Hotel must expect more city scrutiny

By Andrew Sangster

The City will be watching hotel companies like a hawk over the next 10 years, according to Simon Johnson, leisure and hotels analyst at investment bank BZW.

Addressing delegates at the Third Annual UK Hotel Industry Conference, held last week at the Brewery in Chiswell Street, London, Mr Johnson said that the stories told by hotel companies floating on the London Stock Exchange in 1996 had all been heard before.

"The City now expects to see the payoff," he added.

Presentations to institutional investors by companies such as Thistle Hotels, Millennium & Copthorne, Principal Hotels and Macdonald Hotels, which sought to obtain a stock market listing in 1996, all claimed that there would be little growth in the supply of new hotel bedrooms. This, they predicted, would ensure that room rates continued to rise.

"At best, this expectation was misplaced optimism," said Mr Johnson.

He highlighted statements by the companies, in prospectuses produced for investors, which claimed that there would be little supply growth. And then he showed how each company in turn claimed it would itself be adding a considerable number of bedrooms to the UK hotel stock.

"Hoteliers will do what they always do in times of rising demand - they will kill the goose that lays the golden egg," claimed Mr Johnson.

John Jarvis, head of Jarvis Hotels, warned that the future would see consolidation among hotel groups. But he added that hotel companies with the right brands, and which were signed up with a global distribution system, would survive. "Sales, marketing and distribution are the only things that matter," he said.

The conference was sponsored by business advisers Arthur Andersen and American Express.