The immediate outlook is nothing like as rosy. Revenues are plummeting; hotel occupancy is spiraling downwards. Desperate hoteliers are slashing room rates, ignoring the lesson of the last bout of heavy discounting, which came in the aftermath of the September 11 terrorist attacks. It took years for hoteliers to restore their pre-2001 prices.
Worse, the hotel industry is confronted by a climate of public distaste at business executive’s conspicuous consumption, such as their travel budgets. The big groups merrily sold their hotels in return for long-term franchise and management deals, which gave them multi-year annual fees and a cut of revenues. They became brand managers, rolling out new lifestyle concept hotels. All they needed for growth was a pipeline of new developments.
Now, hotel owners are feeling the pressure, particularly the highly leveraged ones, and are looking to the big operators to “share the pain”. Some hotel advisers predict a bloody year, as hotel owners miss interest payments, while operators lose money on unwanted rooms.
However difficult it may prove this year to find customers, and however low prices may fall in the short term, particularly in emerging markets such as India and China.
Worse, the hotel industry is confronted by a climate of public distaste at business executive’s conspicuous consumption, such as their travel budgets. The big groups merrily sold their hotels in return for long-term franchise and management deals, which gave them multi-year annual fees and a cut of revenues. They became brand managers, rolling out new lifestyle concept hotels. All they needed for growth was a pipeline of new developments.
Now, hotel owners are feeling the pressure, particularly the highly leveraged ones, and are looking to the big operators to “share the pain”. Some hotel advisers predict a bloody year, as hotel owners miss interest payments, while operators lose money on unwanted rooms.
However difficult it may prove this year to find customers, and however low prices may fall in the short term, particularly in emerging markets such as India and China.
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