HOTELIERS EXPECTS CRISIS TO FORCE PEOPLE TO CUT BACK ON TRAVEL
HONG KONG, OCTOBER 25, 2009 (MALAYA) 'Crisis brings modesty Travel industry says turmoil to disrupt new projects'
The world’s biggest hoteliers expect their industry to stagnate as the financial crisis hits lending for new projects and forces people to cut back on travel.
That gloomy realization, expressed at a conference in Hong Kong, spells more trouble for the global economy. Travel and hospitality employs nearly quarter of a billion people and accounts for a tenth of gross domestic product (GDP).
"In the West there’s fear, in London and New York you can see it, smell it," said Andy Cosslett, chief executive of Intercontinental Hotels Group. "Asia is the place to be, but even they’re not going to get away with it."
The global travel business will probably expand 0.5 percent in 2009, according to an increasingly pessimistic World Travel and Tourism Council (WTTC), which had previously forecast 4.5 percent growth. The industry has notched up annual growth of 3-4 percent since 2003.
"A crisis like this brings modesty," said WTTC president Jean-Claude Baumgarten, adding that falling property markets across the world would hurt tourism.
"If housing prices rise every year, you feel rich," he said. "If it falls, you feel poor, and that will have an impact on the way you spend your income."
The economic downturn is already biting, with revenue per average room down 1.5 percent on average in Europe this year. Spain and Italy are hit hardest because of dependence on tourists rather than business travelers.
In comparison, revenue per room is up 1 percent in the United States, 11.2 percent in Asia and 25 percent in the Middle East.
The global financial turmoil is likely to disrupt big hotel construction plans, as demand wanes, banks recoil from lending, and private equity firms go cold on hotel ownership.
Deals like Blackstone Group’s $26 billion blockbuster purchase last year of Hilton Hotels Corp., seem from a bygone era. Stock prices have fallen so far that IHG, Marriott International, Starwood Hotels, Accor SA and Hong Kong’s Shangri-la Asia combined are worth less than what Blackstone paid.
With 50 million Chinese taking overseas tours this year, and 1.6 billion domestic tourist visits recorded in the country, hoteliers have grand expansion plans for Asia.
About 1,300 hotels are under construction in the region, which would bring 325,000 rooms on to the market, according to Lodging Econometrics, and another 350 projects are scheduled to start in the next year.
But 131 hotel projects in Asia were either canceled or postponed in the first half of this year, before the financial meltdown of recent weeks, the consultants say.
For example, construction of several hotels in Macau, including a Hilton and an Intercontinental have been put on hold, as casino operator Las Vegas Sands struggles for finance.
"In the current economic situation, we’ll probably see a slowdown, not for things under construction, but for new projects," Starwood chief executive, Frits van Passchen, said.
Intercontinental is pushing ahead with its pipeline of 1,800 hotels globally, which will employ some 125,000 new staff over the next four years, but Cosslett expected projects to be delayed by on average three months because of the financial crisis.
Marriott plans to open 25 hotels in Asia by the end of 2009, with another 50 due in the following three years.
And Starwood, which is spearheading a $4 billion renovation program of its Sheraton hotels, still plans to open a hotel once every three weeks in the United States to the end of 2009.
"We have to hold our nerve," said Starwood’s van Passchen.
Hoteliers are also clinging to hopes that they can bring in environmentally friendly policies to cut energy costs by as much as 20 percent.
Some hotel firms such as unlisted Global Hyatt Corp., are keen to buy hotels at knock-down prices in the next couple of years, as owners find it difficult to roll over their debt.
"If there are distressed assets or an independent hotel, we’ll look at that," Steve Haggerty, Hyatt’s head of real estate and development, told Reuters in an interview. "There aren’t a whole load of banks out there, so we’d be an all cash buyer." – Reuters
Chief News Editor: Sol Jose Vanzi
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