Market reports, business information and market research

This report covers: hotels, guest accommodation, star rating, diamond rating, tourism, conference market, consortia, leisure facilities, boutique hotels, corporate clients, consumer clients, business travellers

Companies covered include: British Hospitality Association, Bass, Priority Club, Posthouse, Inter-Continental, De Vere Group, Village Leisure Hotels, Greens fitness clubs, Friendly Hotels, Granada, Granada Compass, Hilton Group, Scandic, Jarvis Hotels, Macdonald Hotels, Heritage Hotels, Millennium & Copthorne Hotels, Maritim, Nomura, Principal Hotels, Le Meridien, Queens Moat Hotels, Regal Hotel Group, Thistle Hotels, Whitbread Group, Accor, Travelodge, Conrad, Ramada International, Crowne Plaza, Marriott, Formule 1, Novotel

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The UK hotel market was valued at £7.75bn in 2000, having increased by 17 percent since 1996. The strength of the UK and world economies has been a major factor in creating positive trends.

Sales to the corporate market account for the highest proportion of turnover. Revenue is generated not only from room nights but also from the use of facilities (including conference and meeting rooms), with many of the major hotel groups having established separate brands for this market. Business travellers account for an even higher share of sales and this has been recognised by the intense targeting of the market by hoteliers. New room designs and incentive schemes, together with the incorporation of better business facilities, have been among the developments for this market.

The consumer market has suffered intense competition from other European destinations. The relative strength of sterling, together with the greater accessibility of Europe, has impinged on the short-breaks market. In response, many of the major brands are beginning to market themselves more actively for this market.

The largest corporate development in the hotels market in 2000/2001 was the decision taken by Granada PLC to divest itself of its hotel interests, with the exception of the Travelodge brand. Nomura acquired Le Meridien, Macdonald Hotels PLC doubled in size following the takeover of Heritage Hotels, and the Posthouse chain was purchased by Bass PLC to be rebranded as Holiday Inns.

Other corporate activity has included the development of sale-and-leaseback activity — hoteliers are selling off their owned properties and leasing them back under management contracts to continue operating under their own brands. This has been an attractive proposition for banks and investors looking for better returns than are currently available elsewhere in the financial markets, while also loosening up equity for the hotel operators. Groups undertaking this have included Hilton Group PLC and Nomura.

The impact of the foot-and-mouth crisis, together with a dip in the stock market and world economy in 2001, will have a negative impact on the hotel market in the UK. However, performance will stabilise in the medium term.

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KN70021 KEY NOTE HOTELS AUGUST 2001