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First Hospitality Group announces distressed hotel program

Rosemont, IL—In response to the rising numbers of defaulted hotel properties nationwide, Rosemont, Ill.-based First Hospitality Group, Inc. (FHG) has expanded its third party management services to include a comprehensive distressed hotel division to enable smooth, effective and efficient takeovers. FHG President Robert Habeeb made the announcement.

In place for only a few short months, the program has already achieved great success, having facilitated the effective transition of three distressed assets.

The first was a struggling Hotel & Conference Center in Gurnee, Illinois. FHG was appointed receiver and has developed a plan to quickly improve performance and prepare the property for sale. The second, an underperforming Residence Inn in Grand Rapids, Michigan, was purchased by FHG as part of cooperative agreement with the borrower and bank.  The third, which involved a management takeover of the high-volume restaurant, Fuego Mexican Grill in Arlington Heights, Illinois, is in the midst of an operational reconfiguration by FHG that will improve operating performance.

These three examples demonstrate the diversity of FHG's experience and the company's results-focused approach to dealing with distressed assets, a formula that that has generated tremendous interest from a growing number of lenders and servicers.

With more than 5% of U.S. hotels currently in default and a predicted 20% by this time next year, FHG's distressed hotel program was designed to address the needs of the growing lender population struggling with the management of repossessed hotel properties, as well as those companies struggling to make payments on the properties. These assets present a host of unforeseen and unexpected challenges for those unfamiliar with the hotel management process, including liquor licenses, bonding, insurance, inventories, personnel, and franchise agreements. FHG's program provides step-by-step assistance with a team of experienced industry professionals to guide the process from takeover to sale.

"We saw a real need within the industry for a partner to assist with the many questions and difficulties faced with during hotel takeovers," said Habeeb. "We created this program to leverage our comprehensive understanding of the entire process and to be just that, a partner from start to finish. We provide all-inclusive management of distressed properties with an efficient and effective program that garners results."

Kempinski delays Palm hotel opening

The size and scale of the Palm Atlantis development has forced the German hotelier Kempinski to delay opening its planned five-star hotel on the Palm Jumeirah by two years.

While the company will open its Kempinski Residences serviced apartments next March, its 240-room Emerald Palace hotel will not open until 18 months later because of concern about demand.

“We saw the monstrosity of the Atlantis grow and grow and grow,” Ulrich Eckhardt, the Middle East and Africa president of Kempinski, said yesterday. “We felt to open in the wake of the Atlantis would have been the wrong this to do. We would have been eaten up.”

Kempinski was unaware that the Atlantis would have 1,539 rooms, six times the proposed size of the Emerald Palace and more than seven times the initially proposed capacity threshold for the development, he said.

“When the Palm was conceived it was supposed to be very low density, with hotels that had a maximum of about 200 rooms,” he said.

Dubai hotels have attracted attention since Dubai World’s announcement last month it was seeking a standstill on billions of dollars in debt. UK searches for lodgings in the emirate have risen by 570 per cent over that span, the internet site hotels.com said, as travellers searched for perceived bargains in a warm-weather climate.

The average price of a five-star hotel room in Dubai was £174 (Dh1,040) per night in the first half of this year, the travel site said. However, a similar room would cost on average £144 a night next month, a 17 per cent drop, amid a downturn in travel demand and increased room supply. A five-star weekend break in mid-January started from £74 per night, hotels.com said.

Although thousands of rooms are scheduled to open in Dubai next year, Mr Eckhardt said a number of them might not come to fruition.

“I think there is a marked slowdown in Dubai in hotel construction and hotel openings,” he said. Banks were less inclined to lend money to the hospitality market in the current economic climate, he said. Kempinski also manages the Emirates Palace hotel in Abu Dhabi, which Mr Eckhardt said must introduce more flexible pricing packages during the quieter summer months to avoid losing money.

By: Rebecca Bundhun

A world centre of excellence

Since the collapse of Lehman Brothers in the US last year, the world economy has undoubtedly been in a mess and there has been a significant economic contraction that has affected business and consumer confidence.

Dubai, as a successful new financial centre, has inevitably been impacted by the global credit crunch, although somewhat later and not as severely as in Europe or America.

Since the collapse of Lehman Brothers in the US last year, the world economy has undoubtedly been in a mess and there has been a significant economic contraction that has affected business and consumer confidence.

That there are financial problems, as in New York or London, is clear — but there is no doubt that the Dubai government will find the necessary solutions with its international partners. The country has supreme confidence in this.

The last few days have, however, drawn some media distortion from certain journalists who are always willing to ‘invent' a catastrophe, where none exists.

I, myself, have advised many senior management teams in Dubai, and the UAE, for over five years. Having worked all over the globe, in a period spanning twenty years — I am today extremely proud of being associated with the extraordinary achievements of the Dubai government.

Dealing on a professional basis with CEOs and executives throughout UAE's industry and the professions, I am constantly impressed with the level of higher education, and the pride that Emiratis and expatriates take in their achievements.

Crime-free environment

Over the past decade, millions have come to Dubai from every continent on the planet — many via Emirates — to see for themselves a true example, the only example, of 21st century architecture and engineering — all within a crime-free environment. Most visitors are hugely impressed. Dubai will survive — leaner but stronger, and will continue to be an exemplar to the world of how to apply modern technology to provide good living.

The author is a BBC guest-broadcaster and Motivational Speaker. She is CEO of an international stress management and employee wellbeing consultancy based in London. Contact them for proven stress strategies - www.carolespiersgroup.co.uk

Facts: Gettingit right

Some of the world's press, may have jumped on Dubai's financial challenges, and in doing so, have ignored many of the facts — ten of the more obvious being:

- The financial crisis and economic turndown are global phenomena.

- Arguably, both the UAE, and Dubai in particular, have fared no differently than other financial centres — possibly better.

-There is an element of schadenfreude in a proportion of press comment.

- Dubai has proved itself to be a centre of excellence and achievement in many fields.

-Its architectural innovation and engineering ingenuity, are the envy of the world.

- The tallest inhabited building, the Burj Dubai, at over 800 metres, is a monument to the most advanced civil engineering technology in the world and a triumph of unsurpassed architectural know-how.

- Hotel accommodation and hospitality are unrivalled in New York, Paris or London.

- The crime rate in the UAE is, compared to Europe or America, non-existent.

- Emirates airline offers the most advanced flying experience.

- Hospitals and medical services in Dubai are of a world-class standard and attract eminent specialists.

The author is a BBC guest-broadcaster and Motivational Speaker. She is CEO of an international stress management and employee wellbeing consultancy based in London. Contact them for proven stress strategies - www.carolespiersgroup.co.uk

UAE set for tourism boost

Country positioned to tap into newer markets to attract visitors

Dubai: The UAE has the added advantage among the Gulf countries to leverage its existing hotel assets and attractions to attract tourists during the next few years, industry experts said.

"After a successful period over the past five years, the year 2009 is proving to be a tough period for the UAE. The hospitality industry is affected by the slowdown in both the UAE and its key tourism source markets which include the European countries, primarily the United Kingdom.

Another issue is the currency peg of the UAE dirham to a strong dollar, which renders the destination expensive for travellers from the UK," Robert O'Hanlon, Tourism, Hospitality and Leisure Partner at Deloitte Middle East, said

He said hoteliers in the region have been engaging in strategic measures such as induced demand generation efforts by offering value for money packages to tourists.

While it is expected such trends will continue in the near future to attract travellers to the region, tapping newer source markets for tourism is an expected trend given the country's commitment to boost its travel and tourism industry.

Gassan Aridi, CEO of Alpha Tours, said the average fall in visitors globally is about four per cent but in the UAE it is growing about three per cent monthly.

He said the fall in occupancy rates is due to the large inventory of rooms. "The UAE is adding more than 20,000 rooms per year and more will come up. But we still maintain the highest occupancy in Asia-Pacific followed by Hong Kong and Sydney."

According to STRGlobal's report, the UAE reported 53,789 rooms in the total active pipeline, the largest amount of any country in the region, out of which 30,039 rooms are in the ‘in Construction' phase.
 
Saudi Arabia followed with 7,406 rooms in the ‘in construction' phase and 13,469 rooms in the total active pipeline. The country reporting more than 5,000 rooms in the total active pipeline is Qatar with 5,408 rooms.

Marketing campaigns

"We are competing with many top destinations. With strategic marketing campaigns, which are done by all the governments in the UAE, the industry is expected to make a strong rebound next year," Aridi said.

According to STR's report, all the Gulf counties except Saudi Arabia suffered a decline in all three form factors — RevPAR, ADR and occupancy rate.

Saudi Arabia recorded a 4.3 per cent rise in occupancy rates to 47.5 per cent in October compared to 45.5 per cent during the same period last year.

In the UAE the fall in occupancy rates is diminishing. For October, the UAE witnessed a 10 per cent fall in October to 74.4 per cent compared to 82.6 per cent in October 2008.

But the UAE still maintains the highest ADR and RevPAR among the Gulf countries at $261.81 (Dh960.84) and $194.72 respectively.

"Hoteliers in the region have been pursuing strategic measures to counter this short-term slump in demand by offering more value-for-money packages to tourists," Robert said.

Expansion

Quoting World Travel and Tourism Council estimates, he said the travel and tourism economy in the Gulf region is set to expand considerably at an annualised average growth rate of 5.2 per cent during the period 2010-22.

Given such a positive outlook for the region, it is extremely important to recognise the fact that the region has the assets and infrastructure to leverage to attain the predicted growth.

Aridi said: "We expect tourist inflow into the UAE in 2009 to stand at around 700,000 compared to 600,000 in 2008. We expect to maintain 5-10 per cent growth next year.

"The downturn is behind us now; the cruise industry is doing brisk business right now in the UAE with an average growth rate of more than 20 per cent. Big liners are coming to the emirate and more are expected this winter as more conferences and congresses are taking place. More than 60 cruise ships call on the UAE a year."

By Naushad K. Cherrayil,

Source: Hotelier Middle East

Divan Hotels announces first Iraq property

Turkish hotel chain Divan Hotels is set to take on the growing hospitality market in Northern Iraq, after announcing plans to open a five-star hotel in Erbil in 2011.

Divan Erbil, a five-star hotel located in the capital of the Kurdish Autonomous Region, will feature 228 rooms, six meeting rooms, a ballroom, a business centre, and a fitness and spa club.

The property will also house four restaurants, a bar and a nightclub.

Divan Hotel chairman Sarp Turanlıgil said: “We believe that an international-standard chain hotel will meet an unserved need in this market and for that reason we resolved to make this investment.”

The Turkish hotel group is hoping to capitalise on the US $5 billion worth of trade between Turkey and Northern Iraq that took place in the first nine months of 2009, with that figure expected to grow to US $8 billion for the whole year and US $25 billion by 2012.

Divan Hotels general manager Jeop Bakx said: “As a part of the expansion strategy that Divan initiated in 2005, we are continuing to pursue exciting city hotel projects in major cities in Turkey and within our strategic region.

“In both economic and cultural terms Erbil is clearly positioned for dynamic growth and enjoys close business ties with Sulaimaniya, Duhok and Kirkuk.

“The city also boasts both of the region’s international airports, offering direct connections to both Europe and the Middle East and is home to Salahaddin University,” he added.

The property will be owned by Elegan Tourism who have invested US $90 million into the project and will be located in the Erbil Congress and Exhibition Centre.

by Ben Watts