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									                                                      HOTEL SNAPSHOT
                                                    UK ECONOMY & HOTEL MARKET – HALF YEAR TO 31 DEC 2008



  AN OVERVIEW OF THE                            ECONOMY
   UK HOTEL MARKET                              •    The Bank rate was reduced substantially during the period, finishing the year at
                                                     2% following several reductions, whilst inflation increased in the early part of the
  HO T STA TS BRIE FING DA TA                        period however finished at 4.1%.
        UK C H AI N H OT E L S                  •    Despite the media continuing to exacerbate economic concerns there has been an
    P E R F O R MA N CE R E P O R T                  increase in the number of potential hotel buyers looking to re-invest into the
 (12 MONTH PERIOD ENDING DECEMBER 2008)
                                                     purchase of hotels, with bricks and mortar being seen as a safer haven than many
                                                     lending institutions.
  The 12 months to December 2008
                                                •    During 2008 the previously rarely used term of LIBOR rate (3 month) became
            UK Total     London Provincial           commonly used. Banks offered funding based on the inter-bank lending rate which
Occ %          74.1         81.1         70.2        reached a height of 6.3%, dropping in the final quarter to 2.77%.
ARR           90.00      117.31         72.91   •    The FTSE-100 recorded its worst performance in its 24-year history in 2008, falling
RevPAR        66.65       95.13         51.21        31%. The FTSE-250, meanwhile, lost 40% of its value last year. HBOS was the
TrevPAR     112.87       137.14         99.71        worst performer in the blue chip index, plunging more than 90% as a result of the
Payroll %      28.6         24.8         31.3        banking crisis.
IBFC PAR      43.46       63.69         32.49   •    The initial concerns, particularly over utility costs, have lessened with the cost of
                                                     oil reducing from a height of $147 per barrel down to below $50 a barrel during the
                                                     final quarter of 2008.
  The 12 months to December 2007
                                                •    A fundamental difference between the current downturn and that of the early 1990s
            UK Total     London Provincial
                                                     is the concern over the current availability of credit. However in the previous period
Occ %          75.5         82.1         71.9        inflation ranged from 7.7% to 10.9% whilst the base rate reached as high as 13.88%.
ARR           88.39      113.68         72.63

                                                HOTEL MARKET
RevPAR        66.73       93.36         52.21
TrevPAR     114.03       135.66        102.23
Payroll %      28.2         24.6         30.9   •    Due particularly to nervousness in the market place and the lack of available
IBFC PAR      45.17       63.79         35.02
                                                     bank funds, transactional activity showed a marked reduction in the period.
                                                •    Although there have been obvious signs of concern, unlike the early 1990s there
                                                     was limited evidence of individual hotels being placed into administration.
                    Movement for the            •    It is anticipated that impending redundancies in the banking and financial services
               12 months to December                 sector will result in increased demand for hotels and public houses from parties
            UK Total     London Provincial           interested in running their own business in a sector that has remained relatively
Occ %           -1.4         -1.0        -1.7        resilient when compared with other property related businesses. The downturn in the
ARR            1.8%         3.2%        0.4%         early 1990s resulted in many former middle management employees entering the
RevPAR        -0.1%         1.9%        -1.9%
                                                     sector for the first time.
TrevPAR       -1.0%         1.1%        -2.5%   •    Although there has been a slow down in the UK economy the hotel sector continues
Payroll %        0.3          0.3         0.5
                                                     to remain relatively robust with many hotels holding their trading performance.
IBFC PAR      -3.8%        -0.2%        -7.2%   •    With a weakening pound against the Euro and the anticipated change in UK
                                                     residents’ lifestyle, it is anticipated that there will be an increase in the amount of
                                                     leisure driven hotel business in the period ahead. As an example of this, Travelodge
                                                     reports more than half of British holidaymakers plan to stay in the UK this summer,
  Source: TRI Hospitality Consulting                 with Blackpool and the West Country among the favourites. Other prime UK leisure
                                                     resorts are anticipating strong demand for domestic holidays both from the UK and
  Glossary of terms:                                 overseas markets.
  Revpar – Revenue Per Available Room
  IBFC – Average daily income
         before fixed charges



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    COLLIERS ROBERT BARRY          UK ECONOMY & HOTEL MARKET – HALF YEAR REVIEW 2008


                               CORPORATE NEWS
                               •   Hotel du Vin to expand further in Scotland
                                   Hotel du Vin, one of the boutique hotel chains owned by Marylebone Warwick
                                   Balfour, is set to expand in Scotland. Fife Council's North East Fife area committee
                                   is expected to approve an application for the redevelopment and extension of
                                   St Andrews Golf Hotel in Fife as a 40-bedroom Hotel du Vin. Hotel du Vin opened
                                   in Aberdeen and in Edinburgh during the period. Hotel du Vin and sister company
                                   Malmaison are 82.5% owned by Marylebone Warwick Balfour as part of its hotels
                                   division.
                               •   Whitbread continue to perform
                                   Whitbread said it remained on course to add 4,000 rooms to its budget Premier Inn
                                   hotel chain after announcing a 7% revenue rise in its half-year trading update.
                                   The chain opened 14 hotels during the period and recently added 21 sites to Premier
                                   Inn, which opened its 500th British hotel in November after swapping 44 pubs with
                                   Mitchells & Butlers. Whitbread said it would spend £18m to convert the hotels by
                                   early 2009.
                                   Whitbread has cut its capital expenditure for next year by £100m as it takes a more
                                   prudent approach to its expansion.
                                   The group, which owns the Premier Inn budget hotel chain, Costa coffee shops and
                                   the Beefeater pub restaurant group, said that the decision to cut capex from £300m
                                   in 2008 to £200m in 2009 followed a review of its future development plans.
                               •   Travelodge continue to expand
                                   Conversions included two former Swallow hotels which were added to the portfolio
                                   in Edinburgh and Scarborough. In Edinburgh, the 64 bedroom former Learmonth
                                   reopened following conversion and rebranding work just before Hogmanay whilst
                                   in Scarborough work is being carried out and the former St Nicholas Hotel will
                                   re-open as a 140 bed Travelodge in May 2009.
                                   Travelodge also worked with a Danish fund, Habro Properties, to acquire the former
                                   Best Western Berkeley Hotel on Worthing seafront, and this re-opened in November
                                   following a full refurbishment to deliver 90 rooms.
                                   Two of the more interesting new build schemes were at Uxbridge and Heathrow
                                   Central, both being full modular construction projects – Heathrow with 307 beds
                                   opened at the end of 2008 being the largest totally new build Travelodge
                                   development in the UK which complements the existing 297 bed unit at T5.
                                   In total Travelodge opened 37 new UK hotels during 2008 adding in excess of
                                   3600 rooms.
                               •   Accor pulls out stops on multi-brands
                                   Accor has 34 hotels in its UK pipeline for 2009, many of them new brands in this
                                   market. They include Suitehotel, which has one scheme in the pipeline, and Adagio,
                                   a city centre apart-hotel concept in a joint venture with Pierre & Vacances. The
                                   French hotel company is confident of launching the Pullman top-end brand in the
                                   not-too-distant future. It is in talks over possible hotels in London, Birmingham and
                                   Manchester and wants to add more Sofitels in London. The All Seasons budget
                                   brand should arrive in the UK shortly from Australia. Accor believes it can develop
                                   more than 150 Etap super-budget hotels in the UK. They have also remained active
                                   in their expansion of the more familiar brands throughout the UK including the
                                   Sofitel London Heathrow Terminal 5, Novotel London Paddington, Mercure
                                   Letchworth Hall Hotel (opening on a franchise basis) whilst Etaps in Bradford,
                                   Leicester, Birmingham International Airport, Portsmouth and London Hounslow
                                   have come on stream.




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        COLLIERS ROBERT BARRY       UK ECONOMY & HOTEL MARKET – HALF YEAR REVIEW 2008


                                CORPORATE NEWS
                                •   Kew Green Hotels
                                    Despite the challenge of securing bank funding, hotel group Kew Green Hotels
                                    completed a £140m re-financing exercise.
                                    New financing was secured through a syndicate of banks comprising Bank of
                                    Scotland Integrated Finance, Barclays and Lloyds TSB.
                                    The company has replaced its existing facilities and secured additional funding to
                                    accelerate its refurbishment and extension construction programme to meet its new
                                    five-year business plan. Kew Green Hotels owns and operates 20 branded hotels in
                                    the UK. The hotels are operated under a variety of franchises from Intercontinental
                                    Hotels, Wyndham Worldwide and Marriott International.
                                    The company is currently building a new 218 bedroom Courtyard by Marriott at
                                    Gatwick Airport which is due to open in March 2009, and has just been awarded a
                                    Management Contract to run the Goodwood Park hotel in East Sussex.
                                    Kew Green was formed in 2001 by founding directors Jeremy Richardson and Paul
                                    Johnson and is backed by Moorfield Group and HBOS.
                                •   Rezidor Hotel Group
                                    Rezidor's midmarket Park Inn brand is set to continue its UK growth with five hotel
                                    openings in the UK in 2009. After its inception, Park Inn grew from 0 to 50 hotels
                                    in operation or under development in the UK within a period of 5 years. Radisson,
                                    Rezidor's upscale brand, will reach the 3,000 rooms mark in the UK with the
                                    opening of the Radisson Bristol and the Radisson Cardiff in mid 2009. The Rezidor
                                    Hotel Group is planning to open their first Hotel Missoni in Edinburgh in the first
                                    half of 2009. Rezidor holds a worldwide licence agreement with the iconic global
                                    fashion brand. The property will be located on the historic Royal Mile and feature
                                    136 rooms and unique food and beverage concepts such as Cucina Missoni and
                                    Bar Missoni.
                                •   Hotel franchising on the increase
                                    There has been a marked increase in hoteliers still keen to run their hotels however
                                    with the comfort of an international badge and associated central reservation system.
                                    Although this comes at an additional cost, certain operators have chosen to invest
                                    in the franchise model.
                                    An example of this has been Hilton which entered into a franchise license agreement
                                    with Sanguine Hospitality, which will see the Hoole Hall Country Club and Hotel
                                    in Chester become a Doubletree by Hilton in early 2009. The property has 110 guest
                                    rooms, meeting space, a ballroom, restaurant and bar. Significant investment is
                                    expected to add a spa to its already popular health club and pool.
                                    Several UK hotel corporates including Rezidor and Accor are using the franchise
                                    route to satisfy their own growth targets, particularly where a non standardised brand
                                    is applicable.
                                •   Starwood seeks £90m for Le Méridien Piccadilly
                                    Starwood Hotels & Resorts sought offers of £90m for its Grade II-listed hotel
                                    Le Méridien Piccadilly, W1.
                                    The 267-bedroom hotel will be sold subject to a management contract
                                    with Starwood Hotels & Resorts and will continue to operate as Le Méridien.
                                    Le Méridien Piccadilly also comprises a restaurant, two bars, two lounges, a beauty
                                    salon, spa, fitness centre and meetings facilities. A room renovation programme is
                                    currently being proposed.




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    COLLIERS ROBERT BARRY          UK ECONOMY & HOTEL MARKET – HALF YEAR REVIEW 2008


                               •   Indigo hotel brand
                                   InterContinental Hotel Group are bringing their new hotel brand – Indigo – to the
                                   UK. Indigo is filling out the InterContinental portfolio, which already offers mid to
                                   upper scale accommodation; this new brand will sit between these offerings as a
                                   lifestyle boutique hotel. The hotel is currently being marketed to business travellers
                                   and independent leisure tourists who are looking for a varied hotel experience – one
                                   that is unique and stylish, aimed to refresh and rejuvenate visitors.
                                   InterContinental are in the process of rolling the Indigo brand out across Europe,
                                   with the first due to open in London in early 2009.
                               •   GuestInvest goes into administration
                                   Buy-to-let hotel group GuestInvest went into administration.
                                   Deloitte were appointed to handle the administration of the HBOS-backed business.
                                   GuestInvest was founded in 2003 and gave individuals the chance to buy a hotel
                                   room, stay there for free for up to 52 nights a year and receive a rental income from
                                   its use during the rest of the time.
                                   Blakes Hotel, which GuestInvest bought during 2007 for £34m, is operating outside
                                   the administration.
                                   It is believed that although a substantial number of offers were received to date this
                                   has not resulted in any transactional activity.
                               •   Marriott Hotels being marketed
                                   Private investors Igal Ahouvi and Derek Quinlan sounded out buyers for their £1.1bn
                                   Marriott hotels portfolio during the period.
                                   The pair, who bought the 47-strong portfolio of hotels from the Royal Bank of
                                   Scotland in 2007, have been trying to gather interest in a sale of all or part of the
                                   portfolio since July.
                               •   Malmaison and Hotel du Vin
                                   Marylebone Warwick Balfour (MWB) started to sound out potential purchasers of
                                   Malmaison and Hotel du Vin, its boutique hotel chains. Bank of America is
                                   canvassing interest in the two brands.
                                   Both brands have expanded rapidly since they were taken off the market in
                                   September last year because of the credit crunch. With openings in the pipeline,
                                   MWB had a target of 14 Malmaison and 18 Hotel du Vin properties by 2010.
                               •   W Hotels checks in to London and Manchester
                                   US-based Starwood Hotels and Resorts has confirmed plans to open two hotels in
                                   London and Manchester under its W Hotels brand.
                                   The London 194-room hotel will open on the site of the former Swiss Centre
                                   building, which is being developed by McAleer and Rushe.
                                   In Manchester, the brand will operate a 160-room hotel at West Properties’ Origin
                                   scheme in Manchester city centre.
                                   Starwood also owns the Sheraton, Le Méridien, St Regis, Westin and The Luxury
                                   Collection brands, which already operate in the UK.
                               •   InterContinental Hotels Group
                                   One of Malaysia’s richest men has taken a 3% stake in InterContinental Hotels
                                   Group adding to a portfolio that includes a 25% holding in gaming and bingo hall
                                   operator Rank. IHG’s shares rose 6.3% on news that Quek Leng Chan has built a
                                   £51m stake in the hotel group. He already owns the Guoman Hotels, formerly
                                   known as Thistle.




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        COLLIERS ROBERT BARRY       UK ECONOMY & HOTEL MARKET – HALF YEAR REVIEW 2008


                                TRANSACTIONAL MATTERS
                                •   Energy Performance Certificates
                                    Following the introduction of the HIPs for the residential market, EPCs are now
                                    firmly on the transactional agenda. From 4th January 2009, a vendor must have an
                                    EPC before the hotel property can be put on the open market.
                                •   Bespoke Hotels take a cluster of hotels formerly run by Folio Hotels
                                    The Folio Hotels Group, one of the UK's largest independent operators of
                                    three-star and four-star hotels with 36 hotels throughout the UK, went into
                                    administration following a sharp decline in trading, placing pressure on fulfilling
                                    rental payments that were agreed at the height of the market. According to a report
                                    Folio had been in talks to secure rent holidays on some of its hotels ,however this
                                    failed to come to a successful conclusion.
                                    As a result of the marketing by the administrators MCR 13 of the hotels were taken
                                    over by Bespoke Hotels on management contracts as opposed to leases.
                                •   Waterloo hotel site sold
                                    Ebury Securities has sold St George's House in Waterloo, SE1, to private clients of
                                    Legat Corbishley for around £13.45m. The site has consent for a 284-bedroom
                                    Travelodge and 14,000 sq ft of offices.
                                •   Leisurecorp checks into Ayrshire golf resort
                                    US-based Starwood Hotels & Resorts completed the sale of the Westin Turnberry
                                    golf resort in Ayrshire to Leisurecorp for £55m. The Dubai sovereign wealth fund
                                    have closed the Turnberry for a renovation programme of in excess of £10m.
                                    The historic golf course will reopen in June 2009 ahead of next year’s
                                    Open Championship. Turnberry comprises a 219-bedroom hotel, 12 lodges and
                                    nine cottages as well as the famous golf course. The resort also has 300 acres of
                                    undeveloped land. It is thought that Starwood will be retained to manage the resort.
                                •   Hotelier donates properties to the National Trust
                                    One way of taking ownership of a group of hotels is to gratefully receive them as a
                                    donation. Hotelier Richard Broyd has given three historic country houses to the
                                    National Trust. They are Middlethorpe Hall near York, Hartwell House near
                                    Aylesbury, Buckinghamshire and Bodysgallen Hall in North Wales. The transfer of
                                    the freeholds is the biggest single donation to the National Trust since the Second
                                    World War.
                                •   IRE buys Aberdeen Patio
                                    Investco Real Estate bought the Patio Hotel in Aberdeen. The price was rumoured
                                    to be £30m-£40m. The 4 star hotel is strategically well located being close to
                                    Aberdeen city centre and trades with 168 bedrooms.
                                •   Tophams Belgravia Hotel sold without a whisper
                                    The newly refurbished 48 bedroom boutique hotel on Ebury Street, SW1 was sold
                                    in a highly confidential fashion by Colliers Robert Barry’s London hotels team.
                                    The sale of a long leasehold interest (freeholder Grosvenor Estate) was agreed in an
                                    off-market deal off an asking price of £10m.
                                •   Premier Inn investment sale
                                    There has been a shortage of investment driven hotel sales during the period;
                                    however on the back of the success of the Premier Inn brand, Colliers, on the
                                    instructions of St Modwen, sold the Premier Inn hotel situated at the Trentham
                                    Gardens Estate in Staffordshire. The regeneration specialist sold the 119 bedroom
                                    hotel's 150-year ground lease to Danish firm KS Habro Stoke for around £10m.
                                    Trentham Gardens was formerly part of the Duke of Sutherland’s estate and has
                                    been transformed into a £100m tourist and leisure destination over the past four
                                    years. It now attracts 3m visitors annually.




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    COLLIERS ROBERT BARRY                     UK ECONOMY & HOTEL MARKET – HALF YEAR REVIEW 2008


CONTACTS:                                 •   Greene King make Hotel Disposals
                                              The company took the decision to rationalise their hotel portfolio resulting in sales
                                              which included the Close in Tetbury, Gloucestershire - the charming manor house
UK Corporate                                  hotel located in the middle of this Cotswold market town was marketed off an asking
Julian Troup                                  price of offers over £2m by Colliers Robert Barry. The clients achieved their price
julian.troup@colliersrobertbarry.co.uk        expectations on the back of competitive bidding.
Tel: 07825 891233
                                          •   London Crowne Plaza hotel bought for £85m
                                              The 203-room hotel, which is managed by InterContinental Hotels Group (IHG),
                                              was acquired by Marg Galadari, a wealthy businessman from Dubai,
Colliers International                        for around £85m.
John Sheppard                             •   Moorfield completes £30m sale and leaseback with Mitchells & Butlers
john.sheppard@colliers.com
                                              Moorfield Group has carried out a £30m sale and leaseback with leisure group
Tel: 020 7344 6626
                                              Mitchells & Butlers for its 95,000 sq ft head office and adjoining 120-room hotel.
                                              Moorfield has bought the buildings for its Moorfield Real Estate Fund II which
                                              raised £400m of private equity on closing at the end of 2007.
Valuation and Advisory
David Hossack
                                              The hotel and office are on Fleet Street in Birmingham and the hotel is branded an
david.hossack@colliersrobertbarry.co.uk       Express by Holiday Inn. Both have been leased back to Mitchells & Butlers.
Tel: 07919 015899                             Marc Gilbard, chief executive of Moorfield Group, said: ‘We are delighted to have
                                              reached agreement on this acquisition. High quality buildings in a strong location,
                                              let to a sound covenant, make this a compelling investment opportunity for us.’
Head of Hotels                                MREF II is backed principally by US endowment and foundation funds and
Chris Moore
                                              European pension funds.
chris.moore@colliersrobertbarry.co.uk
Tel: 0161 831 3337                            Colliers CRE acted for Mitchells & Butlers.




                                          Disclaimer - These notes contain a summary only of certain aspects of the subject matter.
                                          They have been prepared for the purposes of the newsletter and are not a substitute for legal
                                          advice on specific facts. Great care has been taken in their preparation but no responsibility is
                                          accepted for any inaccuracies or omissions.                                   FEBRUARY 2009



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