GLOBAL - Hotel markets worldwide will continue to suffer in 2009 but operators should use the downturn to step up their game, according to a report by Ernst & Young (E&Y).

The US 2009 lodging report, which covers the major international hotel sectors and lodging segments, predicted the global hospitality industry will continue feeling the pressure from reduced less leisure and business travel, slowing economies and falling values.

Michael Fishbin, national director of Hospitality Services at Ernst & Young, said:  "As a result, this year we will see hotel operators continue to focus more of their energies on cost reduction, improving operating efficiencies in their hotels, reaching out to guests via enhanced internet communication and strengthening their brands through an emphasis on green principles in activities related to both development and operations."

According to the report, hotel companies should be focusing on developing their business by cutting costs and improving their brand presence on the internet to strengthen their businesses for the next cycle. 

E&Y's research suggested regions like Asia Pacific, the Middle East, North Africa and Latin America may offer better opportunities for hotel investors in the current downturn, as they have large growing economies and relatively few hotels.  China, India, Vietnam and Brazil are expected to be among the strongest growing markets.

With governments thought to be looking at punishments for large carbon footprints, and the LEED certification for hotels expected to become available to hotels in the US this year, hotel operators are pushing sustainability higher up the agenda.

At least 415 hotels in the US have already gained or registered for LEED certification with the US Green Building Council.

The report said further US government investment in infrastructure would largely improve the US hospitality sector by improve access to key tourist locations and encouraging domestic travel.

Going forward, E&Y said it expected areas around hotels will develop mixed uses, with hotel developments being mixed with office or rental accommodation to better suit market conditions. Condo hotel properties are likely to become scarce in new developments.

With new loans set to be very scarce and $19bn (€14.9bn) of loans in commercial mortgage-backed securities set to mature in 2009, E&Y has predicted hotel borrowers will modify loans or search alternative ways of recapitalising assets.

The US' Financial Accounting Standards Board's (FASB's) Fair Value Measurements are likely to become more important for hotel companies in 2009, as they look for better understanding of values in the economic downturn.

A recent E&Y survey of US real estate investors showed 60% intend to take advantage of market re-pricing and buy commercial real estate. Private equity firms have already raised $400bn for distressed debt sales and E&Y said it expected investors to start investing before the end of 2009.

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