A year in perspective - Hospitality Net• on-going Middle East crisis • terrorism in Europe 4 Global industry outlook pre-9/11 US - slowdown evident Europe - southern - strong -

1

A year in perspective- a review of the European hotel market and outlook

Nick van Marken Chris Rouse Mark Finnie

2

Nick van Marken

3

Where were we pre-9/11?

Economic environment

• volatility in global markets (notably TMT sector)

• slowdown in the US; stagnation in Japan

• uncertainty over growth in Germany

• debt default in Argentina

• foot and mouth outbreak in UK coming under control

Political

• on-going Middle East crisis

• terrorism in Europe

4

Global industry outlook pre-9/11

US - slowdown evident

Europe - southern - strong- northern - variable- overall revPAR growth positive

Asia-Pacific - mixed - general recovery in progress

Middle East - mixed - Intifada impact

5

Europe - revPAR % change to August 2001

14

29

1311

8 8

3

(3)

11 11

3

13

8

1

(6)

(2)

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

Mosco

w

Milan

Barcelo

na

Madrid

Geneva

Lisbo

n

Athens

Rome

Paris

Frankfu

rt

Brusse

ls

Prague

Berlin

Dublin

Lond

onAmste

rdam

Recovery Growth potential Peak Supply risk Slowdown

6

Post - 9/11 - “all bets were off”

Immediate impact• global crisis of confidence

• airlines slash routes and staffing

• significant decline in US outbound traffic

Market impact• significant decline in gateway city revPAR

• upscale sector most affected

• provincial markets relatively insulated

• balance sheet pressure; capex cuts

7

revPAR % change by market tier - Sept-Dec 2001

-35

-30

-25

-20

-15

-10

-5

0Amsterdam Frankfurt London Paris Madrid Rome

Top Mid Lower

8

Where did we end 2001 - revPAR % change

Number of citiesAug YTD 2001

<0%

0-10%

10%+

7

13

9

10%+

0-10%

<0%

1710

2

9

Europe & US - tracking each other? - monthly revPAR % change - 01/02

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

Janu

ary

Februa

ry

March

April

May

June July

Augus

tSep

tembe

r

Octobe

rNov

embe

rDec

embe

r

Janu

ary

Europe (€) US$

10

revPAR performance - Europe (2000-02)

-25

-20

-15

-10

-5

0

5

10

15

20

25

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan

(% c

hang

e)

2001 20022000

11

revPAR performance - London (1999-02)

-50

-40

-30

-20

-10

0

10

20

30

40

Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan

(% c

hang

e)

2001 20022000

12

revPAR performance - Paris (1999-02)

-40

-30

-20

-10

0

10

20

30


(% c

hang

e)

2001 20022000

13

revPAR performance - Berlin (1999-02)

-30

-20

-10

0

10

20

30

40

50


(% c

hang

e)

2001 20022000

14

revPAR performance - Rome (1999-02)

-30

-20

-10

0

10

20

30

40

Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan(% c

hang

e)

2001 20022000

15

revPAR performance - Madrid (1999-02)

-20

-15

-10

-5

0

5

10

15

20

25

Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan(% c

hang

e)

2001 20022000

16

revPAR performance - Amsterdam (1999-02)

-20

-10

0

10

20

30

40

50


(% c

hang

e)

2001 20022000

17

So, what of the future?

Economic/political• Improving outlook• Uncertainty over US intentions in Middle East• Potential volatility - notably oil price

Market• Improved travel outlook - upturn in airline passengers• Gateway revPAR decline is decelerating rapidly• Transaction activity has and appears likely to continue• Values should continue to trend upwards

We will, however, continue to live with uncertainty

18

Chris Rouse

19

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

1999 2000 2001 2002 YTD

Euro

M

Euro Zone Other Non-Euro ZoneUKSource: Insignia Hotels

Transaction volumeEuro versus non-Euro zone

20

-

0

200

400

600

800

1,000

1,200

1,400

France Germany Italy Sweden Netherlands Spain

199920002001

Source: Insignia Hotels

EUR

O M

Transaction volumeMajor Continental European markets

21

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

France Germany Italy Sweden Netherlands Spain UK

199920002001EU

RO

M


Transaction volumeMajor European markets

22

Major corporate transactions

Group Buyer Price(€m)

Principal Hotels Nomura PFG 395Heritage Hotels Macdonald Hotels

Bank of Scotland 374Posthouse Hotels 6 Continents 1,293Swissôtel Holdings Raffles Holdings 268Scandic Hotels Hilton Group 971Le Meridien Group Nomura PFG 3,148Astron Hotels (2002) NH Hotels 161Total 6,610

23

Compass’ disposal of Forte Hotels

Entity Buyer Price(€m)

Cavendish Hotel De Vere Hotels 97Cumberland Nomura PFG 240Regent and Strand Palace* London & Regional 170Heritage Hotels Macdonald Hotels 347Posthouse Hotels 6 Continents 1,293Le Meridien Group Nomura PFG 3,148Return of Forte Name Sir Rocco Forte 0Total 5,295

*unlikely to compete

24

European transactions by country

Europe 1999 (%) Euros 6.9 bn

64% 8%

6% 9% 3%1%4%

5%

SpainFranceSwedenItalyIrelandGermanyOtherUK

Europe 2000 (%) Euros 5.8 bn

26%

31% 7%

4%

22%

3%7%

Europe 2001 (%) Euros 11.3 bn2%

23%

1%2% 9%

63%


25

Impact of foot and mouthon the regional UK market

0

10

20

30

40

50

Jan Feb Mar Apr May Jun Jul Aug Sep0

100

200

300

400

500

600

700

800

900

1,000

RevPAR, £ FMD Cases

FMD

Cas

es

Rev

PAR

, £

Source: Andersen, DEFRA

26

Transaction volume per month 2001

0

200

400

600

800

1,000

1,200

1,400

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Tran

sact

ion

Volu

me

(bar

s)M

Eur

os

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

Roo

ms

Sold

(lin

e)


27

Sources of investment capital (%)

AsiaMiddle EastUSEurope

2000

0.8% 0.4% 2.3%

96.5%

2001

95.7%

2.4% 0.9% 1.0%

1999

1.9% 8.2%0.4%

89.5%

28

Sources of investment capital (€m)

0

500

6,000

7,000

8,000

9,000

10,000

11,000

12,000

1999 2000 2001

Asia

Middle East

US

Europe

29

European yields

Hotel Country Yield

(%)

Posthouse Hotels UK 12.7

Villa Magna Spain 10.6

Le Meridien Worldwide 10.0

2 Hotels Sweden 9.0

12 Meridien UK 7.6

11 Hilton Hotels UK 6.9

Heathrow Park UK 5.7

30

Mark Finnie

31

2001 - A pretty uneventful year!

Jan 1 Dec 31Accor €45 €41Hilton Group 209p 211pNH Hoteles €13 €11Six Continents 729p 680pWhitbread 550p 549p

32

2001 - Key events for the market

• Trading - pre- and post

• M&A

• New sources of funding

• Equity market review

• Outlook

33

M & A

34

New sources of funding

35

Hotels sector vs property sector

Source: DATASTREAM

1997 1998 1999 2000 2001 200255

60

65

70

75

80

85

90

95

100

105

UK HOTEL SECTOR

UK PROPERTY SECTOR

Note: Share price performance relative to FT All-Share

36

Equity markets - winners and losers

NB: Relative to Eurostoxx

(3%)

+6%

+13%+16%

+23%+26%

Hilton Group Whitbread SixContinents

Accor NH Hoteles Sol Melia

37

Multiple expansion

Note: 2001 EBITDA multiple - European hotel sector

8.4x

7.8x

7.6x

January 2001 June 2001 December 2001

38

Constrained supply growth

• The most reassuring aspect of all? Source: Jones Lang LaSalle

0

5

10

15

20

25

London

Paris

Stockholm

Berlin

Frankfurt

Mad

rid*

Barcel

ona

Brusse

ls*Amste

rdam

Pragu

e*Euro

pe aver

age

% g

row

th

1990-92 1998-00

39

Outlook - M &A

Willing buyers Willing sellers

?

40

A final thought . . .Who is being ‘long-term’ now?

Capex budget Share price

(%)

Hilton Cut +22

Accor Cut +30Sol Melia Deferred +9Millennium & Copthorne Deferred +24NH Hoteles Cut +11Whitbread Deferred +35

Note: Share price movement since September 20

Documents

A year in perspective - Hospitality Net• on-going Middle East crisis • terrorism in Europe 4 Global industry outlook pre-9/11 US - slowdown evident Europe - southern - strong -