Attracting Investment to your Destination

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Attracting Investmentto yourDestination
Hotel Futures TMI Workshop Newcastle 2005

• TMI WORKSHOP
• 22 September 2005
• Newcastle
• Lynn Thomason Andrew Keeling
• HOTEL SOLUTIONS

Attracting Investment to your Destination
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Introducing Hotel Solutions

• A partnership consultancy Tourism Solutions
  ACK Tourism
• Background in hotel development, operational
  management, regional tourist boards
• Hotel Futures Studies
• Identifying development potential
• Attracting hotel investment
• Informing policies and site allocations
• Managing developer interest - maximising
  destination benefit

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Workshop Format

• A focus on the hotel sector
• Wider principles re the investment
  decision-making process and destination response
• Interactive tell us what you need help with
• Lending expertise
• Understand marketplace what drives these
  investment decisions
• How to gear up to facilitate the development
  process
• Knowledge tools ACTION

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We need a new hotel because..

• Were short of accommodation for events
• We dont have enough hotels to support our
  conference centre
• We need a 4 star hotel to attract more conference
  business
• Our existing hotels are not of a very high
  standard
• We dont have a decent hotel in the town centre

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We need a new hotel because..

• We need a 4/5 star hotel to improve the image of
  our destination
• Our competitor destinations have a better range
  and quality of hotels
• We need better quality hotels/ better located
  hotels to attract short break business
• We need a hotel to support our new attraction

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We need a new hotel because..

• We havent got a decent hotel for our VIP
  visitors
• We need a good hotel for civic functions
• We need a 4/5 star hotel to help regenerate our
  destination

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Workshop Objectives

• Discussion

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National Hotel Performance Trends

• 3 key performance indicators
• Room occupancy
• Achieved room rate (ARRs)
• Rooms revpar
• Provincial 3/4 star occupancies dropped slightly
  between 2001 and 2003 (to around 70) - increased
  in 2004 (to 71) but may drop back slightly in
  2005

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National Hotel Performance Trends

• Provincial 3/4 star ARRs were largely static
  between 2001 and 2003 (at around 62.50) but
  have increased in 2004 (to 64) and 2005 (to67
  YTD)
• Higher quality 4 star hotels in major cities and
  business destinations are achieving ARRs of 80
  in 2005
• 4 star country house hotels achieve lower
  occupancies (60), but high ARRs
• (100)

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National Hotel Performance Trends

• 3 star hotels in rural locations and market towns
  often achieve lower occupancies (55-58) and ARRs
  (around 50)
• London 3/4 star hotels achieve much higher
  occupancies (80) and ARRs (90) they dropped
  sharply between 2001 and 2003 recovered in 2004
  but look likely to drop back in 2005

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National Hotel Performance Trends

• The business market is the key driver of hotel
  performance
• Leisure demand helps to boost occupancies at
  weekends and holiday periods but is often at
  lower rates
• A good mix of business and leisure demand is
  needed to achieve high occupancies and ARRs

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National Hotel Performance Trends

• Budget hotels achieve very high occupancies
  (80-85)
• They attract a good mix of business, contractor,
  VFR and leisure demand
• Budget hotel ARRs are close to their published
  rates (exVAT) around 40
• Upper-tier budget hotels achieve high occupancies
  (70-80) and ARRs of around 55

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National Hotel Development Trends

• Rapid expansion of the budget hotel sector
• Continued expansion of the main budget brands
• (Travelodge, Premier Travel Inn)
• New budget brands
• (Ibis, Days Inn, Sleep Inn)
• The development of the upper-tier budget hotel
  sector/ new generation 3 star hotels (Express by
  Holiday Inn, Ramada Encore,
• Tulip Inn,Dakota)

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National Hotel Development Trends

• Some 4 star development primarily in city
  centre locations
• (Radisson SAS, Park Plaza, City Inn, Macdonald,
  Marstons)
• Emergence of boutique hotels
• (Hotel du Vin, Malmaison, Alias, Niche)
• Renewed interest in golf hotel development
• (Macdonald, De Vere)

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National Hotel Development Trends

• Upgrading of country house hotels
• (Hand Picked)
• Some 3 star development mainly in major cities
• (Jurys Inn, Novotel, Village)
• Leisure operators (attractions, football clubs,
  race courses) developing hotels

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National Hotel Development Trends

• Some development of serviced apartments
  interest from suite hotel operators
• Some niche hotel products have expanded
• (Warners Just for Adults, Luxury Family Hotels)

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The Market Conditions for New Hotel Development

• Discussion

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The Industry ViewKey Performance Indicators

• Occupancy 70
• Rate (ARR) ex. discounts, vat, breakfast
• Budget /- 40
• Upper tier budget 50-55
• 3 star 55-65
• 4 star 70
• Luxury 100
• Significant levels of denials
• A strong corporate base (weekday 90-100)
• Something for the weekend
• The state of the current hotel supply
• Other planned hotels

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The Industry ViewSite Location Requirements

• Will you make the hit list?
• City/town population 100,000 150,000
• A growing economy evidence of development
• Strategic location good access, proximity to
  business users and leisure attractors
• Town centre and out of town
• Site size 1-3 acres
• Realistic land values (5k-15k/room)
• Variation by size/ standard /geographic spread
• Most development opportunistic evidence base

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The Industry ViewBarriers to Investment

• Identifying and acquiring sites
• Availability of land/site values/competitive uses
• The planning process
• Policy plan-making/handling enquiries/planning
  advice/processing
• Sourcing information and contacts
• Sector supply performance data/tourism
  data/economic business data/key local authority
  other contacts

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Hotel Investment Action Plan

• Know your market realistic aspirations
• Produce an evidence base KPIs/ analysis of
  potential
• Tackle the site issues
• Plan positively for hotels the LDF opportunity
• A joined up approach within the destination
• Pro-active targeting of development
• Be responsive focused investment materials
• Keep your finger on the pulse