Economy is on the up but hospitality remains cautious

Operators across hospitality say that they have noticed the first indications of an economic upturn, but many remain cautious about the long-term outlook.

Recruitment consultancy Berkeley Scott was the first to say last week that there were clear signs of an upswing in trading. The company, which acts as an advertising agency for many of its recruitment clients, reported that its advertising revenues had jumped 50% since a low point in April of this year.

Berkeley Scott chief executive Roddy Watt also claimed that the number of new management assignments handled by the company grew by 44% in the six weeks to 7 July, compared with the previous six weeks.

"The past three years have arguably been the toughest the industry has experienced," he said. "But our crystal ball is now indicating that we are through the worst, the economic cycle has bottomed, and the remainder of this year will see a gradually improving picture for most sectors of the industry."

He said that Berkeley Scott had ended the four-and-a-half-day working week it placed staff on at the start of the Iraq war, and it planned to increase its team to meet increasing demand in the recruitment marketplace.

Watt's views were given a cautious welcome by others in the industry.

Melvin Gold, managing director of PKF Hotel Consultancy Services, said trading conditions were "less bad", but he pointed out that April had been the worst month for a long time and so the situation was bound to improve.

He also believed that further repercussions from the war were still possible. "It hasn't happened yet, but if a major terrorism incident did occur, it would have a serious impact on the hotel and tourism industry," he said.

John Cotter, sales and marketing director of the 16-strong Marston Hotels group, agreed that there was more confidence out there. "People have not seen the huge crash many feared; the shock of the Iraq war is dying away; and Sars seems to have finished."

He said that London was still depressed, however, and that the "culture of doom and gloom" had spawned crazy deals and discounts, which had affected the whole of the South.

A spokeswoman for the Four Seasons Hotel London on Park Lane said that, although April and May had seen a substantial drop in occupancy, the hotel had not discounted.

"This does pay off in the end," she said. "How can you provide a five-star service at a certain price and then prove that suddenly you can provide the same service at a lower price? Your customers lose confidence in you; they feel short-changed." She added that occupancy for June and July was back to normal levels.

Despite sharing the optimism, Jonathan Raggett, managing director of Red Carnation Hotels, sounded a note of realism. "The central reservations office for our five London hotels was averaging 300 calls a day in April and May; over the past four weeks it has had an average of 475 calls a day. Business is ahead of last year, but it is not back to pre-11 September levels yet."

• Additional reporting by Chris Druce, Angela Frewin and Jessica Gunn

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Source: Caterer & Hotelkeeper magazine, 24 - 30 July 2003