Branded chains push for Europe takeovers
THE wave of takeovers in the European hotel market will gather pace over the next few years, driven by large companies who want to expand their brands, the International Hotel Investment Forum was told last week.
Sir Ian Prosser, chairman and chief executive of Bass, whose hotels include Holiday Inn and Inter-Continental, told the conference in Berlin that further acquisitions were inevitable.
"Even Holiday Inn, the biggest hotel brand in the world, has just 3% of total revenues," he said.
Prosser said that branded hotels were able to pull in more business because they could invest in computerised global reservation systems and because guests were reassured by familiar brand names.
"Guests travel more widely every year and they want to feel secure in what they know will be a strange environment to them," he said.
Groups also needed to grow larger to be able to afford the costs of marketing and benefit from other economies of scale. As well as takeovers, Prosser predicted there would be an increasing trend towards "alliances" between hotel companies to share such costs.
Investors in hotel shares are also increasingly looking to branded chains, the conference heard.
Paul Slattery, director of corporate finance at Dresdner Kleinwort Benson, said some investors were now only interested in the larger companies because it takes too much time and effort to follow the performance of smaller firms. This will make it harder for the smaller companies to raise capital to expand.
But branded hotels are unlikely to dominate the European market as they do the US market, some speakers argued. In the USA 69% of hotels are branded but in Europe the figure is just 18%.
Said Rob Parsons, chief financial officer of Host Marriott: "It will never get to the same level. The market is different, it's more diverse and there are more cultural differences."
Christian Windfuhr, president of Mîvenpick hotels, agreed. "There are very good independent hotel companies in Europe that will thrive on the local market. For example, 80% of business in German hotels is from Germany."
Even Bass's Prosser conceded: "There are certain hotels with their own unique location and unique styles that, frankly, are not suitable to be part of a branded chain. I'm sure they will survive."
l Bass has decided not to develop its Forum chain, acquired as part of its takeover of Inter-Continental. "We are going to look, with the owners, at the opportunities to convert to our existing brands, rather than develop the Forum brand," said Bass chairman Sir Ian Prosser. by David Shrimpton
