Among Asian Chains, Only Nikko Holds Position

<B> Among Asian Chains, Only Nikko Holds Position</B>

By Maria P. Vallejo

Asia-based hotel companies continue to make their presence felt in the industry this year, but some chains lost their footing because of travelers' changing preferences in service style and a reduction of North American travel to the continent in the wake of the Asian financial crisis.

"I'm finding that the tastes and requirements of the market, even in Asia, are preferring the casualness of Western-managed hotels," said hospitality analyst Wayne Williams, president of Los Angeles-based Williams & Associates. "The formats within those hotels are far less formal, and the Western hotels are gaining market share because of it."

Williams, who specializes in Asia-based hotel companies, said even high-end American business travelers increasingly prefer a more relaxed service style than was customary in the past few years. Instead, today's business traveler is opting for the more personalized type of recognition--like finding their favorite books or wines waiting in the room when they check in--that is the promise of the newest guest-history databases.

For years the elaborate service provided by Asian hotel companies was considered the pinnacle of the hospitality industry. The continent was known for an employee-to-guest ratio that often put two or three hotel employees at the disposal of each traveler, offering everything from personal butler service to speedy responses to requests.

"It's nice to have someone appear at your door at night and offer you a selection of soaps, but it's even nicer to have someone greet you at the lobby of the hotel," said Williams. "It's the casualness of the service that's appealing. Now even the Asians are traveling and saying they like casual service. The Asian companies have not completely learned to find that happy medium. "

Meeting planner Patty Danielecki, who handles about 50 meetings a year for Bristol-Meyers Squibb, also was appreciative of the service Asian chains like Shangri-La offer corporate customers. "For us, the most important thing is the availability of the hotel representative and the quickness of their response," she said. "Shangri-La reps are incredible in customer service. They truly represent their properties and represent them well."

<CENTER><B>New Technology Redefines Service</B></CENTER>

But the emergence of guest history technology in Western hotels has overshadowed some of the Asian companies. In the battle between Eastern and Western service, analysts and travel buyers agreed that Asian companies provide exemplary levels of service, but their style is too aloof for the new breed of road warriors.

"Western hotel companies have been reinvesting drastically in quality of service, where Asian hotel companies have been doing the same thing," said a hospitality analyst. "The Eastern hotel companies think lots of employees in a luxury hotel are the key to success. The cumulative effect of the sameness and quietness of Asian service is not playing as well as the attentive and proactive service of Western hotel companies."

Still, some travel and meeting buyers disagreed with that assessment, arguing that the Asian style of service is precisely the reason that many travelers choose those hotels.

"I think that Asian hotel companies are known for exceptional graciousness and hospitality," said Carolyn Pund, senior manager of corporate meetings at Nortel Network in San Jose. "I don't think Western service is necessarily more friendly than Eastern service."

Pund, who books about 100 meetings a year, consistently uses the Pan Pacific in San Francisco because of the service it provides to Nortel's top executives and its willingness to assure them availability. "They're very high-end and give our executives a feel of class," she said. "Many of our travelers are looking for that Asian influence and pampered feel, with the mats out and slippers and the private conference center. They bend over backwards to make your meeting happen for you."

Still, only one Asian hotel chain--Nikko Hotels of Tokyo--retained its position in the survey from last year, holding on to fifth place in the upper upscale category. Nikko officials believe their success is a result of their continued focus on the U.S. and European business travel markets. Even prior to the financial crisis, the company focused its efforts on expanding inbound travel, and as a result was less reliant on intra-Asian business.

"A lot of the Asian hotel companies have been centered around giving the Asian guest a place in the Western market where they feel comfortable," said Nikko director of marketing support Evelyne Sansaricq. "We have been focused on mixing our market and on the international traveler, not just the Asian market."

Nikko Hotels also is mixing its service styles to meet the various needs of its international travelers. Depending on a property's location and its primary customer base, the hotel company designs services tailored to meet the unique demands of its clientele.

At the same time, though, it is not giving up on its home market. "To survive in this competitive industry, we have to switch to other areas and focus on other international business travelers, like Europeans, Latin Americans and those in the United States," said Eikon Ito, vice president of Hotel Nikko USA. "But we still need to spend money and effort in Asia, because Asia will be coming back."

Still, analysts and insiders agree that the economic crisis has caused a reduction in travel to Asia, and a difficult year for its hotel companies.

"This year, travel has been fluctuating because of the financial crisis," said corporate travel manager Dorian Stonie at Verifone in Santa Clara. "It's definitely having some major impact on business in the Asian markets. We tend to see consolidation of businesses in the markets where it affects our product lines."

Verifone, an Internet commerce division of Hewlett Packard that includes Singapore-based Pan Pacific Hotels & Resorts among its preferred suppliers, delivers almost 1,000 room-nights a year to the company's Asian properties.

Slipping from fourth to ninth place this year in the upper upscale category, Pan Pacific encountered a wide fluctuation in its U.S.-based business, with transient and group travel dropping only 1.5 percentage points in Bangkok, but 50 points in Jakarta, said Ron Drake, Pan Pacific's corporate director of marketing and sales.

"Our business make-up in Asia has changed over the past year, to a greater percentage of discounted leisure business at the expense of higher yield corporate business," Drake acknowledged. "If there is a negative perception of the Asian marketplace, it may be attributable to the unrest in Indonesia being seen by U.S. business travelers as affecting all of Asia, and in particular, Southeast Asia. U.S. multinationals operating in Asia have less demand for their products in this part of the world."

Chainwide occupancy remains in the mid '60s, while the average daily rate has continued to drop, he said. Collectively, Asian travelers comprise 60 percent of Pan Pacific's business, with U.S. travelers making up another 30 percent and European travelers, 10 percent.

With clouds hanging over the continent, U.S.-based corporate travel buyers have been successful in negotiating greater discounts this year. Many high-volume corporate accounts have received between 25 and 30 percent reductions in room rates over 1998, Drake said, and some four-and five-star hotel rooms are going for as little as $40 to $65.

Despite Pan Pacific's drop in the survey, buyers continue to use its properties not only because of its low rates, but also for the company's willingness to bend to its customers' visions for their individual travel programs.

Stonie at Verifone, which has listed Pan Pacific in its hotel directory for the past eight or nine years, cited as an example its help as Verifone moves to an Internet booking product. As of December, fully 54 percent of Verifone's travel was being booked online. The company hopes to shift all its simple bookings in that direction eventually, and asked its preferred hotel partners to help in the effort by providing real-time booking capability and single-image inventory systems.

"Ultimately for us the hotel side has been the weak link in the Internet booking process, especially in the ability to access negotiated rates and inventory," Stonie said. "But Pan Pacific has been very open to it. The hotel industry is just at the start of this new technology cycle. There is such a fragmented infrastructure among hotels that it's a lot more difficult to get them into a uniform direction."

<B><CENTER>Shangri-La Scores Above Expectations</CENTER></B>

Shangri-La Hotels & Resorts jumped into fourth place in the deluxe category this year after being moved from the upper-upscale segment. Analysts said they were surprised at its high ranking given the problems encountered by other companies.

The Hong Kong-based company experienced a 10 percent reduction in inbound business travel from the United States, according to senior vice president of marketing Robert Hutchinson, with U.S. corporate travelers now accounting for 16 percent of Shangri-La's business.

During the past year, the company saw domestic demand from Chinese travelers increase after it opened Shangri-La and Traders hotels in secondary cities. It now has 36 properties in its portfolio, and three new hotels--in Harbin, Wuhan and Beijing--are scheduled to open within the next six months.

Still, "while the current economic downturn has affected Asia as a whole, its impact ranges considerably from country to country. Asia is often viewed as one land mass with the same set of issues and problems, which is simply not the case," Hutchinson said.

Some companies contradict the argument that U.S. travel to Asia has actually fallen during the past year. At Peninsula Group, based in Hong Kong, U.S.-based travel and European travel remained steady and possibly increased, said sales and marketing manager David Katemopoulos. It was the intra-Asian leisure travel market that was affected the most.

"Our hotels are in destinations that have escaped relatively lightly in the economic crisis, although each has been affected," Katemopoulos said. "U.S. rates have held, with the Peninsula New York coming in November. Pricing strategies have altered in Hong Kong, where the Peninsula is still the highest rate in town, while occupancy was allowed to drop, in a deliberate move. The four-star Kowloon Hotel competed on room rates, but had higher occupancy rates."

Peninsula's properties may have escaped the financial crisis, but at least one project was delayed. Company executives have temporarily halted the new Jakarta hotel, citing financial problems in Indonesia.