News round-up: hotels

It's been an eventful year in the hotel sector. Andy Williamson looks back over a period that's seen new faces at the head of multinational hotel companies and the gathering pace of hotel companies selling off their property assets.

What did fizzy drinks, power tools and chocolate bars have in common during 2005? Answer:the new chief executives of three of thehotel sector's biggest players have a background in these products.

In the space of just three months, Steven Heyer previously with Coca-Cola, was taken on at Starwood, Hilton hired Ian Carter from DIY giant Black & Decker, and InterContinental Hotels Group appointed Andrew Cosslett from Cadbury Schweppes.

This trio of industry outsiders may appear an odd choice, but their arrival reflects a fundamental shift of focus from managing a property empire to running hotels and this trend was reflected in an extremely busy year for hotel sales.

InterContinental, for example, sold 73 hotels, a total of 12,841 rooms, to the LRG consortium for 1b, but retained the management contracts. Hilton sold 11 properties early in the year to Stardon, with five of them being snapped up by InterContinental's Holiday Inn brand under a franchise deal. Currently, 16 more Hiltons are on the market.

As these hotel companies shift their make-up, the skills needed to run them are also changing. Thus Starwood, Hilton and InterContinental have all opted for new bosses with brand-development and marketing skills. "This policy makes sense in the current climate," says hotel industry consultant Melvin Gold. "But it raises questions. In the longer term some companies may regret their decision to sell assets as it will fundamentally change the size and shape of their organisation, leaving them less able to react to new circumstances."

To underline Starwood's strategic shift to a management- and franchise fee-focused model, the company acquired the 130 hotels of the Le Meridien brand in November.

Chief executive Steven Heyer explained its appeal. "Le Meridien hotels are located in many markets where we don't already have a strong presence. This, coupled with the brand's excellent reputation and its strong European DNA, is what made it such an attractive proposition for us."

The focus at InterContinental is also on expanding its portfolio. "At IHG we're focused on managing and franchising hotels," said new chief executive Andrew Cosslett. The company rounded off the year by announcing its decision to sell off Britvic. This followed its declared strategy of focusing on becoming a pure-play hotel company.

On the home front, the national tourist boards of England, Scotland and Wales, along with the AA and RAC, finally agreed on a unified set of criteria by which to judge and rate hotels. The new system, with inspections starting next month, will divide accommodation into a number of different categories, including hotels, guesthouses, budget and travel accommodation.

To qualify for five stars, hotels will need to offer additional facilities, such as this year's must-have hotel accessory, the spa. An increasing number of hotels upgraded or invested in spa facilities during 2005 although, as guests have grown more discerning, the spa market has diversified and become more competitive.

In future, hotel inspectors will have their work cut out when it comes to labelling hotels. Developers continue to find new gaps in the market to exploit, creating hybrid products such as the luxury budget hotel. This straddles the divide between budget and midmarket and is exemplified by the first EasyHotel, which opened in August 2005 in west London.

Others are set to follow, such as luxury budget groups NiteNite, due to open its first 104-room hotel in 2006 in Birmingham, and Yotel which will open at Gatwick and Heathrow airports in mid-2006.

Another niche product grabbing attention this year was the buy-to-let hotel. Pioneered in the UK by GuestInvest, which opened Guesthouse West in 2004, the idea allows developers to raise funds by selling individual rooms on extended leases. A similar approach is planned for a 395-room County Hall Park Plaza near London's Waterloo station, but the model is unlikely to work in provincial towns due to the lack of sustainable demand.

Overall, 2005 saw UK hotels experience steady growth in rooms yield. Although the upward trend is expected to continue in the near term, rising energy costs, rising property taxes and the increasing cost of licensing all raise challenges.

In London, July was a month of both tragedy and triumph. The London bombings hit performance, but their limited nature and duration underlined the growing resilience of the market to such outrages.

On a happier note, July also saw London selected to host the 2012 Olympics. This is good news for the capital's longer-term outlook and capped a lively year for the hotel sector.

The year in hotels

January

• Fairmont Hotels & Resorts takes over management of London's Savoy hotel.

February

• Andy Cosslett joins InterContinental Hotels Group as chief executive from Cadbury Schweppes.
• Black & Decker's Ian Carter is appointed chief executive of Hilton International Hotels.

March

• InterContinental sells 73 hotels to consortium LRG for £1b.
• Hilton Group sells 11 provincial hotels to Stardon UK for £111m.
• Whitbread puts its four- and five-star Marriott-branded properties on the market for about £1b.

April

• The 400-bedroom Emirates Palace in Abu Dhabi opens at a cost of £2b.

May

• Starwood sells Venice's Danielli hotel to Statuto Group for £134m.

June

• Swallow Hotels, part of the London Inn Group, buys eight hotels from Corus for £32.9m.

July

• 6 July - London wins bid to host 2012 Olympics.
• 7 July - terrorist attacks.
• Hilton Group puts 18 hotels in the UK and Ireland on the market for £300m.

September

• Hurricane Katrina hits Florida coast, devastating New Orleans and its tourist trade.
• Starwood Hotels & Resorts takes over InterContinental Paris, turning it into a Westin.
• Whitbread sells its historic conferencing and banqueting site, the Brewery, for £55m.

October

• Hilton Group and Hilton Hotels Corporation confirm they are in talks.

November

• Starwood completes acquisition of Le Meridien brand after 18 months of negotiations.
• Host Marriott buys 38 Starwood hotels for £2.3b.

December

• John Stauss (left) is announced as Caterer's 23rd Hotelier of the Year 2005
• Hilton International announces plans to reintroduce the Scandic brand to the UK.

Top ten UK openings

• Soho Hotel, London
• Apex City hotel, City of London
• Brown's hotel, London
• The Hempel hotel, London
• Marriott Grosvenor Square, London
• Hotel du Vin, Henley-on-Thames
• Endsleigh hotel, Dartmoor, Devon
• Four Seasons, Hook, Hampshire
• Malmaison, Oxford
• Butlin's hotel, Bognor Regis

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