Battening down for the crunch
So far it hasn’t affected bookings in Africa and Asia
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