KN70022

KEY NOTE HOTELS : SEPTEMBER 2002

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This report covers: hotels, guest accommodation, star rating, diamond rating, tourism, conference market, consortia, leisure facilities, boutique hotels, corporate clients, consumer clients, business travellers, one-star, two-star, three-star, four-star, five-star, hotels, internet bookings, budget hotel developments, tourism trends, room occupancy,

Companies covered include: CHE Group, Compass Group, Corus & Regal Hotels, De Vere Group, Hilton, Jarvis Hotels, MacDonald Hotels, Millennium & Copthorne, Nomura Bank International, Queens Moat Houses, Scottish & Newcastle, Six Continents, Thistle Hotels, Whitbread, Accor, Hanover International, Menzies Hotels,

EXECUTIVE SUMMARY

The UK hotel market generated an estimated turnover of £10.41bn in 2001, an increase of 10 percent since 1997. The market can be divided into corporate and consumer sectors on the basis of clientele, with the former accounting for the bulk of revenues through conferences and other corporate travel.

In 2001, the hotel market was hit by foot and mouth disease. This particularly affected hotels in rural districts. The terrorist attacks on the US on 11th September 2001 were an even greater blow, depressing international travel and causing a sharp fall in tourism receipts. The subsequent downturn in the global economy has been further cause for concern. In response to these factors, many hotel companies have frozen or reduced expenditure programmes and cut back on investment. There has also been competition in the leisure market, with hotels seeking to compensate for the fall in corporate expenditure by raising consumer revenue. Companies have also focused on other areas, such as the smaller conference sector.

The late 1990s and the early part of the new millennium were marked by extensive merger and acquisition activity in the hotels market. This was headlined by the sale of chains such as Heritage, Posthouse, Principle and Swallow, which are all now absorbed into larger groups. Brand building was at the core of many of these moves. The budget hotel sector continues to see the largest increase in room numbers, although the rate of growth has slowed. For the most part, the major players in the market are identifiable through their international brand portfolio, although two of the leading budget brands are owned by groups with core businesses in catering and brewing.

The future will see continued company activity, with the offer for sale of the Travelodge budget hotel chain likely to headline activity in the market in late 2002. In addition, companies will continue to look for opportunities for sale and leaseback deals to release capital. Revenues in the market will continue to be affected by the slowdown in the global economy. However, some recovery should be evident in 2003.

TABLE OF CONTENTS

Text © 2002 Key Note

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