
BARCELONA Barcelona, located in Cataluña, Spain's economic powerhouse, has significant barriers to entry in the traditional prime areas. But an opportunity to develop and operate hotels is currently being offered as part of the development of a new Convention Center due to open in 2004. Barcelona has the attraction of having one of the five highest occupancy rates among European cities. Between 1990 and 1998, occupancy demonstrated a 6.8% compound growth per annum, from 71% to 81.2% in 1998. In 2000, RevPAR grew by 28%.
BRUSSELS The tourist market in Brussels is driven predominantly by corporate, conference and E.U. visitors, due to the presence of the E.U. and NATO headquarters in the city. Brussels is the fourth busiest conference city in the world, after Paris, London and Vienna. Due to current demand patterns, hotels in Brussels achieve high occupancy levels during the week but considerably lower rates at weekends. Overall, however, hotel occupancies in Brussels have been at 70%, with ADRs in the region of 0100 (US$89). Hotel supply in Brussels has stabilized, with only a limited number of new developments proposed.
DUBLIN Since the early-1990s, the Irish economy has grown dramatically. Since 1988, visitation to Ireland has increased by a massive 150%. Despite new developments in Dublin over the last three years, room yields have risen steadily. But to some extent there was a degree of uncertainty in the hotel sector during 2000. The favorable concessions on capital allowances given to hotel owners and operators have now ceased. Some of the banks are showing a marked reluctance to fund hotel projects. In addition, labor shortages are now a major difficulty, with approximately 10,000 unfilled vacancies in the hotel sector at present. And the market is held back by its inability to compete for larger and more lucrative international conferences. The International Conference Center project is still delayed.
FRANKFURT The city's leading position in the banking and finance sector has created one of the most stable hotel markets in Germany. There are 163 hotels registered in Frankfurt with a total of 22,470 beds, supported by a demand of 3.36 million bed nights and an average stay of 1.8 days in 2000. Occupancy levels were at their highest in 2000, around 74% and average daily rates grew almost 10% to 0125 (US$112) through the year. Frankfurt relies heavily on corporate demand; with its limited tourist appeal, tourism is expected to continue to play a minor role in the market.
GENEVA Over 200 international bodies have headquarters in Geneva, and the city ranks fifth in the world in terms of placement of expatriate workers. It has the highest number of five-star hotels per capita in the world, with ADRs ranging between 0225-0300 (US$200-US$267) for quality hotels. Occupancy levels have traditionally hovered around the 70% mark. Although long a stable market, room night demand has recently begun to grow and is expected to show moderate improvement.
MADRID In 2000, Madrid ADRs saw an increase of 10% on the previous year, resulting in a yield growth in excess of 13% over levels achieved in 1999. There are many projects in various stages of development, including a Ritz-Carlton, but Madrid still retains very challenging barriers to entry. With the consolidation of the Spanish hotel market continuing apace, the acquisition in 2000 of the Tryp portfolio by Sol Meliá has resulted in almost 22% of the upper-scale Madrid market being in Sol Meliá's hands.
MILAN Hotel occupancies in Milan's largely business-oriented market are volatile, a result of the City's reliance on the Fiera di Milano exhibition facilities for generating hotel demand. Still, rate and occupancy achieved record levels in 2000, reaching occupancies in excess of 70% for the first time in a decade and rates in excess of 0185 (US$165), a 15% growth over the previous year. Good demand growth is anticipated to continue to push yields in Milan.
MUNICH The Munich hotel market was among the best performing markets in 2000, registering occupancy levels at almost 76% and ADRs in excess of 0105 (US$94). This resulted in a large double-digit jump in RevPAR growth for the year, second only to Berlin. Munich has an international reputation as a trade fair location, experiencing some volatility between periods of high occupancy at times of trade fairs to periods of over-capacity at other times. However, the hotel market has strengthened considerably over the last several years with increased activity in the trade fair, leisure and business sectors.
PARIS A solid domestic market and improved exports are driving the French economy's strong growth. Some commentators say the Paris property market is at the top of the cycle, with signs of funds placing investments on the market to benefit from the strong investment sentiment. Development of hotels of any significant size is very difficult in central Paris. A number of hotels in the upper sector of the market have undergone major renovation including Georges V, Meurice, Plaza Athenée, Inter-Continental, and the Millennium. The principal area for new hotels is on the outskirts of Paris. Occupancy levels are at an all-time high, in excess of 77%, reaching capacity during the summer and autumn. Room rates are among the highest in Europe, hovering around 0250 (US$222) for quality hotels. The new supply anticipated to enter the market in the short run should be easily absorbed by this buoyant market.
PRAGUE Strict planning controls in Prague's city center, together with lack of available sites and complex land ownership, has limited new developments. There are currently 583 rooms under construction in Prague and due to open this year. This will increase the city's room supply by 2.5%. Prague's hotel demand is dominated by a highly seasonal tourism business, of which a large proportion is tour groups. Because of this, the Prague hotel market has achieved relatively low ADRs, compensated by high occupancy. But as a result of the lower VAT rate introduced in 2000 and exchange rate fluctuations, Prague experienced a 32% growth in ADR during the first half of 2000.
ROME The Rome hotel market has always enjoyed some of the highest occupancies in the Mediterranean, hovering around 75% over the last few years. During the Jubilee year of 2000, hotels were able to record annual average rates in excess of 0175 (US$156). There are little more than 1,000 new rooms anticipated in new developments in the short term, which should be absorbed by the anticipated growth in leisure demand. But this market, though strong, is more susceptible than most to any downturn in international economies, particularly the United States.
WARSAW The Warsaw hotel market has developed considerably since the late 1980s when just two hotels served the international market. Since then operators such as Sheraton, Marriott and Le Méridien entered the market, benefiting from demand generated by new foreign investment in Poland, which brought many high-spend business travelers to the capital. Still, the majority of hotels in the city, including quality hotels, offer substantially discounted weekend packages in order to fill rooms. During 2001, occupancy and average rate are expected to be stable, a function of strong economic growth mitigated by the effect of new hotel supply. Poland's anticipated entry into the European Union in 2004 will improve the communications and accessibility of Warsaw with the rest of Europe.
Middle Eastern And African Markets At-A-Glance
AMMAN The Jordanian capital, gateway to its many tourist attractions including Petra, the Dead Sea and the Gulf of Aqaba resorts, is affected by regional unrest, but has nevertheless forged ahead with new projects, including the Grand Hyatt and a Sheraton, plus the expansion of the existing Inter-Continental and a future Four Seasons. Yield increased slightly to just US$37, at 67% occupancy, up 6% on 1999.
BEIRUT Lebanon remains as vulnerable as ever to the ups and downs of the Peace Process, despite its significant tourism potential. Three-fourths of Beirut's hotels were destroyed in the civil war, and the major movements in recent years have been their restoration or replacement and the arrival or return of major chains like Inter-Continental, Le Méridien, Accor and Starwood. With luxury yield down 25% to US$69 and occupancy around 60%, over-supply seems inevitable with 15 more hotels and 3,000-plus rooms planned.
CAIRO Like Dubai, the Egyptian capital is divided into three hotel markets: city center, Heliopolis (airport) and the Pyramids. Following a swift recovery from the 1997 Luxor massacre of tourists, the combined Cairo yield jumped 10% last year to US$63, with Cairo center leading at US$69. The new Conrad and Four Seasons upscale hotels helped to achieve this boost, but 16 future hotels with 5,000-plus rooms June have a negative impact. This figure contrasts significantly with the package-driven Egyptian Red Sea and Gulf of Aqaba resorts, where yields average US$25-US$32.
CASABLANCA The Moroccan business city of Casablanca is dominated by the luxury Sheraton, Crowne Plaza, Hyatt Regency and leading Royal Mansour Méridien hotels, which achieved yields ranging from US$55-US$97, at occupancies averaging 73%. Now Accor is planning multiple new properties in the city. Alongside Neckermann of Germany and Spain's Sol Meliá, the French chain is a major supporter of the government's nation-wide initiative to build six seaside tourist resorts for $5.2 billion by 2010.
DAMASCUS A new Four Seasons upscale property and a Rotana hotel opening this year will be among the first additions to the Syrian capital's luxury stock in a decade. Restrictive business and tourism policies under former President Hafez Asad hampered growth, but June change under his son Dr. Bashar Asad. The low luxury yield of US$36 reflects a 50% discount for Syrian guests and an occupancy of 50%.
DOHA Qatar's lucrative new-found natural gas revenues combined with a fresh attitude to provision of liquor in hotels have grasped the attention of the global chains, inspiring new Inter-Continental, Ritz-Carlton and Holiday Inn properties in the capital's West Bay new town area. Qatar will host the 2006 Asian Games, and has a new General Corporation for Tourism. Luxury yields were up 5% to US$65, at around 60% occupancy.
DUBAI With 254 hotels and 124 hotel apartment buildings, Dubai retains its dominant position in the Gulf hotel sector, and has now matured to possess three distinct markets: the city center, Sheikh Zayed Road and Jumeirah Beach. The latter is the Gulf's most successful riviera, with a 2000 luxury segment yield up 45% to US$150, average rate more than US$200 and occupancy averaging 75%. The Dubai Marina and Palm Island mega-resorts alone promise another 150 hotels. Citywide, the yield increased 20% to about $90.
JEDDAH King Faisal and entourage have spent more time in Jeddah than in previous years, boosting yield 10% to US$68. The busy Red Sea port city, which attracted 2 million mainly domestic visitors to its summer festival, is about to gain a new 425-room Hilton, together with many independent properties along its endless Corniche.
KHARTOUM The Sudanese capital is enjoying the beginning of an economic boom, thanks to new-found political stability, outside ties under President Omar El Beshir, and the benefits of new oil wealth. The 25-year-old Hilton remains the city's top property, despite competition from the Malaysian-run Holiday Villa, a revamped 1902 property. Market ADRs hovered around US$90 to US$100 at 50% occupancy, reflecting negligible tourist demand. New hotels are planned, but not confirmed, except a Hilton in Port Sudan on the Red Sea, a key trade port and upcoming divers' lure.
KUWAIT Still plagued by security problems, the Kuwait luxury market has negligible tourist demand, despite its lively Hala February shopping/cultural festival, and is sustained thanks to the Kuwait Hotel Owners Association's minimum rate agreement. A yield of US$79, up 6% on 1999, is offset by an average rate of over US$170 and an occupancy of 46%. New Hilton and Holiday Inn resorts are anticipated with interest.
LAGOS With democracy restored and oil prices up, Nigeria is taking tentative steps to build infrastructure for tourists, which numbered 611,000 in 1999. The move of the official capital to Abuja, personal security problems, and a lack of quality attractions (there are a few game reserves in the east of the country) have not prevented Lagos' Sheraton, Meridien, Sofitel and Federal Palace hotels from performing well. Year 2000 rates ranged from US$70 to US$170, at occupancies from 80%-85%. With a population of 12 million, this key West African gateway city is now expecting new Hilton and Sheraton properties.
MAKKAH/MEDINAH Crucibles of the Islamic world, these twin cities draw demand from the one-month Hajj, or pilgrimage to Makkah, season and Umrah, visits to both cities outside the Hajj season. During Hajj, which attracts more than a million visitors, hotel rates can be increased tenfold, while Umrah has recently been extended to last all year. These factors have inspired a spate of new chain hotels. A yield of US$68 reflects an average rate of US$145.
MANAMA A major leisure lure for visitors from Saudi Arabia, to which it is attached by a 35 km causeway, the tiny, liberal island of Bahrain has 73 hotels, the luxury segment of which achieved a US$62 yield last year, up 9% over 1999, at 59% occupancy. Bahrain just won a dispute over the Hawar Islands near Qatar, and now plans major oil exploration and resort developments there.
MARRAKECH Marrakech is a beautiful tourist city, representing a contrast to Casablanca, with at least 50 hotels and a thriving sub-structure of riyads (traditional guest houses). The historic La Mamounia and Aman Resorts' exclusive Amanjena earned impressive average rates of US$310 and US$600 respectively, at occupancies of 60%. Even the better-known riyads achieved rates of up to US$350 at as much as 70% occupancy. France contributes half the room nights of this European FIT lure. Numerous planned properties include hotels by Ritz-Carlton, Marriott, Sheraton, Virgin and Club Med founder, Serge Triganou.
MUSCAT Oman's selective tourism strategy has held back hotel performance in Muscat, which has been burdened by new Grand Hyatt and Radisson SAS hotels, despite new demand from a successful cultural festival. Development in the picturesque mountain city nevertheless continues, with Shangri-La's ambitious Barr Al Jissah resort adding 714 letting units. Yield among luxury hotels dropped 5% to US$44, at 55% occupancy.
RIYADH The new Rosewood, Al Faisaliah, and forthcoming Four Seasons upscale hotels, both within landmark tower developments, have added a new upper layer to the aging 'standard' 5-star stock, resulting in a 10% drop in occupancy to 57%, and a US$70 yield. Meanwhile, the creation of a Saudi Higher Tourism Commission is the culmination of two years of trial international leisure tourism-previously, only businessmen and Muslim pilgrims were allowed into the Kingdom.
View All Blogs
