View from City Road: Punch-up at the Hotel Britain

The 248-page annual tome from Kleinwort Benson Securities on the world markets for publicly quoted hotel companies foreshadows a big fight for profits in the UK this year at the expense of the small, independent operator. Equally likely is a significant round of acquisitions in Continental Europe.

Quoted UK companies hold enormous sway over the home market. There are 49 of them, owning one-third of hotel rooms in the UK, and they account for half the sales and two-thirds of profits of the entire hotel industry.

But despite the recent signs of recovery in UK occupancy levels - up by 8.9 per cent to 28.3 million room nights in 1993 - the yield or total income per room remains under pressure.

This is partly because the UK market for business travellers is maturing and the hotel companies are having to offer cheaper, lower- margin packages. London operators have had to sell their bottom lines if not their souls to claim their share of the growth in first- time travellers from the US.

The big, star-encrusted hotels are tapping more deeply into the growing demand for everyday leisure facilities as a matter of necessity. This is bad news indeed for smaller three-star operators.

Quoted hotel companies have about 10,000 too many rooms in the UK. Sooner or later these will have to be dumped on the market. More bad news for the small man.

While they are fighting for a static or falling market at home, the bigger operators can only satisfy their appetite for physical expansion by buying hotels overseas.

Kleinwort says that UK hotel companies already generate 46 per cent of profits overseas. In the medium to long term it expects this proportion to rise at an increasing rate. This helps to explain the recent big bidding in the auction for Ciga, the deep-pile, deep-debt Italian chain owned by the Aga Khan. And the Meridien chain controlled by Air France already has several suitors queuing at the reception desk.

For independent operators in the UK, it is perhaps tempting to sell up and take some short-term breaks at their bigger rivals' hotels.