Hotelier.com

From Bust to Boom

These days, panic-stricken hoteliers are constantly fretting over room rate. It’s the biggest question these days in hospitality, as rate integrity has eroded along with occupancy. No longer are hotels in the driver’s seat when determining the cost for a hotel room; it seems as if the consumer is in charge now. 

The problem, of course, is multi-faceted. The recession has caused many companies to pull back on corporate spending. They’re also afraid to hold meetings for fear of media reprisal. It’s caused knee-jerk reaction among hoteliers to fight it out market to market. The end result has been an attempt to cut rate to steal market share, but it’s only caused more headaches for hotels, many of which are overleveraged with debt and need to fill rooms at any cost to make debt service payments.

What a mess! Fortunately, all indications point to the worst being over. Either way, however, hoteliers are unwilling to drop their defensive postures until there are stronger signs their competition won’t undercut them with lower rates. 

So the big question on everyone’s minds last week at The Lodging Conference at the plush Arizona Biltmore Resort and Spa in Phoenix, AZ, was, “When will room rate return?”

According to Steve Swope, Chairman and CEO of Rubicon, the key to understanding where room rates are headed is through examining the pace at which rooms are booked in any given four-week time period. And, for the first time in a year and a half, it looks as if future bookings are on the upswing.

“We are starting to see positive pace for the first time in a long time,” said Swope. “Any glimmer of excitement is the pace number has finally swung up. And that is good news. However, it is going to be a long slog to get rates back up. But the first sign is to see rates stop falling and that is where we are today.”

Swope added that there has been an acceleration of demand during the last four weeks for the future 12 months. In fact, it’s up pace 3.3 percent year over year, and 18 of 25 top markets are now in positive territory.

Andrew Stegen, General Manager of the host hotel, the Arizona Biltmore, said he sees prospects are up 300 percent from this time last year. It’s a sure sign things are on the mend.

Larry Shupnick, Senior Vice President Development and Acquisitions with Interstate Hotels and Resorts, agrees that it looks like the profit needle will soon start moving in the right direction. “I think that the market will turn a little bit in 2010. Probably by the second or third quarter we will see the market pick back up in RevPAR,” said Shupnick.

R. Mark Woodworth, President of PKF Hospitality Research, agreed that it seems as if the market has bottomed out. “I think things are going to start looking better as we move forward,” he said, noting that he thinks RevPAR will turn positive later in 2010. “From the bottom line there will be another year of losses in 2010, but we see some very attractive year over year increases in 2011.”

Woodworth said some of the problem is going to be a surge of new openings of projects approved at the end of the last cycle, which will continue to give the industry some grief for the next quarter or two.

According to Swope, the booking decline was first seen around February 2008 for forward bookings. At that time pace started slipping as much as 20 – 30 percent. And it wasn’t until this past spring that the booking pace stopped freefalling and began to flatten out. “We kind of hit bottom in mid-May. It’s undulated a little bit since then,” said Swope.

When this year is complete Swope said he expects transient demand to be down about five percent, while group demand should be down about 12 percent.

One problem that will continue to haunt hoteliers is companies renewing room contracts for the coming year and buying less room nights for a lower price per night. In addition, Swope said the customer is many times abandoning the negotiated rate for a conference and going with an online travel agency to get a lower rate.

By: Glenn Haussman

Budget airline launching in Cairo

During tough times in the travel and tourism business a new low-cost airline is launching in Cairo.

The Sharjah-based Air Arabia and the Egyptian hospitality company Travco Group International recently announced a partnership to form Air Arabia Egypt for budget flights in Europe, the Middle East and Africa (EMEA).

"The low-cost model, which will be used in operating Air Arabia Egypt, is uniquely attractive in these challenging economic times. When travel budgets are low and travel is a must, travelers prefer value-for-money options," said Sara Salib, the director of marketing and public relations for Travco, in an email to Al-Masry Al-Youm.

Profits in the worldwide commercial airline business have declined sharply in the last two years. The International Air Transport Association (IATA) predicts the global industry will lose US $11 billion in 2009. Commercial airlines lost $16.8 billion in 2008, a drop of $29.7 billion from the previous year.

"Reported losses have already exceeded $6 billion in the first half of this year," said an IATA report released this month. "Although the beginnings of an economic upturn are now visible…yields are much weaker than anticipated and oil prices higher. These last two factors are more than offsetting better economic growth."

Airlines in the Middle East, however, have suffered less than other regions, the report says. Although commercial airlines the Middle East are generally smaller than counterparts in North America and Europe, for example, carriers in the region are gaining a greater market share of international flights. It is also the only region in the world that had higher year-on-year passenger traffic in 2009.

And there's evidence that a low-cost model can be successful. Air Arabia's net profits for the first half of 2009 are up by 21 percent from the same period last year to $52.6 million, according to a report by AFP.

“At a time when the global aviation industry is witnessing serious challenges as a consequence of the worldwide financial crisis, we continue to move forward with our strategic expansion strategy, as demonstrated by this important announcement," said Sheikh Abdullah Bin Mohammed Al Thani, chairman of Air Arabia, in a press release.

The low-cost carrier model has worked in Europe and the United States, and even been recession proof. The Irish carrier Ryan Air has increased its number of passengers for every month year-on-year since January 2007. The American carrier Southwest Airlines earned a profit for 71 consecutive quarters until the beginning of 2009–and rebounded in the second quarter.

Figures for EgyptAir Express, the national carrier's low cost airline, are not available on the company's website beyond June 2008. Similarly, tourist figures are not available past the same time period on the Egyptian Central Bank's website, the official place the Ministry of Tourism publishes statistics.

The numbers for the first four months of 2009 show a 13.2 percent drop in the number of tourist nights compared to the same period in 2008, while the number of tourist arrivals during the same period has declined 10.3 percent to 3.67 million arrivals.

The tourism industry is going through some rough times, thanks to the global financial crisis. The Ministry of Tourism had released figures for the first four months of the current year, showing a 13.2 per cent drop in tourist nights and a 10.3 per cent decrease in tourist arrivals compared to the same period last year. A report released this month by the Center for Trade Unions and Workers Services also stated that the tourism sector is the highest in terms of layoffs this year. If anything, the timing is right to take advantage of tighter travel budgets and Egypt as an affordable destination. In addition to Air Arabia's experience as a low-cost airline, the new group will benefit from the economy of scale in an end-to-end hospitality group like Travco.

"Controlling all aspects of the tourism value chain also allows operating efficiencies and cost savings," Salib said. "Being the only fully integrated powerhouse in Egypt and the region only increases Travco's competitive advantage."

Air Arabia will have a 40 percent stake in the new venture and will handle the day-to-day operations, serving on a joint board with Travco, which owns 50 percent. Travco declined to name the independent Egyptian investor who owns the remaining ten percent. Air Arabia, which flies to 57 destinations east of the Atlantic Ocean, launched its second hub in Casablanca this year to compliment operations in Dubai. The company has not announced when flights will commence from Cairo.

By Andrew Bossone

Tipping for wages to be outlawed in the UK

Many restaurant employers in the UK use the service charge, or tipping, system to give waiters and waitresses their wage. However new rules that are to come into place in October that will outlaw the use of the service charge for wages.

These new rules will say that employers are not allowed to use tips to give their staff wages, however the hospitality industry have said that this could potentially lead to the loss of up to 5,000 jobs and could cost restaurants £130 million.

These rules will come into effect from October 1. Restaurants, from this point, will need to pay staff their full salary.

By NATHAN ADAM

Randy Quaid arrested over unpaid hotel bill

Randy Quaid, the Hollywood actor and his wife Evi, a former model, have been freed on bail after being held in Texas over an unpaid $10,000 (£6,200) bill at a hotel in California

The couple spent several hours in jail in the desolate town of Marfa, Texas before the local sheriff drove them to a bank so they could withdraw bail money.

A police mugshot of Quaid, 58, showed him bearded and smiling and carrying a suit jacket over his shoulder.

The actor and comedian is best known for playing a hard nosed rancher in the Academy Award-winning film Brokeback Mountain. He also starred in the Hollywood blockbuster Independence Day and the Farrelly brothers movie Kingpin. He is the older brother of fellow actor Dennis Quaid.

A warrant had been issued for Quaid and his wife for burglary, defrauding an innkeeper and conspiracy after a hotel in Santa Barbara, California, said earlier this month they had not paid.

They were arrested while staying at another hotel in Marfa, a remote town of 2,000 people that was used as a location for the film There Will be Blood, starring Daniel Day-Lewis, and the Coen brothers' No Country for Old Men.

According to the local sheriff's department Mrs Quaid briefly resisted arrest but "calmed down quickly".

Sheriff Danny Dominguez gave the Quaids a lift to the bank in his car so they could withdraw $40,000 (£24,800) to post bail. He said: "It's a small town. I like to help everybody out."

By Nick Allen in Los Angeles

World Tourism Day 2009: "Tourism – Celebrating Diversity"

World Tourism Day, celebrated annually on September 27, will be taking place this year in Accra, Ghana. As part of the official celebrations, UNWTO will collaborate with the host country to organize a Think Tank around the 2009 theme “Tourism: Celebrating Diversity."

This will be World Tourism Day’s 30th anniversary and presents an opportunity to highlight the wealth of cultural and natural diversity across the globe, as well as the role of sustainable tourism in preserving this diversity. Diversity has long been the driving force behind tourism which in turn has become an engine for socio-economic development, poverty alleviation, and international understanding. As world leaders come together to tackle the challenges of climate change and the economic crisis, diversity will continue to drive tourism, engendering international cooperation, and ensuring sustainable development.

Following the successful experience of previous World Tourism Day celebrations, UNWTO is organizing with the host, Ghana, a Think Tank based on the World Tourism Day Theme: “Tourism: Celebrating Diversity." Bringing together leading public and private tourism stakeholders, as well as members of the media and UNWTO representatives, the Think Tank promises to be instrumental in raising awareness of the significance of diversity and sustainable tourism.

The Think Tank will:

• Highlight tourism’s capacity to maintain diversity in the face of globalization

• Outline how tourism can enhance cultural and environmental diversity

• Consider the role of tourism in engendering international cooperation

The main purpose of World Tourism Day is to foster awareness among the international community of the importance of tourism and its social, cultural, political, and economic values.

Assistant Secretary-General & Spokesperson: Geoffrey Lipman Media Officer: Marcelo Risi T: +34 91-567-8178 / +34 91-567-8100 F: +34 91-567-8218 Email: comm@UNWTO.org Web: www.UNWTO.org