4th International Hotel Conference in Rome with 400 participants
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The opening discussion broached many subjects and participants touched on the general development of the industry with their many statements. Russell Kett, Managing Director of the consultancy firm HVS London, predicted: The trend of the chains to sell real estate will continue. Little by little they will be sold in order to achieve the best possible price. By 2009, Kett expects another positive increase in demand in the travel industry; and not until this development comes to an end is it likely to become critical on the real estate market.
Peter C. Krause, card carrying private equity man from Barrow Street Real estate Fund, New York, can make enough money from investment funds to buy whole chains. He spruces the hotels up and sells them on again after an average period of around seven years, sometimes significantly less - as was the case with Red Roof Inns, sold to Accor after only 3 years. Krause prefers the chains saying he has too much capital for it to be spread out on small hotels. Individual hotels need longer (often too long) before the profits start coming in.
Stephan Bollenbach, CEO of Hilton Hotels Corporation, suggested that contacts represent the one side of the coin, and integration into the distribution apparatus the other. He introduced Hilton's new and allegedly very sophisticated "OnQ" IT system, which has already brought cost and staff savings.
Philippe Rossiter, CEO of Hotel & Catering International Management Association, describes the decreasing availability of staff as one of the biggest challenges facing the branch and also complained of lack of competence amongst existing staff. 60% of staff in London's hotels are not of English nationality. He predicts a "black hole" for the branch. Russell Kett responded: As soon as the industry learns to stress the professionalism of their staff and no longer just to offer casual work, nationality will become irrelevant.
Although the Americans have just discovered environmental protection as "green philosophy", Hilton's CEO Bollenbach said: There are many ways of ensuring the environmentally friendly operation of a hotel. Charging guests for the use of a hand towel is, however, not appropriate. Russell Kett accused the hotel chains of still not doing enough for the environment. And as energy costs - despite large increases in oil prices - still make up just a small fraction of turnover, more awareness and sensibility for this issue are unlikely.
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The Russian market was the subject of another discussion in the "think tank" on Eastern Europe. The excitement of international investors has petered out. Now they are beginning to take a more careful look at the markets. "There's a transformation taking place," Michael O'Hare says, Horwath's Managing Director for Central and Eastern Europe and Russia, drawing on his twelve years of experience in these markets. "Meanwhile there are four investment funds in Russian but still not one single private equity company." In the meantime, Moscow counts 17 international brand hotels, yet the 11 million strong capital still has unused potential. Trond Johansen, much travelled representative from VingCard Elsafe pointed to the unsatisfied demand in Russia for 3 and 4 star hotels, yet went on to say: Russia is too expensive, the development costs will become too large. This will all take time, above all because the Russians themselves love luxury and glamour.
Also interesting: The Russians also make up the largest proportion of guests in international hotels such as Marriott. What's more, around five Russian hotel chains are expanding at a rate of knots, completely unnoticed by the international community - even in secondary and tertiary cities and the regions, sometimes covering land stretches larger than the Czech Republic or Hungary.
All the same, Ingrid Quint-Hager, head of international hotel finance at the Erste Bank, Austria, stressed that in Russia, the only businesses that take off are the ones with local partners. Her bank therefore uses contacts with local banks on the spot. "Of primary importance is finding a good lawyer and tax advisor right from the very start." Three years planning is the norm in Russia, along with "accidents" like losing papers, endless evaluation procedures by owners as well as litigation.
Though some comfort can be taken from the efficiency of the Russian courts to deliver quick judgement. Although the Russian business mentality is becoming more and more transparent, David Simons says, Partner at RDS Developments, almost 80% of foreigners hoping to make a start on the Russian market fail for lack of awareness of Russian business practice. Though not all reports were negative. Michael O'Hare had a positive note to add in Russia's defence: The Russians pay on time, are very direct and are very good businessmen.
The biggest challenge for the Russian hotel industry is finding enough qualified or trainable staff. Many Russians are returning from abroad, but most only want to "play manager". A ray of hope: Younger Russians meanwhile speak (at least) English.
Participants in the discussion judged the European market accordingly: Kiev and Bucharest are attractive locations, Prague still has potential, though Budapest is losing and Moscow has become difficult. Wherever low cost airlines land, markets grow.
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The "think tank" on boutique hotels also had a lot to say on how this niche market can distinguish itself from the chains and make its mark on the market. Ami Federmann, Vice Chairman of Isreal's Dan Hotels and initiator of a real estate fund in Isreal, registered a move from pure design to specialised design hotel (for instance - fitness facilities). A spa is meanwhile the absolute minimum, just like a spacious room and seductively designed and ever larger bathing tubs for two. A dressing area for women guests wins the design hotel equally as many points from its demanding clientele as would a quick internet connection.
According to expert consultants Sumner Baye from the International Hotel Network, and Peter Wirth from TWT, both firms based in New York, as far as investors are concerned, the single decisive factor for and against a boutique hotel is whether the property will increase in value in the long term.
For this reason, all cost intensive ventures should be axed - above all, the house restaurant. Outsourcing is the word here. Even staff costs should be kept low; the attractiveness of a boutique hotel comes first and foremost from the design and the atmosphere. And its here that the biggest challenge exists for the niche hotel. Marketing a hotel as a design boutique hotel is to subject the hotel to a rapidly changing world of design superlatives that can mean permanently new costs.
On the other hand, boutique hotels bring in significantly highly rates than other conventional hotels with full service offers.
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Roberto Wirth, Chairman and General Manager of the renowned Hotel Hassler in Rome, reminded hoteliers of the necessity for disabled access and services in hotels. Wirth, who himself is deaf, said with the help of an interpreter: "Give guests what they need in order to feel normal!" The internationally honoured and respected hotelier is himself a shining example of unfailing commitment. Wirth, also a Cornell graduate (1975) has now founded the first Cornell chapter in Italy.
More on the topics discussed at the International Hotel Conference in Rome will be reported by hospitalityInside.com in further articles. / Maria Puetz-Willems
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