Orient Express Hotels. Check out?

FOXTROTS  

Fox – sly.  Trots – left-leaning (Trotsky) plus its more insalubrious meaning.  Foxtrots – leading the industry in a dance. 

 

2008 January 25

Orient Express Hotels. Check out?

Predators are circling Orient Express Hotels, pushing the company to publish letters insisting that it will not sell. The (known) predators are Dubai Holding and Indian Hotels. Unknown predators are probably a half-dozen big hotel names (Accor, InterContinental, etc) and the usual suspects – Blackstone, Colony Capital, Kingdom, Texas Pacific, etc. 

Many predators attack the weak. OEH, led by James Sherwood since he created it in 1976, was to be run by son Simon when James retired 12 months ago. But the board decided to look for another leader, and found Paul White, who had been head of finance. 

Then there is Myanmar, where OEH runs ‘Road to Mandalay’ – which, despite its name, is a river-cruiser on the Irrawaddy. These days, it is bad geo-politics to have a prominent operation in Myanmar. OEH should have quickly put RTM up for sale; there are various ways to hold this operation at a distance to confuse those pesky European hypocritical liberals. But OEH’s preoccupation with leadership changes may have caused it to temporarily neglect some operational matters. 

Then there are OEH’s preferential shares – that might give, for example, a holder of 5% special shares 10% of voting rights. They have just been declared illegal in the European Union; OEH will have to change. 

Predator 1 Dubai Holding is the Dubai government, and also the ultimate owner of Jumeirah Hotels and Travelodge UK. Jumeirah has only got this far because of its big financial support, and it could do with OEH to make it a ‘real’ company. At the same time DH ownership would solve OEH’s Myanmar problem (Dubai is not troubled about Myanmar) as well as the special-shares problem in the EU. 

Travelodge is a franchise with three separate owners (Asia is controlled by Australia-based  Toga Hospitality), and under DH the UK-based franchise can be expected to grow. It says it is more interested in the rest of Europe – although it is about 15 years late. And I guess DH is also interested in Toga. 

Predator 2 Indian Hotels is the Taj Group. OEH was rude about Taj (which is usually my area of expertise), but got one thing right – Taj still has branding problems. But OEH was misleading at best when it said Taj is primarily a domestic India operation (unless you would also describe Marriott, say, as primarily a domestic US operation); Taj’s top hotels are spread wide. OEH and Taj would also be a good fit. 

I expect DH or Taj or others to offer enough money – including payoffs to current OEH executives – that will result in a sale before end-2008.   

The Fox

Tony Fernandes. Air Asia et al.

FOXTROTS  

Fox – sly.  Trots – left-leaning (Trotsky) plus its more insalubrious meaning.  Foxtrots – leading the industry in a dance. 

 

2008 January 24

Tony Fernandes. Air Asia et al.

Does Tony Fernandes, head of the Malaysia-based Air Asia group, suffer from delusions of grandeur? 

His plans to start flights to a clutch of distant destinations is flawed in business terms (apart from some of the closer ones, such as India, which are actually good ideas). 

The routes would work in the sense that low fares would fill his planes and make him a popular man with everyone except his financial backers. 

His opening publicity stunt – fares for MR9.99 (US$3) Malaysia-Europe – indicated he was losing touch with business realities. Even though obviously a promotional opener, a fare more in keeping with reality – even MR99/US$30 – would have had the same promotional impact as MR9.99.  

Until now, we thought the tag-line Fernandes has for Air Asia – ‘Now everyone can fly’ – was just a marketing statement. But perhaps it was the first sign that he believes he is doing something wonderful for mankind. That’s delusions of grandeur.   

The Fox

World Tourism Organization. More writing wrongs.

FOXTROTS    Fox – sly.  Trots – left-leaning (Trotsky) plus its more insalubrious meaning.  Foxtrots – leading the industry in a dance. 

 

2008 January 22

World Tourism Organization. More writing wrongs.

I see that the World Tourism Organization has decided to have a sub-title. Although I think its current three words are sufficiently clear, the WTO has added considerable confusion. Read on. 

WTO’s new sub-title is ‘Committed to Tourism, Travel and the Millennium Development Goals’. OK, let’s look at that in detail: 

-I never liked that ‘Tourism’ word, but have come to accept it, even if not to love it. But now I am forced to comment that the WTO ignored the fact that 99% of people, inside and outside the industry, believed a ‘tourist’ was a leisure traveller. 

It fixed that inconvenience by saying No, a ‘tourist’ includes business traveller, VFR, conventioneer, pilgrim, et al. But in conversations and comments, most (maybe the percentage has fallen to 90%?) still use the word ‘tourist’ to describe a leisure traveller. And furthermore, an inbound visitor, not including outbound travellers. 

-So after twisting the definition, how can the WTO now justify adding the word ‘travel’? Following its own definitions, the WTO is now committed to all-travel (covered by the word ‘tourism’) plus ‘travel’. So either the sub-title is wrong, or it makes no sense. 

-Then there is the quaint English-English grammar form which says there should be no comma before the last ‘and’. American-English grammar is sometimes more sensible. 

After all, how would you say ‘rooms, staffing’ and then split ‘food and beverage’ as if you were talking about two things – beverage and food – not a hotel F&B department? The E-E cannot do it. They would say ‘rooms, staffing, food and beverage’ – which means three things. I would say ‘rooms, staffing, food, and beverage’ – four things. 

Meanwhile then, back at the WTO, is ‘…Tourism, Travel and the Millennium Development Goals’ two things or three? If it was three, I would say ‘…Tourism, Travel, and the Millennium Development Goals’. But the WTO? 

So, are we talking about Travel as it relates to the MDGs? And if so, then is Tourism also related to the MDGs (ie T&T as they relate to the MDGs)? 

This might not be important in the big world picture, but how can a body such as the WTO – presumably filled with wise men and women – make such an unforgivable blunder? 

-And finally, there are those MDGs. I know I am not alone in having no idea what those goals are. Are there 10 of them? Do they match WTO’s DDD (Daft Davos Declaration) or are those different altogether? Although I guess that at least one MDG banishes poverty, another banishes global warming, and probably another follows Bhutan’s charming example of creating a Gross Happiness Index rather than GDP. But after that I am lost. 

Sadly, all these comments really mean that the WTO is nothing but a harmless talking-shop quango. Full of fierce righteousness, but signifying nothing. (Apologies to Shelley, or was it Byron?)  

The Fox

Bob Burns. Sells Feltrinelli.

FOXTROTS    

Fox – sly.  Trots – left-leaning (Trotsky) plus its more insalubrious meaning.  Foxtrots – leading the industry in a dance. 

 

2008 January 18

Bob Burns. Sells Feltrinelli.

Bob Burns* tells PinT that he sold his Villa Feltrinelli following a bidding war by two Russian buyers from St Petersburg. He settled for US$55mn. 

He is now, as he says, “hotel-less” but he wants to find a property in Vietnam, a resort or a city hotel. He has been trying to acquire something which he believes could be a “Peninsula-type” hotel in Ho Chi Minh City. 

(*Co-founder of Regent Hotels with Georg Rafael [who later founded Rafael Hotels, subsequently sold to Mandarin Oriental] and Adrian Zecha [who later founded Aman Resorts]. Burns completed almost-total redevelopment of what is now Grand Hotel at Villa Feltrinelli in the village of Gargnano on Lake Garda in Italy.)     The Fox

Humbug. Istithmar Hotels.

 FOXTROTS    

Fox – sly.  Trots – left-leaning (Trotsky) plus its more insalubrious meaning.  Foxtrots – leading the industry in a dance. 

 

2008 January 16

Humbug. Istithmar Hotels.

The following from Joe Sita, head of Istithmar Hotels; the Istithmar group is the investment arm of the Dubai government: 

“…Budget hotels…represent a significant growth opportunity, particularly in emerging markets such as the Middle East and Africa, [South Asia], Southeast Asia, and China [which have] a growing demand for this type of property. 

“Luxury hotels should see good potential in double-digit growth economies such as those in Russia, India, China, and Eastern Europe.” 

Self-serving at best, rubbish at worst. There is a ‘growing demand’ for most hotel types, so this is meaningless, and particularly when China is mentioned at the same level as Africa. And, of course, there is also a ‘growing demand’ for budget hotels in parts of the non-Istithmar-world. 

Sita goes on to say Istithmar’s investment in Kerzner is because it is a “proven operator” – which seems to have no meaning. And that Kerzner has two “strong” brands – Atlantis and One&Only. Yet Atlantis is hardly known, although O&O is more widely known than its small number of resorts would normally warrant. 

(Istithmar has invested in Corinthia Hotels, Kerzner, and is developing Easy Hotels in some regions.)  

The Fox

WTO. Climate change, and talking the talk.

FOXTROTS

   Fox – sly.  Trots – left-leaning (Trotsky) plus its more insalubrious meaning.  Foxtrots – leading the industry in a dance.   

 

2008 January 15

WTO. Climate change, and talking the talk.

There must be many others that have wondered what the World Tourism Organization is doing for climate change. 

Many will tell me that the WTO is doing a lot. It has sponsored two meetings over a period of four years, it has participated in a UN forum in Davos and of course the forum on climate change in Bali last December, and much much more. 

It has said almost ad nauseum that climate change is something that the travel business must take seriously, and that the industry must lead in solving the problems. 

Yes, but what is it doing? 

Well, it  has held two meetings, participated … you know the rest. 

Yes, the WTO has done nothing apart from telling us that we must do something. 

Worse, before even proposing something, it has introduced exceptions – for poor or developing countries. For them, acting against climate change is excused if they need the economics of the visitor business for their economies. One huge cop-out. 

But back the WTO. Why cannot it propose something, anything? 

I regard the WTO as covering the whole travel industry, but its actions and words indicate that even at the WTO it sees its business only as the inbound visitor business, and often talks as if only the inbound leisure visitor business. 

IATA, International Air Transport Association, for instance, would never consider that it is in the same business as that covered by the WTO. Pity. Partly because at least IATA has moved mightily to reduce carbon emissions, paper, alternative fuels, etc. 

Yet IATA is made up of airline companies. WTO is made up primarily of government divisions or close. How come those nominally-more-powerful people can do nothing? 

I have a few suggestions for WTO on action, rather than talk. But I am worried that WTO does not have the power to run anything in the travel business. Only talk about it.  

The Fox

IATA. Bisignani’s barbs bite.

FOXTROTS    Fox – sly.  Trots – left-leaning (Trotsky) plus its more insalubrious meaning.  Foxtrots – leading the industry in a dance.   

 

2008 January 09

IATA. Bisignani’s barbs bite.

Apologies for the mixed metaphor – but has the air transport industry turned a corner? 

We believe Giovanni Bisignani, head of IATA (International Air Transport Association), is a good leader for the airlines he represents. We criticised him in his previous positions – head of Alitalia followed by the then-airline-owned OTA (online travel agency) Opodo. He was protectionist and illiberal. 

But there has been an enormous about-turn. We now feel he is leading IATA, and thus airlines, into an era of great change, with great confidence – and with sound ideas and policies. We now believe he is a great and liberal leader for aviation. 

In the change, he has been outspoken, in particular by criticising governments and others for, in effect, hypocrisy. And he talks direct. We have already run some of his ‘barbs’; here are more.  

“Governments are far too quick to impose taxes,” says Bisignani. “But they are slow to implement air-traffic management solutions that will improve environmental performance.” 

But his message may be getting through. One recent example was from an editorial supplement on air transport in The Economist. Usually, the publication is critical of the industry. This time, it appeared more critical of governments. And that might have something to do with Bisignani. 

As well as wastage in air traffic control management, Bisignani attacked airports, particularly Bangkok, London, and Paris.   

“Combined, they grabbed US$1.4bn in increases from the industry in 2006. This is outrageous and I will continue to embarrass them with figures and facts.” Bisignani says airports with margins of more than 40% include Auckland, Hong Kong, Johannesburg, Seoul, and Sydney. 

He also attached the UK. For the environment, he said, new prime minister Gordon Brown “doubled the Air Passenger Duty and we are paying a billion pounds for his green credentials. He helped the UK budget but what has he done for the environment? He hasn’t planted any trees but he is lost in the woods.” 

He added that the airline has reduced aircraft noise by 75% over the last 30 years, and fuel consumption by 70% over the last 40 years. 

“I was asked not to call the situation a complete mess, so I will be polite and call the actions of governments irresponsible and inconsistent. A Single European Sky could save up to 12mn tonnes of CO2, but instead of action, we have a European circus. Fifteen years of talks, talks and nothing but talks.” 

IATA’s environmental policy is: invest in technology, fly the planes effectively, and make the infrastructure efficient. But he also says the industry has a lot to do. 

“Our carbon footprint is growing and that is not politically acceptable – for any industry. Climate change will limit our future until we change our approach from technical to strategic. Strategy starts with vision. For Toyota, it’s an Earth Charter, GE has ecomagination, and BP has Beyond Petroleum. So what is our vision?

Let me start the debate by aiming high. Air transport must become an industry that does not pollute.”  

The Fox

Starwood. New CEO.

FOXTROTS

   Fox – sly.  Trots – left-leaning (Trotsky) plus its more insalubrious meaning.  Foxtrots – leading the industry in a dance.  

 

2008 January 04

Starwood. New CEO.

Starwood Hotels appointed Frits van Paasschen as its new CEO, starting late September. Before, he has been CEO of Coors Brewing (one of four CEOs at the parent company Molson Coors) and head of Nike for EME&A.

Van Paasschen was less than three years at MC. Starwood says CB’s revenue and volume increased under his tenure, but MC does not separately reveal divisional results. Latest annual data for MC shows total volume sold (barrels) increased 4% in 2006, revenue 5%, and operating profit 60% (following a decline in 2005).

Results at Nike look better. In his seven years there, van Paasschen increased revenues from US$2.5bn to $4bn, which represents an average 8% a year. Before Nike, he was two years as VP, Finance & Planning at Disney Consumer Products, and management consultant at McKinsey and Boston Consulting.

Starwood describes his assets as a “unique perspective, strong performance in managing global brands and deep international experience.”. Whereas we assume everyone has a ‘unique perspective’, about half of Starwood’s rooms are outside North America. So van Paasschen’s international experience, plus his brand knowledge, would certainly be useful.

However, Starwood notes that the company is “focussed on…opening new properties, with 80…planned for this year and over 100 [for 2008]. That would seem outside van Paasschen’s skills, which appear to have been mainly increasing sales of established brands.

As his name indicates, van Paasschen was born in the Netherlands. But he was educated in the US, and is innately American; when he talks of “looking forward to going East” he does not mean Japan, but New York. He has not yet grasped that a good share of Starwood’s business assets (hotels and guests) are outside the US.

Van Paasschen, 46, is married, and has three children.    The Fox

Travel finance. Unravelling the bolero.

 

FOXTROTS

   Fox – sly.  Trots – left-leaning (Trotsky) plus its more insalubrious meaning.  Foxtrots – leading the industry in a dance.   

 

2008 January 02

Travel finance. Unravelling the bolero.

Forget the foxtrot; the past two years has been a frenetic bolero. 

Big purchases by Starwood Capital, Blackstone, Kingdom, etc, and a raft of smaller moves – in Asia, such as UOL buying Pan Pacific, DLF buying half of Aman, Orient Express under siege, etc. 

Will the reduction in credit availability, plus/or higher interest rates, result in some reverse moves in the next two years? 

Oil money interests – such as sovereign funds from Abu Dhabi, Kuwait, and Qatar – seem likely to continue buying. And so do other sovereign funds such as Dubai and Singapore. They seem likely to get involved with any recent acquisitions by finance companies then flush with funds. 

But there could also be something more interesting. That these finance companies will have to run their new acquisitions to make money, not just rely on juggling their finances.  

The Fox