Oversupply in Jersey's 4 & 5 star hotel market?

2007 will herald the opening of a 190 bedroom Radisson Hotel on Jersey's Waterfront along with a rebuilt Royal Yacht Hotel and a refurbished Grand Hotel. These join the recently refurbished Hotel de France, Pomme d'Or Hotel and Club Hotel & Spa to compete in the 4 & 5 star market. By the end of next year nearly a quarter of the island's beds will be in this range and the key question is will there be enough business to go around? The hotels are going to compete in 3 key markets - business, short break, meetings & conference. So let's look at each of these markets in turn.

1. Business visitors. Following 9/11 corporate organisations dramatically cut back on business travel & in the four years following 2001, business visitors to Jersey fell by a total of 24% to 56,640 in 2005. After an initial reduction due to the terrorist threat, businesses realised that in many cases travel had become unnecessary as modern systems allowed more cost-effective communication. At the same time the average length of stay for those still making a business trip to the island fell by almost 13% to just over 2 nights in 2005. This trend appears to have flattened out in 2006, but nonetheless these figures must be of some concern to the new hotels seeking to carve out a share of an at best flat market. The business visitor market is created to a large degree by the Finance industry. A downturn in this sector could spell disaster.

2. Leisure visitors. The leisure market has also declined sharply, but much of this has been at the 1 & 2 star end of the market. As consumer expectations have risen, so 4 & 5 star properties have benefited. There is no doubt that this is where the future growth for leisure breaks is going to be focused, as the so-called 'Cosmopolitans' seek modern & comfortable higher-end accommodation providers. The problem is that the market is predominantly for short breaks, travels at weekends & acts on impulse booking within a few days or weeks of departure . Anyone who has tried booking an air seat in or out of Jersey on a Friday & Sunday will know that the cost is prohibitive and with so many other short break destinations available, Jersey will find it very hard to compete, unless more capacity is added at weekends on key routes.

3. Meetings & Conference. Again a market that has seen decline in recent years, although this was partially due to the temporary closure of the island's key conference hotel - the de France. However the lack of a modern, attractive conference centre (Fort Regent is no longer acceptable) the opportunity to attract larger association events is virtually nil. There is also the on-going issue of access - the airport's location dictates that on a certain number of days a year fog prevents any aircraft movements. Organisers of large conferences simply cannot afford to have the risk of a major event being completely written-off due to weather. There is evidence that conferences are getting smaller & certainly the new properties are well placed to take advantage of this market.

So the huge investment (c. £140 million) in high-end hotels, entirely undertaken with private investment is seen as testament to the industry''s belief in the future of tourism in Jersey. With almost 1000 additional beds entering the 4 & 5 star market next year, investors will be holding their breath to see whether their dream turns into a nightmare.