(Editor�s note: these comments were made before the tsunami)

HOTEL Asia Pacific CEO panel:

• Michael Issenberg, MD, Accor Asia Pacific
• Koos Klein, President, Asia Pacific/Middle East, Hilton International
• Patrick Imbardelli, CEO, Asia Pacific, InterContinental Hotels Group
• Michael Sagild, MD, Asia Pacific, Le Meridien
• Nick Clayton, Director of Operations, Mandarin Oriental
• Giovanni Angellini, MD, Shangri-La
• Miguel Ko, President, Asia Pacific, Starwood

Issenberg - Many travellers have begun to factor in the "new uncertainty" when making their travel plans. Global terrorism is now a fact of life and, while we should always be wary of the potential side-effects to our business and never assume that stability will be a long-term way of life, we can be encouraged that tourism has grown strongly in the past year.

The past four years of global upheaval have had the benefit of making some [though not all] hotel developers more realistic about the industry and its cyclical nature. This should benefit professional hotel operators who have been able to prove that they are equally adept at managing a business in crisis as they are in times of stability.

Klein - Without a doubt, it's the growth of China and India, both as source and destination markets.

Imbardelli - The hotel industry stands to gain from the optimistic economic outlook in Asia Pacific, especially in high-growth countries like China, where domestic travel is growing exponentially and inbound travel has doubled over the past 10 years. 
With improved infrastructure and increasing affluence, coupled with the proliferation of low-cost carriers, the industry can expect strong growth in the region. 

There are opportunities for expanding brand presence, venturing into up-and-coming cities and driving revenue to hotels. We can also expect the introduction of new brands and new concepts into the region, as the industry addresses the changing needs of the different market segments.

Sagild - While hotel ownership in the region remains highly fragmented, we are starting to see higher-profile property companies and institutional capital coming into the market.  A continuation of this trend will see the development of high-quality assets, with investment being focused in markets with strong fundamentals. 

There will be an expanded opportunity for leading hotel operators to partner with sophisticated hotel real-estate owners on a multi-unit basis. 

Clayton - At the end of 2003, the industry was emerging from a very challenging time. I am not sure if this is completely behind us yet, but 2004 was encouraging, with visitor arrivals generally on the rise, and the Asia Pacific region rebounding. 

Angellini - We are optimistic about the hotel industry in Asia Pacific especially in China, as arrivals continue to increase at a healthy pace. In China, the growth in domestic travellers is large and is set to expand even more as the standard of living and disposable income increase. In general, hotels' revPAR will increase.

Ko - 2004 is probably the first "normal" year for the hotel industry in Asia, and we can positively look forward to a much brighter outlook in 2005.  The majority view is that 2005 will be a very buoyant year for most destinations, a "normal" year the likes of which we have not seen in a long time. In fact, it's shaping up to be the best year in a decade.

CHALLENGES - What do you see as the main challenges facing the hotel industry in Asia Pacific in 2005?

Issenberg - The "unknown". No one forecast SARS but, after that, bird 'flu, Iraq and terrorism, the industry should be reasonably well prepared to handle most major adversities.  There is also a threat of oversupply again as a result of improving economic conditions around the region. This fails to take into account that, over the past two decades, the industry has gone through serious peaks and troughs. There is more caution in Australia, where there are unlikely to be any major new-build hotels in key capital cities, but in Asia there is again the risk of hotels being developed without a clear market demand to justify the development. Hotels still need to be seen as businesses and not just real-estate plays. 

Klein - The Japanese economy and global security are two key issues. Japan is the largest and most important market for Hilton in Asia Pacific. It generates about one in four room nights, around 27% of all revenue for our 41 Hilton hotels throughout the region and close to 5% of all Hilton International business globally. [The group's Asia Pacific division also includes seven properties within Japan, which heavily depend on domestic business.] 

Last year, we saw a tremendous rebound of about 23% in outbound business from Japan, one reason being the pent-up demand for overseas travel following 2003. Within Japan, growth is not as robust as it has been in the past. 
Global security is obviously a concern for all hoteliers and international businesses. 

Imbardelli - Against the backdrop of international developments, including acts of terrorism, the hotel industry in Asia Pacific will need to press on with its efforts to build and maintain confidence in the marketplace in order to drive returns on assets.

Sagild - Higher oil prices are increasing the cost of travel and starting to impact price-sensitive sources of business from long-haul markets. Room rates at resort markets in Asia Pacific are likely to suffer should higher oil prices persist. Oversupply in some markets is exposing the industry to medium-term risk. Owners will come under pressure as interest rates inevitably rise. Rising staff costs and limited availability of skilled workers in many markets.

Clayton - 9/11 and the ongoing threat of terrorism have had a great impact on how people feel about travel in general, particularly about long-haul travel. This will continue to be a challenge for our industry.

Angellini - Shorter stays and shorter lead-in times, the constant increase in the cost of doing business and the shortage of trained staff. 

Ko - The main challenges are cost hikes in many emerging countries and cost containment.

PRIORITIES - What are the chief priorities for your group in the region in terms of expansion/consolidation?

Issenberg - China remains an absolute priority, and we have an extensive expansion programme underway there. Thailand is also a focus for expansion, and we see considerable potential in Japan's mid-market, where fragmentation provides great potential for an international operator with a strong brand that can be applied to local hotels. We are growing our 5-star Sofitel brand strongly because it gives high-visibility to Accor in key locations, but we are also growing our mid-market Mercure brand and the economy Ibis brand. Base Backpackers will also continue to expand, primarily in Australia and New Zealand. Opportunities in Asia are also being explored.

Klein - Our first priority is to continue to rejuvenate the Hilton Asia Pacific portfolio. This includes retiring old properties that no longer meet brand standards, renovating hotels that are located in key destinations and still drawing strong business, and introducing a number of new-generation Hilton hotels, including Hilton Worldwide Resorts.  Expansion of the Asia Pacific portfolio is moving forward, with 16 management agreements signed for the next three years, about half of which come under the Hilton Worldwide Resort banner. 

Our second priority is to extend the Conrad brand in key destinations throughout Asia. [Hilton's top-tier brand has already been launched in Bangkok, Australia and Bali.] This year, we will open Conrads in Tokyo and Phuket, and are working with developers to launch the brand in new destinations. 

Our third priority is to give more focus to growing our mid-market brand, Scandic, in Asia Pacific. We believe Australia, China, India and Indonesia are all well-suited for the brand.

Imbardelli - We will continue to focus on working with the right partners to bring the right brands to the right locations, where there are opportunities for strong growth. 
The emergence of new low-cost airlines has improved the overall accessibility of major destinations in Asia Pacific, particularly in holiday and resort destinations. More airlines plying Asia Pacific routes will also mean an expanded pool of potential partners and, on a broader scale, the changes in the airline industry will also help attract more investments into regional destinations. 

Sagild - Le Meridien opened six hotels in the region last year, and managing the performance of these new hotels will be a key priority for us in 2005. Extending relationships with existing owners for additional hotels will become increasingly important as well. We are actively pursuing new deals in China, Korea, Vietnam, Thailand and Malaysia.

Clayton - The vision for Mandarin Oriental is to continue with the creation of a global luxury brand. To achieve this, in recent years we have focused on establishing ourselves in a number of brand-defining cities, such as London, New York and Paris. This year, we will also open The Mandarin Oriental, Tokyo and The Landmark, Mandarin Oriental in Hong Kong and begin refurbishment of our flagship property, The Mandarin Oriental, Hong Kong. Europe and North Asia remain a focus for the group, and we are also developing several "hideaway" concepts. [The first opened in Chiang Mai in December.]

Angellini - Our expansion goal in 2005 remains to preserve our position as the largest luxury hotel brand in Asia Pacific. We will focus particularly on China, where we have already announced more than 15 new projects, in addition to the current portfolio of 17 hotels. In the Middle East, we would like to develop hotels in more destinations besides Dubai. 

As to the category of hotels, our plan is to remain focused on the luxury segment in key international cities and to develop the Traders brand in China and India. 
We will continue to focus on major gateway cities and leisure destinations in Asia Pacific, particularly China, as well as the Middle East.  We are also seeking opportunities in long-haul markets, such as North America and Europe, following the announcement of our first hotel in North America, the Shangri-La Hotel, Vancouver, opening early 2008.  With 44 existing hotels and more than 25 hotels under development, we anticipate more than 50 hotels in our portfolio by the end of 2005.

Ko - Our chief priorities are expansion in China, India, Thailand, Vietnam and the resort market.

RENOVATIONS - Are you planning any major renovations in the region this year?

Issenberg - When you have 230 hotels in the Asia Pacific, there is a continual programme of renovations, but there are a number of hotels that have been taken over that are being renovated to ensure they meet the standards of the various Accor brands - hotels such as the Mercure Grand Broadbeach, which is being upgraded to the Sofitel Gold Coast.

Klein - Major renovation projects nearing completion include the Hilton Maldives and the two-year, A$200 million (US$156 million) roof-top-to-basement rebuild of the Hilton Sydney. The Hilton Beijing's master plan began in October last year, with completion scheduled for mid-2005.  Major renovations to start in 2005 include Hiltons in Shanghai, Cairns and Tokyo. Other ongoing renovations include the Hilton Brisbane.

Imbardelli - We carried out extensive renovation and refurbishment works in several of our hotels throughout 2002 and 2003 including the InterContinental Sydney. With 150 hotels across the region, there will be continual refurbishments and improvements to ensure that our hotels live up to their brand promise and the expectations of our loyal guests.

Sagild- With several of our hotels being recent new-build properties, we are in good shape on the product front. There are two or three hotels in the region where we are looking at major refurbishment projects with our owners. 

Clayton - In fact we will complete an extensive multi-million dollar renovation early in 2005 at our property in Singapore, which will be re-launched in Q1.

Angellini - We have spent over us$300 million during the last four years in renovating our properties. Many of these projects in mainland China, Australia, Fiji and Hong Kong are ongoing and will be completed through 2005. 

Ko - No.

SIGNINGS - How many properties do you plan to sign up in 2005 in the region?

Issenberg - Up to 30 hotels across our brands.

Klein - As many properties that we can profitably operate.

Imbardelli - In the past 12 months, IHG has signed 27 deals, across all brands, in key locations around the region. Next year, the group's expansion will progress at an even faster pace, with an expected 35 deals across all our brands.

Sagild - Le Meridien never sets out to grow for growth's sake but, rather, we will pursue deals where our brand and management services can be of most value.
As such, we do not have a specific growth target for the region but, based on the current pipeline, we expect to see a continuation of our current growth pattern of around four to six hotels entering the Le Meridien Asia Pacific portfolio each year. 

Clayton - In order to achieve our goal, we are reviewing a number of properties in key city and resort destinations around the world.

Ko - We signed 14 new contracts last year, and this year we look forward to a balanced-growth portfolio and expect to exceed the number of contracts signed in 2004.

CONCEPTS - Do you plan to introduce any new concepts in the region, either facilities or F&B concepts?

Issenberg - Sofitel will introduce its revolutionary My Bed concept, which is undoubtedly the most innovative and comfortable form of bedding available in hotels around the world [Editor's note: I'll let that go]. 

Novotel will continue to upgrade to the new Novation standards that have given the brand such a renaissance in Europe and such leadership in the Asia Pacific 4-star market. We have introduced the Bistro de l'Echanson restaurant concept at the Mercure Ginza and we will look to extending this across Asia.

Klein - The Hilton Park Lane's Zeta Bar is consistently ranked as one of the top-10 bars in London, serving power-packed cocktails, cool vibes, great ambience and live international acts. We will transfer this successful F&B concept to selected [new or renovated] hotels throughout Asia Pacific. We have opened our first Zeta Bar in the Hilton Kuala Lumpur and are scheduled to open another in the Hilton Sydney, Hilton Beijing and Millennium Hilton Bangkok. 

Likewise, Studio - a one-stop dining and entertainment centre housing five restaurants and two bars in a four-storey upwardly spiralling dome in the Hilton Kuala Lumpur - has also proved successful, and we will be reviewing opportunities for other markets.

Imbardelli - We recently announced the debut of Express By Holiday Inn in China with two management signings, and we will focus our efforts on growing and extending its presence in key locales in China and to introduce the brand to more travellers within China. We will also continue to innovate and deliver exciting and creative new concepts at our hotels, such as Spoon at the InterContinental Hong Kong and Level 1 at the InterContinental Pudong Shanghai.

Sagild - We are not planning to introduce any new concepts this year. But we are working on our second hotel in Asia which will carry our Art+Tech design concept, which will open in Bangkok in 2006, and will continue to roll out this unique contemporary concept in markets that are ready for it. We expect that only a few of our new hotels in Asia will be Art+Tech design concepts, but we are always looking for highly individualised properties to carry our brand. 

Clayton - We will consolidate and grow our spa brand, and will be introducing some exciting new dining concepts at various properties around the world. Our Hideaway concept is also an extension of our luxury brand. The Mandarin Oriental, Dhara Dhevi opened in Chiang Mai in December 2004, and this will be followed by The Mandarin Oriental, Riviera Maya in Cancun this year.

Angellini - Shangri-La will continue its fast-paced repositioning of food entertainment and lifestyle restaurants, following successes such as Yi Cafe at the Far Eastern Plaza, Taipei, Cafe Cha at the Shangri-La Hotel, Beijing and RED at the Makita Shangri-La, Manila. 

Several of our Chinese restaurants will also be refurbished, and we will continue to look at contemporary-designed Japanese restaurants. 
Upon its completion in mid-2005, our Shanghai property's new extension tower will make a definite statement with the marriage of contemporary Chinese culture and art with French cuisine. 

In July last year, we debuted our CHI Spa at the Shangri-La Hotel, Bangkok, and there are plans for an additional 15 CHI Spas in various Shangri-La city-centre and resort locations over the next few years. Five will open this year.

Ko - We are looking at introducing some new dining concepts. We want to make sure that our restaurants lead in local culinary scenes, instead of being led.

TRENDS - Do you see any major trends from the US or Europe that are likely to be introduced in Asia Pacific this year?

Issenberg - Accor has introduced sophisticated economy-class accommodation in Asian destinations that have revolutionised the sector. In Korea, China and Indonesia, Accor was the first international hotel group to pioneer this sector, bringing a European model and adapting it to local conditions. Its success has already attracted many imitators, but we believe we have the product and the background to make it successful on an even wider basis.

Klein - Franchise agreements are a reasonably new initiative for us in Asia Pacific, and will help us rapidly expand the brand. Our strategy is to partner only with proven, well-capitalised partners who have a successful business track record. [Hilton has already launched one franchising agreement in India when it joined forces with EIH to launch a strategic alliance that saw eight hotels across India re-branded under the Hilton Towers and Trident Hilton badges.]

Imbardelli - With our global reach and resources, we have the advantage of being able to share insights across our operating regions. Currently, we are evaluating the feasibility of introducing initiatives that have taken off in the US and Europe. However, at this stage, it would be premature to go into detail.

Sagild - European luxury brands across all industries continue to thrive in Asia. As a leading European hotel brand, we are seeing an ever-increasing appetite for our brand from consumers and owners alike.

Clayton - As a global brand with our heritage steeped in the Or-ient, we are constantly reviewing the services and facilities that we offer our guests. Consequently, we have been particularly innovative with our spa and F&B concepts - which have, in general, been more influenced by Asian philosophies that match our brand heritage.

Angellini - We will see increased demand for customised and personalised travel, helped by advanced technology. For example, Expedia is working with Shangri-La to introduce Dynamic Packaging, which can be booked directly from Shangri-La's website. 

Through the packaging, our online customers can choose from travel services available through Expedia, such as flights, car rental, destination activities and packages including a stay at a Shangri-La property - all in one convenient location online.

Ko - Traditionally, Asia Pacific has always led in service levels, but lag-ged behind in rates. We intend to adopt more aggressive rate management, just like the industry has been doing in the US and Europe.

ONLINE STRATEGY - What is your strategy in 2005 for working with the third-party online booking channels?

Issenberg - Accor has been the leader in building its own retail-style online portals, and this will continue with our accorhotels.com sites introducing more local-language booking engines. On the other hand, we have made our intentions clear that we want to work even closer with our traditional distribution partners by introducing the accortrade.info site. 

Too many hotel companies are obsessed with internet bookings at the moment, forgetting that 90% of bookings still come through traditional channels. 

Klein - Hilton is seeking partnerships to ensure our brand can freely compete. Our priorities are: 

• To enable best choice and value for consumer;
• Fair and equitable rewards for distribution partners;
• Eliminate predatory marketing practices;
• Fair payment terms;
• Equitable balance of inventory risk and reward; and
• Demand-based pricing and electronic distribution.

By constantly innovating and leveraging our global infrastructure and technological leadership, we have scored several industry firsts in e-commerce, met the changing needs of our customers and stayed one step ahead of the competition. With third-party intermediaries, we have led the way with our strategy to certify online distributors that meet stringent criteria and whose practices are aligned with ours. This has contributed to greater transparency, as well as increased consumer confidence and satisfaction. 

Sagild - We believe that maximising the bandwidth of distribution channels is fundamental to revenue management. We are, therefore, seeking to maximise our online booking channel partners in the system - as long as such third-parties are prepared to respect our rate-parity policy in the market. 

Clayton - Our online distribution strategy puts the primary focus on the brand's proprietary website. However, the group is in close partnership with a few carefully selected third-party sites and is also featured in many additional sites through its representation in the GDS. We regard third-party sites as important partners, reaching customers that could not be reached otherwise. We retain a consistent balance in distribution between third-party and our own sites.

Angellini - We will continue to work only with selected websites which allow us to maintain rate integrity, introduce simple and easily understandable offers, and use internet presence as an important aspect of brand communication.

Ko - We need to manage them to ensure we have well-defined rules in engaging them. We will be selective in working with those who meet the rules.

Copyright HOTEL Asia Pacific. Contact Publisher/Editor Steve Shellum at [email protected]

The latest edition of HOTEL Asia Pacific (60 pages) is available in PDF format at www.hotelasiapacific.com. It is free to qualified hospitality professionals, and requires a simple one-time registration.