Table of Contents
Introduction
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- Definitions of key terms
Data Sources
Overview
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- HNWI financial wealth to grow
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- Figure 1: Growth in the numbers and financial wealth of high net worth individuals, 1995-2005
- North America
- Japan
- Europe
- Strong contenders
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- Figure 2: Countries with the fastest growth in the number of high net worth individuals, 2004-05
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- Figure 3: HNWI financial wealth forecast, by region, 2003-10
- What could upset the applecart?
- Rising interest rates spell higher risk
- Air travel restrictions a long-term risk
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- Figure 4: GDP, air travel and hotel demand in the US, 1987-2003
- Long-haul flights will be reserved for an elite
- The impact of an ageing population
- A steady rather than spectacular future
Branding
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- Too strict or too loose…?
- One-brand chains put all their eggs in one basket
- Intangible service features define the upscale brand
- Architectural uniformity defines the budget brand
- Low-cost airlines are the business model for budget hotels
- Express by Holiday Inn is one of the most standardised
- Multi-brand chains target a broad market
- Brand portfolios
- InterContinental Hotel Group (IHG)
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- Figure 5: IHG brand positioning, 2006
- Figure 6: IHG brands’ positioning and pipeline, September 2006
- Branding strategy
- Wyndham Worldwide is targeting international expansion
- A third more rooms by 2010
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- Figure 7: Wyndham brand positioning vis à vis the competition in the US market, 2006
- Marriott has broad hotel market coverage
- Select service the way forward
- Only offer what guests want and need
- Self-service lowers prices
- Open lobbies encourage guests to do their own thing
- Mini-markets instead of mini-bars
- Lower moderate-price select-service categories
- New SpringHill Suites rollout
- Collaboration with franchisees
- Four extended-stay products
- Hilton reunited
- Hilton’s brands cover all markets except the economy segment
- Hilton and Hampton account for 60% of HHC’s branded rooms
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- Figure 8: Hilton hotels and rooms, by brand, September 2006
- Hilton targeting around 25% growth in branded rooms by 2009
- Hilton to take its limited-service brands abroad
- Hilton Garden Inn has already come to Europe
- Hilton has sold Scandic
- Choice covers the range from economy to lower upscale
- Suburban Extended Stay positions Choice as economy extended stay
- Accor has two categories of brands
- Mercure’s easy format has favoured rapid expansion
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- Figure 9: Accor’s brand positioning 2006 and 2010
- A non-standardised brand for the economy segment
- Red Roof Inns under review
- Sofitel a weak link in the chain?
- ‘Wine & Women’ or ‘Women & Wine’?
- Starwood concentrated in upscale and luxury
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- Figure 10: Starwood hotels and rooms, by brand, 2006
- Stepping up its rate of expansion
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- Figure 11: Starwood’s pipeline, 2006-09
- The first smoke-free hotel chain
- Preserving Le Méridien brand
- W Hotels – Starwood’s boutique hotel brand
- W is taking the advice of celebrity chefs
- Whatever, Whenever and Whappenings
- Eight hotels in the pipeline
- Some Ws have Bliss spas
- Carlson Hotels Worldwide
- Carlson’s hotel brands cover the range from upper economy to luxury
- Regent is finally getting off the ground
- North America
- Asia-Pacific
- Europe
- The Middle East
- Future Perspective: new brands for new lifestyles
- Choice is entering the upscale all-suites segment
- Some 43 franchises already on the way
- Hilton: the Waldorf-Astoria Collection
- Hyatt’s brand renewal
- Targeting Generation X
- Conversion will cost US$220 million
- Entering the extended-stay segment too
- IHG’s Hotel Indigo – a lifestyle boutique hotel brand
- Sol Meliá
- Music, art and cuisine
- Key execs come from Hard Rock & W Hotels
- Rande Gerber bars and restaurants
- Álvaro Sans collaborated with Keith Hobbs
- The first hotel has opened in Madrid
- Two new Starwood brands: aloft and element
- David Rockwell as design consultant
- aloft already exists in the virtual world
- Developers keen
- 500 alofts by 2012?
- element, the latest Starwood brand
- element will offer ’smart space’ living
- À la carte breakfasts and barbecues
- Target customers are well-to-do business travellers
- element hotels will cost US$110,000-130,000 per key to build
- Also targeting 500 elements worldwide
- Crillon and ‘1’ Hotel
- Crillon
- €1.5 billion to spend on hotels
- Major capitals and unique resorts are being targeted
- ‘1’ Hotel & Residences is designed for eco-appeal
- ‘1’ Hotels to be built according to LEED standards
- A list of branding experts are guiding the process
- Key operations will be outsourced to industry leaders
- 15 hotels over the next two years
- Big chains leverage their brands
- Timeshare and ‘fractionals’
- The big chains have a great advantage in marketing
- Restoring the image of timeshare
- Banking services
- Timeshare owners
- Cost synergies and maintenance fees
- Wyndham Worldwide extends its brand to all its timeshare development activity
- Around 18 upscale Wyndham resorts by end 2007
- Timeshare contributes 45% of group EBITDA
- Wyndham is launching a major publicity campaign
- Marriott was the first hotel chains to enter the timeshare business
- Exchangeable points enhance timeshare’s attractiveness
- Hilton Grand Vacations Club has 37 properties in its system
- Starwood is in the timeshare business too
- Hyatt has developed 12 timeshare resorts since 1994
- Carlson’s hotel brands extend into the cruise business
- Regent brings a more personalised approach
- “Circles of Interest” provides guests an individualised experience
- Redesigned suite life
- Big chains working with luxury brands
- Bulgari hotels run by Ritz-Carlton
- Ferragamo is also a hotelier
- Soon to be two Palazzo Versaces
- Rezidor has replaced Cerruti with Missoni
- Missoni is into interior decoration, clothing and fragrances
- Three Hotel Missoni sites are already in the pipeline
- Studio Thun’s master design concept realised locally
- Armani Hotels & Resorts to launch four luxury properties
- Hotel operations are headed up by former Méridien chief
- EMAAR has deep pockets and a long reach
- Hamptons will help promote Armani hotels and residences
- Ten properties over the next decade
- LXR Luxury Resorts & Hotels’ first Hotel Ralph Pucci
- Collaboration with architect/designers Pilar Proffitt and Robert Bristow
- Hodge-podge or brilliant design concept?
Distribution and Marketing Strategies
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- Direct channels
- The hotel chain website
- Online travel agents
- Electronic channels generate three quarters of chain CRO bookings
- Present trends set to continue
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- Figure 12: Trends in booking channels for 23 major hotel chains, Q3 2006
- Internet bookings by type of website
- Brand websites
- Third-party distributors
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- Figure 13: Internet hotel reservations, by type of website, Q3 2006
- IHG has laid down the law
- Taxes and fees obscured by websites
- Online travel agents increasingly unattractive
- Links cut with Expedia
- Still working with other websites
- Hilton has established ground rules
- Merchant & ‘opaque’ transactions
- Centralisation of the reservation function
- Travelodge (UK)
- Strong growth in hotel performance has favoured the chains
- Expedia’s hotel distribution margins under pressure
- Search engine optimisation
- Discounting only works when demand elasticity is high
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- Figure 14: Elasticity of demand for hotel rooms and correlation to GDP growth in the US, 1967-2003
- Loyalty programmes
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- Figure 15: Change in loyalty programme effectiveness*: 2002-05
- The ten leading brands
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- Figure 16: Brands with the most effective loyalty programmes, 2005
- Driving clients to chain websites
- ‘Me-too’ programmes
- Accor’s scheme separates ‘soft’ and ‘hard’ benefits
- Guest loyalty schemes – costly necessity or dynamic marketing?
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- Figure 17: Breakdown of US hotel guests, by travel frequency and overnights generated per segment, 2005
- Figure 18: Number of loyalty scheme memberships for frequent travellers, 2005
- Loyalty versus rewards
- The risk of cannibalisation
- Costs high and unpredictable
- Real value essential
- Onsite benefits of little value
- Solution: charge a fee?
Property Affiliation Structures
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- Specialisation the name of the game
- Expansion driving brand values
- Property owners bear the risk
- Franchises
- Beds, bathrooms and breakfast centre of attention
- Franchise fees based essentially on room revenues
- Some chains charge for CRS
- Key customer agreements help drive business
- Financing loyalty programmes
- Only the tip of the iceberg
- High land costs can impede expansion of franchised brands
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- Figure 19: Costs and requirements for economy hotel franchises in the US, 2006
- Figure 20: Costs and requirements for mid-scale hotel franchises in the US, 2006
- Management or lease contracts
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- Figure 21: Costs and requirements for upscale hotel franchises in the US, 2006
- Working with ‘second-tier’ managers
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- Figure 22: Interstate hotel portfolio, by brand, 2006
- Property owners’ upper hand
- Hotel owners becoming more demanding
- No standard fee structure
- Chains forced to make further concessions
- Length of management contracts
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- Figure 23: Management contract terms, by region, 2005
- Net instead of gross operating profit
- Meeting agreed standards
- Management companies can be terminated
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- Figure 24: Profile of management contract in the Americas, 2005
- Base fees
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- Figure 25: Profile of management contracts in the Asia-Pacific region, 2005
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- Figure 26: Profile of management contracts in Europe, 2005
- Incentive fees
- Leases
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- Figure 27: Profile of lease contracts in Europe, 2005
- Affiliation structure by major chain
- IHG
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- Figure 28: Hotel affiliation structure of IHG brands, 2006
- Figure 29: Room affiliation structure of IHG brands
- Marriott
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- Figure 30: Marriott’s hotel portfolio, by affiliation structure, Q3 2006
- Hilton
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- Figure 31: Hilton asset management structures, by numberof hotels and rooms, 2006
- Figure 32: Profile of lease contracts in Europe, 2005-06
- Accor
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- Figure 33: Affiliation structure, by Accor brand, 31 December 2005
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- Figure 34: Projected change in Accor’s asset management structure, 2004 and 2009
- Starwood
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- Figure 35: Starwood’s portfolio, by asset management structure, 31 December 2005
Financial Management Strategy
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- Figure 36: Top eight publicly quoted hotel chains, by number of branded rooms, 2005
- IHG
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- Figure 37: Chart of IHG’s stock price (in UK pence), 2006-07
- Wyndham Worldwide
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- Figure 38: Wyndham/Cendants share price performance versus the S & P 500, 1996-2006
- Marriott International
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- Figure 39: Diluted* weighted average shares outstanding 1998-2006
- HHC
- Choice Hotels International
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- Figure 40: Trend in the share price of Choice Hotels International 1998-2007
- Accor
- Starwood Hotels & Resorts
- TUI AG/TUI Hotels & Resorts
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- Figure 41: TUI share price 2002-07
- Two of the top ten are still in private hands
- REITS
- IPOs
- Private equity funds
- Colony Capital has bitten off a chunk of Accor
- Similar trend on the other side of the Atlantic
- The deal of the year
- Colony already owned Raffles
- FHR is largest luxury hotel manager in North America
- Fairmont and Raffles combined
- Four Seasons bought out
- Other acquisitions and divestitures
- Starwood and Le Méridien
- Hotel groups are selling non-core assets
- Hilton has disposed of its standalone health club business
- Still substantial asset sales to come for Accor
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Geographical Expansion Strategy
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- Chains seeking portfolios
- Critical mass is important
- Chain growth outpacing overall hotel sector
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- Figure 42: Hotel industry growth, 1995-2004
- Accor
- Accor jumps headfirst into India
- 100 Formule 1s for India
- 15 Ibis hotels on the drawing board
- Midscale hotels: Novotel and Mercure
- Choice
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- Figure 43: Choice’s international hotel capacity, 2001-05
- International portfolio
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- Figure 44: Choice’s foreign hotels, by major country, December 2005
- Friendly
- Relinquishing its master franchise
- CHE’s troubles not over yet
- Strong grip on the Scandinavian market
- Brazilian partner
- Doubling its Mexican properties
- Australian focus
- Big in Japan and India
- Hilton
- Little geographical overlap
- Taking its limited service brands abroad
- Hilton Garden Inn already in Europe
- Hilton wants to sell Scandic
- Targeting 50-75 hotels in India by 2014
- Hilton Garden Inn coming to China
- Hilton and Doubletree to enter Costa Rica
- Hyatt
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- Figure 45: Hyatt pipeline, 2006
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- Figure 46: Hyatt Hotels under construction, March 2007
- Favouring mixed-use development
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- Figure 47: Hyatt hotels in development in Greater China, 2007-09
- Grand Hyatt expanding in southern China
- Hyatt Regency
- IHG
- Buying its way into the Japanese market
- First mover advantage
- ANA’s hotels to be co-branded
- Quadrupling its portfolio in Japan
- 13 ANA hotels up for sale
- Big luxury brands moving into Tokyo
- Moving into China – full steam ahead
- InterContinentals sprouting up in the provinces
- Investing in education and training
- Marriott
- Courtyard Marriott’s growth vehicle
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- Figure 48: Courtyard Europe and Middle East compared to US model, 2006
- Figure 49: Marriott room openings in Asia-Pacific, by brand, 2007-09
- Different ownership profiles
- NH Hoteles
- Doubling numbers
- Driven abroad by stiff competition at home
- Possibly a take over candidate?
- Aggressive growth objectives
- Starwood
- Le Méridien geographically well diversified
- Rapid expansion in China
- Breaking new ground in Inner Mongolia
- German partnership restructured
- Wyndham
- Hospitality Alliance
- Turnover-based leases reduce risk
- HA is targeting MICE and wellness
- Ramada and Treff hotels
- Ramada on ice
- Rudi Ramada promoting the brand
- Recent performance has been strong
- Re-branding
- Wyndham signed up second European partner
- Adapting brand standards
- Numerous equity partners
- Super 8 international market leader
- Indian partner
Specialised Lodging Groups
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- Tour operators
- First Choice and Club Med move upmarket
- MyTravel already forced to retreat from vertical integration
- Thomas Cook is ‘dis-integrating’
- TUI plans further new openings
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- Figure 50: TUI Hotels & Resorts, properties and beds, 2006
- Vertical integration enhances quality control
- Who is better qualified to own resort hotel?
- TUI centralises many hotel functions
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- Figure 51: Geographical presence of TUI lodging brands, 2006
- RIU accounts for nearly half of TUI capacity
- RIU has 50% more capacity than in 2000
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- Figure 52: Growth of RIU, 2000-06
- RIU in Cape Verde
- RIU in Mexico and the Caribbean
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- Figure 53: RIU’s portfolio of hotels in the Caribbean, as of end 2006
- Figure 54: Schedule of RIU hotel openings, 2007-08
- Grecotel is the first and largest Greek hotel chain
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- Figure 55: Grecotel locations and seasonal opening dates, 2006
- Other TUI lodging brands include:
- Atlantica Hotel
- Dorfhotel
- Gran Resort Hotels
- Grupotel
- Iberotel
- Magic Life
- Nordhotel
- Paladien
- Club Robinson
- Sol y Mar Hotels
- Explosive growth for gaming groups
- Hotels are growing in importance
- MGM Mirage more than doubled its lodging capacity in 2005
- Macao is the new Eldorado for US casino operators
- MGM to expand with non-gaming hotels in China
- Harrah’s has doubled it capacity due to the merger with Caesar’s
- Harrah’s itself has been bought
- Harrah’s is expanding internationally
- Harrah’s still largely dependent on Vegas and Atlantic City
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- Figure 56: Harrah’s capacity, by location, 31 December 2005
- Figure 57: Harrah’s gaming and lodging capacity, 31 December 2005
- Theme park operators: case study
- Disney
- Four for three
- The Mickey Mouse Penthouse
- Disney to offer standalone hotels
- Disneyworld in Bahrain?
What Next?
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- Chains stepping up expansion rate
- Challenges
- Concessions will have to be made
- Hotel brands must proliferate rapidly
- Niche opportunities remain in US market
- Hotel brands must represent a lifestyle choice
- The chains will squeeze intermediaries
- Frequent-guest programmes
- More share buybacks on the way
- More ‘taking private’ to come
Index to Travel & Tourism Analyst
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- Index grouped by geographic area
Index to TTI Destination Reports 1993-2006
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- Country reports
Special Reports Index
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