Bat­ten­ing down for the crunch

So far it hasn’t af­fected book­ings in Africa and Asia

Finweek English Edition - - Business Strategy - SHAUN HAR­RIS shaunhar­ris@ya­

DIS­POS­ABLE IN­COME is un­der grow­ing pres­sure, par­tic­u­larly among gen­er­ally wealth­ier con­sumers in de­vel­oped coun­tries. Jean-Paul Her­zog, pres­i­dent of Hil­ton Ho­tels in the Mid­dle East and Africa, knows the credit cri­sis crunch must be com­ing. He notes a soft­en­ing in the mar­ket and tail­ing off of book­ings since late last year. But not sig­nif­i­cantly, he says.

Apart from re­gional fac­tors that might of­fer some pro­tec­tion in the Mid­dle East and Africa – “Hil­ton has been pretty hard hit in the United States” – he’s also re­alised travel and stay­ing at top-end ho­tels has to some ex­tent moved be­yond dis­cre­tionary spending. “I think peo­ple who are used to trav­el­ling con­tinue to make their ar­range­ments.”

In his re­gions the sec­tor that has proved to be par­tic­u­larly re­silient is the leisure mar­ket. “It’s hard to gen­er­alise, be­cause our cus­tomer base changes so much be­tween dif­fer­ent ho­tels and dif­fer­ent coun­tries. But on av­er­age about half the mar­ket stay­ing at the 41 ho­tels in my re­gions is leisure. And they’re still trav­el­ling. For many it seems a hol­i­day abroad has be­come a ne­ces­sity of life. Var­i­ous stud­ies show that. For ex­am­ple, in Europe it’s al­most con­sid­ered a birthright that you have two over­seas va­ca­tions a year. Those guests are still trav­el­ling.”

Does that mean wealthy peo­ple aren’t feel­ing the re­ces­sion over­seas? “I don’t be­lieve that’s the case. It’s rather that trav­el­ling, even for leisure, con­tin­ues to hap­pen. For ex­am­ple, in Africa and the Arab penin­sula re­gional travel is very im­por­tant.”

What Her­zog be­lieves might also be giv­ing Hil­ton some pro­tec­tion from the eco­nomic slow­down is that it’s a well-known name world­wide. “When peo­ple travel out­side their coun­try they want to stay at ho­tels they know, that they see and are fa­mil­iar with at home.”

Founded in 1919 by Con­rad Hil­ton, there are a num­ber of Hil­ton brands. But un­der the main Hil­ton brand the group has 533 ho­tels in most of the world’s cap­i­tals. Their lo­ca­tion of­ten makes them the scene of news events, in­clud­ing some high pro­file mur­ders and at­tempted as­sas­si­na­tions. But the ho­tels have also been the back­drop for more peace­ful hap­pen­ings. In March 1969 John Len­non and Yoko Ono stayed at a Hil­ton in Am­s­ter­dam to stage one of their (naked) “Bed-Ins for Peace”. Room 702 at the Am­s­ter­dam Hil­ton is still on the tourist map.

How­ever, Her­zog says if there’s no up­turn soon, Hil­ton ho­tels in his re­gions must be af­fected, so he’s al­ready putting mea­sures in place. “For in­stance, we’re of­fer­ing more flex­i­ble pric­ing. Not nec­es­sar­ily cheaper rates, but in­cen­tives – for ex­am­ple, for early book­ings. What we’re say­ing is that to keep our cus­tomers we have to prom­ise more and de­liver more.”

Sav­ings mea­sures are also in place, though Her­zog says he hasn’t yet had to im­ple­ment any re­trench­ments in his re­gions. “But we have to be care­ful so we haven’t been re­cruit­ing new staff since late last year. What’s so dif­fi­cult about this down­turn is that we don’t know where the bot­tom is, which makes it very dif­fi­cult to man­age. We’ve held meet­ings and looked at fore­casts, but about the best we can do is take it one quar­ter at a time. We’re be­ing care­ful about spending but not to the point where it af­fects the qual­ity of what we of­fer.”

Hil­ton ho­tels are of­ten as­so­ci­ated with busi­ness travel and cater for that with con­fer­ence and com­puter rooms and gyms. But Her­zog says the dis­tinc­tion be­tween busi­ness and leisure trav­ellers is also start­ing to blur. “Busi­ness peo­ple aren’t like they were 10 to 15 years ago. The nine to five work­ing day is go­ing. Of­ten a per­son will check in be­cause he’s do­ing busi­ness but will ex­tend his stay for a few days to travel and visit the city he’s in.”

De­spite the down­turn, Her­zog says Hil­ton is com­mit­ted to Asia and Africa. “There are cur­rently 16 ho­tels un­der construction in my re­gions – that’s more than 5 000 rooms. The ho­tels in Africa have been a very sta­ble per­former for the group, con­sis­tently pro­vid­ing good re­sults.”

Her­zog says Hil­ton is looking at ex­tend­ing its port­fo­lio in SA, prob­a­bly with some of the other Hil­ton brands. Those in­clude a fo­cused tourist brand and bou­tique ho­tels.

Trav­ellers still trav­el­ling. Jean-Paul Her­zog

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