Changed rules of the game
for hotel owners and investors
Heribert Gangl, K&P Budapest
NAPI Conference Budapest, 19 May 2009
Changed rules of the game
for hotel owners and investors
Table of Content
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About Kohl & Partner
Actual market environment
Changes and opportunities for hotel owners
Changes and opportunities for hotel investors
Conclusio
Changed rules of the game
for hotel owners and investors
About Kohl & Partner
• Independent and internationally
operating consulting company
specialized in the hotel and
tourism industry
• Leading tourism consulting
company in Austria with more
than 25 years of experience
• 8 offices in 6 countries
(Villach, Vienna, Munich,
Stuttgart, South Tyrol, Sofia,
Bucharest and Budapest)
• International team with 45
tourism experts and assistants
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Changed rules of the game
for hotel owners and investors
Quality is our Mission
Kohl & Partner is …
• Winner of the Austrian
Quality Award 2006
• Certified according to ISO 9001
• Affiliated member of the UNWTO
(World Tourism Organisation)
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Changed rules of the game
for hotel owners and investors
Kohl & Partner USPs
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Austrian tourism know-how
combined with local expertise
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Detailed knowledge of the
complex processes in tourism
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Strong reputation and
excellent industry contacts
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More than 25 years of
international experience
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Services for small, private and
large, international hotels
Quality and tailormade solutions for
the hotel, tourism
and leisure industry
by Kohl & Partner
Changed rules of the game
for hotel owners and investors
Our Customers
Public Authorities
Private sector
• Global organizations (e.g.
World Tourism Organization,
EBRD, UNDP)
• National authorities (e.g.
Tourism Ministry)
• National tourism
organizations
• Representative bodies of
Regions & Republics
• Municipalities
• Entrepreneurs and business
owners
• Investors
• Project developer
• Construction companies
• Banks and financial
institutions
• Interest groups
• Private organizations (e.g.
hotel associations)
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Changed rules of the game
for hotel owners and investors
Kohl & Partner – Services for the hotel industry
Hotel
Industry
Destination
Development
Tourism
Infrastructure
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• Asset Management and
Advisory
• Market Intelligence Services
• Feasibility Study
• Project (Concept) Evaluation
• Operator Selection
• Hotel Valuation
• Hotel Transaction
• Turn Around Management
• Other services
Changed rules of the game
for hotel owners and investors
Real estate advisor and project management company for
domesticand international clients in Hungary and the CEE region
• Brokerage – a real estate agency firm with only the finest,
exclusive properties
• Project management – building services for the perfect quality
buildings on time
• Lobbying – a specialist team, well-connected with the
municipalities, to assist you
• Mediation – creating a holistic approach to accelerate your
project to the utmost
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Changed rules of the game
for hotel owners and investors
Table of Content
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About Kohl & Partner
Actual market environment
Changes and opportunities for hotel owners
Changes and opportunities for hotel investors
Conclusio
Changed rules of the game
for hotel owners and investors
Actual market environment
• Decreasing tourism demand in Europe, especially in
city and business destinations like Budapest or Vienna
• Dropping occupancy and ADR – lower revenues and
yields, especially in the upscale 5/4-star segment
• Decreasing expenditures (business and leisure
travellers) affecting the total service chain – especially
additional guest expenses are reduced
• Lower priced budget- and midscale products benefit
• Well-positioned and managed hotels are more resistant
and better performing
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Changed rules of the game
for hotel owners and investors
Actual market environment
• Tourism sector generally proves to be very resistant
and is currently less vulnerable than other real estate
sectors like offices, logistics or shopping center
• Tourism industry is usually affected with delays (we
expect 6 months) – however experience shows that the
tourism sector is able to recover fast
• Desire to travel is not affected (eg 9/11 or Sars) but
concerns about who can (or wants) to afford it
• EMEA hotel transaction volume down by 81% in 1Q
2009 reaching the level of 2003– domestic investment
activities are dominant
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Changed rules of the game
for hotel owners and investors
Actual market environment
• New hotel developments are slowed down but the
market is still alive
• Project financing currently remains biggest challenge
• Political framework conditions in Hungary are rather
unfavourable (e.g. tax increase, announced real estate
tax, cut back on social benefits, etc.)
• Tourism in Hungary in general is not well organized –
lack of professional tourism organizations and efficient
structures to support tourism and related businesses
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Changed rules of the game
for hotel owners and investors
Table of Content
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13
About Kohl & Partner
Actual market environment
Changes and opportunities for hotel owners
Changes and opportunities for hotel investors
Conclusio
Changed rules of the game
for hotel owners and investors
Changed rules for hotel owners
• Operational costs are increasing, affecting the operator
performance and resulting in decreasing yields and asset
values for the owner
• Many smaller operators are having problems with their
cash-flows – flexibility from the owner-side required
• Re-Evaluation (and negotiation) of operator contracts
• Open and honest communication between operators,
owners and banks essential
• More involvement required - demand detailed business
plans for the next two years and review them on a monthly
basis
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Changed rules of the game
for hotel owners and investors
Opportunities for hotel owners
• Professional asset management: controlling, monitoring and
benchmarking makes the difference
• Understand your business and collaborate closely with your
operator jointly searching for possibilities to increase
profitability
• Internal evaluation and re-structering - review your business
model and operational concept
• Know the industry mechanism - don‘t cut back on sales and
marketing expenses and maintain rate levels
• If you have a good operator agreement stay with it – don‘t
loose a reliable long-term tenant for your asset
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Changed rules of the game
for hotel owners and investors
Table of Content
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About Kohl & Partner
Actual market environment
Changes and opportunities for hotel owners
Changes and opportunities for hotel investors
Conclusio
Changed rules of the game
for hotel owners and investors
Changed rules for hotel investors
• Increased equity capital demand – loan-value ratio of max. 55 60% when financed locally
• Rental agreements vs. management contracts without guarentees
• Contracts without guarentees require top renowned, international
operators like Hilton, Intercontinental, Marriott, Accor, Starwood…
• Professional and profound project due diligence crucial
• Professional hotel concept and management critical
• Investment optimization (hotel facilities, room sizes…) important
• Closer cooperation of all involved project proponents (investor,
constructor, operator, consultants) required
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Changed rules of the game
for hotel owners and investors
Opportunities for hotel investors
• Decreased project costs (especially land and construction costs) –
attractive opportunities for investors with strong financial
background and equity capital
• Distressed sales – currently limited as valuations and prices are
still too high but keep watching
• Demand from the operator side is high, especially for their budgetand midscale brands
• Lack of modern, quality hotels in Hungary and other CEE
countries – especially in secondary cities like Györ, Kecskemét,
Miskolc, Debrecen, etc.
• Spa, wellness and health tourism is one of the fastest growing
tourism segments in CEE -) good market opportunities
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Changed rules of the game
for hotel owners and investors
Table of Content
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•
•
•
•
19
About Kohl & Partner
Actual market environment
Changes and opportunities for hotel owners
Changes and opportunities for hotel investors
Conclusio
Changed rules of the game
for hotel owners and investors
Conclusio
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Back to basics or renaissance of common sense
Location, location, location even more important again
Professional concept and partners are a must
Profound market and industry know-how inevitable
Lack of quality hotels in Hungary – attractive market
opportunities remain
• If you are convinced of your operator be flexible and
patient – support your operator and jointly manage the
current turbulent times
• It‘s time again for realistic yield expectation
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Thank you!
Kohl & Partner Budapest Kft.
Kölcsey u. 4.
1085 Budapest
Hungary
Kohl & Partner Wien GmbH
Wallerstrasse 3
1010 Vienna
Austria
T +36 1 235 00 70
F +36 1 301 0793
E [email protected]
H www.kohl.at
T +43 1 532 6335
F +43 1 532 6335-20
E [email protected]
H www.kohl.at