Iraq conflict ‘will not have Gulf War impact'

19 March 2003 by
Iraq conflict ‘will not have Gulf War impact'

Looking at the impact of the Gulf War, in order to predict how the hotel industry will cope with another war against Iraq is not a fair comparison, according to pundits at last week's Hotel Investment Forum in Berlin, organised by consultant Insignia.

"In the past, crises like the Gulf War have caused problems, but consumer confidence causes greater problems," said Rosemary Radcliffe, chief economic adviser at PricewaterhouseCoopers. "The threat of war has brought hotel bookings down across Europe by 20%."

But it doesn't pay to draw too many comparisons with the last Gulf War. That was a short conflict amid an economic upturn; this time the global economy was already in decline before the events of 11 September.

Jean-Claude Baumgarten, president of the World Travel & Tourism Council, presented delegates with two scenarios.

The first was a prolonged war, resulting in the loss of three million jobs in the global tourism industry and a 1.3% fall in income next year. He said: "In the event this worst-case scenario takes place, we will look for immediate and decisive action from governments to protect and secure this vital world industry."

But a quick, conclusive outcome, he estimated, would result in 1.1% growth in 2003 and a further 4.5% growth each year over the next decade.

There are other differences between now and the 1990s that could see hoteliers in a stronger position in the event of a short war. "In spite of short-term challenges," said Mark Finnie, an analyst at Deutsche Bank, "there is still a lot of capital around that is looking to find a home in hotel properties. Demand remains comfortable, debt is cheap and there is no material financial distress."

Another major difference is the explosion in the numbers of budget hotels and cheaper flights across Europe. And those operating in the budget sectors show no signs of putting plans on ice.

Both Accor, which has the Ibis and Formule 1 brands, and Six Continents, with its Express by Holiday Inn brand, have plans to expand, albeit through the lower-risk option of franchising.

"People think that the UK is saturated, but it's not," said Shane Harris, vice-president of development and investment in Europe for Six Continents. "The market is ready for growth and has the ability. We need to move quickly in Germany and Spain, where we want to have around 80 to 100 hotels."

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