Hotel expansions hit financial wall

23 October 2008 by
Hotel expansions hit financial wall

The credit crunch is likely to stall the development plans of some of the largest players in the global hotel industry, senior figures have admitted.

InterContinental Hotels Group (IHG) last week conceded for the first time that its pipeline of developments will be affected by the global economic downturn.

IHG was aiming to open a further 1,788 high-end hotels in the next four years, but chief executive Andy Cosslett said that some of its openings could now be delayed by "up to a few months".

He added: "We could slow down in some projects while others might disappear."

The statement came after Marriott announced a 28% fall in third-quarter profit and the likelihood of a slowing development pipeline.

Chief financial officer Arne Sorensen admitted that the financial crisis would prompt owners or franchisees to delay or cancel projects, leading to write-offs. "We doubt our pipelines will remain at recent strong] levels for long," he said.

Michael Wale, senior vice-president and director of operations for north-west Europe at Starwood Hotels & Resorts, this week admitted that its pipeline will also be affected.

He told Caterer: "Our development strategy is to grow by 600 hotels, to have a total of 1,500 properties by 2013.

"However, like all businesses in the current climate, we have to acknowledge that there may be some impact on our development pipeline. Nevertheless, these 600 hotels are actual signed deals with experienced developer partners, so we hope that any impact will be minimal."

Some parts of the industry remain bullish, however, with both Hilton and luxury hotel group Jumeirah insisting that their plans are on track.

Jumeirah said that its intention to add 30 properties by 2012 had not been affected, because very rich people were still travelling and staying at top-end hotels.

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By Gemma Sharkey

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