Business News Algarve meets Andrew Coutts of ILM to talk tourism, hotel developments and the prospects for 2011

2 11 2010

Andrew Coutts, CEO & President ILM Group

CHALLENGES AHEAD FOR TOURISM INDUSTRY

In the first of our monthly Table Talk interviews, Business News Algarve managing editor Paul Rouse meets Andrew Coutts of ILM for lunch at Adega, the traditional Portuguese lakeside restaurant at Vila Vita Parc resort in Porches. Over pataniscas de bacalhau, chouriço, pata negra, black pork and a bottle of 23 Barricas red, they talked tourism, hotel developments and the economic prospects for the Algarve in 2011.

If anybody is qualified to predict where the Algarve’s hotel, leisure and resort development industry might be heading next year, then it’s Andrew Coutts. As President & CEO of ILM Group, he heads up Portugal’s most experienced and well-respected management consultancy in what is, undoubtedly, the region’s most important economic sector. And whilst there is some cause for optimism, the coming year is still going to be a tough one.

“The Algarve is a unique region within Portugal,” explains Andrew, “as tourism in all its forms touches every sector of the local economy. Whether you are directly involved, operating or working within hotels, resorts, golf courses, travel agencies and the like, part of the all-encompassing property sector, or even running a small restaurant, shop or service company, you are – and will continue to be – affected by the ups and downs of tourism.

“A lot of people might think that, having made it through 2010, the worst will be over, and that after three years of struggle, things can only get better next year. They should do. But not before we have seen some major casualties. Having propped up several ailing players in the resort and property industry in the Algarve over the past couple of years, I have a strong feeling that the banks are soon going to be saying ‘enough is enough’ and calling in their loans. Some key companies will almost certainly be going to the wall over the next few months, as the banks will have no option but to go for re-possession.”

Warning

It’s a salutary warning. Anybody driving around the Algarve in recent times cannot help but have noticed some very large projects in mothballs – hotel, property and resort developments where work had started prior to the credit crunch but where a new brick hasn’t been laid in many months. In some cases, the developers have merely held back, wisely deciding that it is pointless to add to the hotel or property stock when the Algarve is having enough problems filling the bed spaces it already has. In other cases however, the developers have quite simply run out of money.

“In some ways it’s probably good news for us,” says Andrew, allowing himself a wry smile. “The banks will need advisers and asset managers to help them turn tracts of land or half-finished projects into completed and fully-operational developments. And if we emerge with a leaner but fitter tourism industry, that can only be for the common good. The Algarve, in particular, is facing tough competition on the international stage, not just from established competitors in the sun-and-sea sector such as Spain and Cyprus but from emerging tourist destinations like Turkey and Egypt. The region needs to diversify its tourism product, improve its marketing, and ensure it offers value for money if it wants to remain a major force in the travel and property sector.”

It’s a subject close to ILM’s heart, and mindful that the industry needs hard facts, not just considered opinion, on which to make its judgements, the group has recently undertaken an extensive survey involving every four- and five-star hotel in the Algarve. The survey will look at occupancy rates in the past year, REVPAR (rate per available room) and other key performance indicators with a view to assessing how well, or otherwise, the industry has done in 2010, and highlight trends for 2011. The results are due to be published within the next few weeks and will be included in the next issue of Business News Algarve.

Fall

In the meantime, ILM has recently announced the results of another market survey, published in conjunction with the Algarve Tourism Association, into the region’s meetings industry market. And it doesn’t make for particularly encouraging reading. Compared to the figures for last year, the survey – based on interviews with leading Algarve hoteliers, destination management companies and other industry professionals – shows a worrying 30 per cent fall in room nights generated by the meetings sector.

Whilst still a popular destination for short events, particularly for groups between 10 and 60 participants, the region faces a challenge in attracting major conferences (not helped by the absence of a large international-standard convention centre), the spread of hotel rooms across a relatively wide geographic area, and the lack of direct flights from some key European cities. Other challenges include an over-reliance on the UK as a source market for events, and a lack of breadth across market sectors – around half of the events held in the Algarve for instance are currently generated by the pharmaceutical industry.

There’s that word again. Diversify. Has the Algarve, not just in the meetings sector but in the wider areas of travel and residential tourism, relied for too long on ‘safe’ source markets – if the concept exists any more of course? Or placed too much of its emphasis on its obvious assets, such as sun, sea and golf, at the expense of looking to broaden its appeal, and extend its tourism season beyond the obvious (and usually lucrative) May-September period?

ILM believes it has, and has identified several niche tourism markets which it feels the Algarve needs to embrace, perhaps better than it does at the moment. They include history, heritage, culture, nature, gastronomy and special interest tourism.

“The products are there,” says Andrew, “perhaps not as extensively as in some other regions of Portugal, but there nonetheless. The Algarve has historic buildings and museums, fabulous countryside and barely-explored areas of coastline, an up-and-coming food and wine scene, and perfect conditions for all sorts of special interest travel, from painting and photography to adrenalin adventure and sports training. They just need to be packaged and promoted with a little more imagination than we are currently seeing.

“The opportunity is also there to create more events that will bring in visitors, or add value to the lifestyle of those who choose to make the Algarve their home, permanently or otherwise. For obvious reasons, there hasn’t been much in the way of infrastructure development in the Algarve over the last two-to-three years, with the exception of the new motor racing track. But as the global economy begins to improve, as it soon must, and consumer confidence returns, the Algarve has to be in pole position as far as tourism development is concerned – if it isn’t going to get left behind on the starting grid.”

Adega is the traditional Portuguese restaurant at Vila Vita Parc resort in Porches. To read the Inspirations Algarve restaurant review go to Adega

The Algarve – a SWOT analysis

Andrew Coutts takes an honest look at the Strengths, Weaknesses, Opportunities and Threats vis-à-vis the Algarve’s tourism industry:

STRENGTHS

Solid popular attractions of sun, sea and golf
Strategic location close to key European markets
Wide-ranging infrastructure of hotels, residential property and golf courses

WEAKNESSES

Some tired-looking hotels
Lack of purpose-built tourist attractions (eg theme parks)
Shortage of airline capacity, especially in winter

OPPORTUNITIES

Increase number and variety of flights
Niche tourism
Expand Portuguese and Spanish incoming markets

THREATS

Losing market share within Portugal to newly-trendy Lisbon
Further downturns in UK and Irish economies
Traditional markets favouring more-competitive destinations (eg Turkey and Egypt)

IN FOCUS: ILM GROUP

Andrew Coutts founded Lisbon-based ILM in 1999, and has been living in Portugal for almost twenty years. Following a career in restaurant and hotel management with such prestigious names as Mosimann’s and Brown’s in London and Gravetye Manor in Sussex, he moved into hotel consultancy, first with Horwath, helping establish the Aroeira golf resort near Setubal, and then alongside Deloitte’s working on the master plan for Quinta da Marinha near Cascais.

ILM offers a range of consultancy services to the hotel, leisure and resort development industry, covering finance, planning, construction, marketing and all aspects of management. Working on everything from focused reports to complete turnkey projects such as the Hilton Vilamoura, its list of clients includes Vale do Lobo, IMOCOM, Herdade da Comporta, Ritz-Carlton, Grupo Vigia, Four Seasons and the municipality of Vila Real de Santo Antonio.

“I believe one of our strengths, especially when it comes to new hotel operations, is matching the product and the brand,” says Andrew. “We also do much more than produce feasibility studies and business plans. We project-manage, we advise, and even where necessary we’ll even mediate. It’s one thing to put clients and suppliers together: we also make sure that the relationship continues to be a smooth one. ILM offers a wealth of practical knowledge and experience beyond the theory, whether it’s helping a developer take a green-field site and transform it into a fully-operational resort, or coming in to a project at any stage and helping it progress.”

And in an ideal world? “Bring us in before you’ve bought the green field!” says Andrew.

Business News Algarve

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3 responses

3 11 2010
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10 11 2010
Gene Perez

I would love to do some traveling but its just not in the budget right now and I can see that for many that I come into contact daily ,,, may be why many progects are being moth balled and income is not going up in the U.S … who knows what 2011 will bring. ….commercial loans

25 11 2010
Tour

Thanks for this news.

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