Hotel industry has turned a corner

Global hotel industry is likely experience growth by the end of this year after being battered by the economic downturn, says Fairmont chief.

Tom Storey, the president of Fairmont Hotels, predicts rates will begin to rise in the third or fourth quarter of this year.

The global hotel industry is likely to start experiencing growth by the end of this year after being battered by the economic downturn, the president of Fairmont Hotels and Resorts says. "Occupancy globally has pretty much stabilised," said Tom Storey, the president of the hotel management company that is majority-owned by Saudi Arabia's Prince Alwaleed bin Talal bin Abdulaziz Al Saud through Kingdom Holding.

"[The] average rate continues to be soft and probably will be for the next quarter or two," Mr Storey said. "But I think that coming into the third or fourth quarter of 2010, we're going to start to see rates building back up again, so my hope is that by 2011 we're going to start seeing revenues growing in an absolute sense again in the hotels." Mr Storey said that globally, Fairmont hotels had suffered a 20 per cent fall in revenue per available room, a benchmark industry indicator, across its 59 hotels last year compared with 2008.

But he said it had increased its market share, while the global market declined by between 25 and 27 per cent. Fairmont's Dubai hotel experienced a decline of between 25 and 30 per cent. But the hotel had a US$9.5 million (Dh34.8m) renovation last year. "Compared to the way the hotel was performing in 2007, it's not generating the same revenues it was in 2007, but it's still a very profitable hotel," Mr Storey said.

The Fairmont Palm Jumeirah hotel, however, which is being developed by IFA Hotels and Resorts, is facing severe delays. "It's a funding issue, like a lot of the developments that are under way here," Mr Storey said. "I think they were developing it with proceeds from residential real estate sales and they had certain funding support from their banks, and as a function of the slowdown of the real estate market it has probably affected their ability to release the funding on the bank loans.

"At this point, I'm not sure exactly when it will open, but I'm fairly confident that within the next year or two it will." Fairmont, which opened its Bab Al Bahr hotel in Abu Dhabi this year, is planning further expansion in the Gulf in Bahrain, Oman and Qatar, Mr Storey said. It has already signed an agreement to manage a hotel in Fujairah and another hotel in Abu Dhabi. Fairmont plans to open seven hotels worldwide this year. This will include the reopening of the Savoy in London in the second quarter after a two-year, £100 million (Dh598.9m) restoration programme, and the Mecca Clock Royal Tower hotel.

Other hotels due to open under the management company in the second quarter include the Peace Hotel in Shanghai and the Fairmont Zimbali Resort. Hotels in Vancouver, Pittsburgh and Beijing will all open their doors in the coming weeks, Fairmont said. "Most of these projects have been in development for three to four years, so in order to get the value back out of it you almost have to open them, even if you're opening into a downcycle," Mr Storey said.

"Any time you have the Savoy opening after a renovation, it is going to have an immediate natural following because it's such an iconic hotel." @Email:[e-mail]