Poor trading allows hotels to get rid of second-rate staff

The repercussions of 11 September and the economic downturn have provided hotels with a perfect excuse to get rid of problem staff, a leading consultant said this week.

Chris Rouse, director of Insignia Hotel Partners, said that because business appeared to be so bad, now was a good time to re-evaluate assets, downgrade profit forecasts, strengthen balance sheets, and lay off underachieving employees.

He said: "The industry has an enormous fig leaf. If I were a chief executive, I'd take the attitude that there's little I can do about present trading conditions, so I'll pile on all the agony now, and make myself look like a genius next year."

Rouse said City analysts who did not expect a recovery until 2004 had underestimated different effects in different places. He predicted that European resorts would do well and said the effect of 11 September in the UK outside London was "negligible".

BAA statistics show that while North Atlantic air traffic dropped by 38% after the 11th, there was strong growth to European destinations from Stansted (+11.4%), Glasgow (+6.9%) and Edinburgh (+13.4%) buoyed by low-cost carriers.

Low debt levels and interest rates and the experience of the early 1990s recession meant that hotel managers were in a strong position to ride out the downturn. Rouse said: "I can't see anyone failing."

Morgan Stanley's annual forecast, entitled Not Safe, Not Cheap, said: "For the first time the companies have not really cared what our new forecasts are."

Rouse agreed: "To unduly worry about the state of your share price now would be a lot of wasted energy." But he believed that hotel stock continued to be undervalued.

by Ben Walker