Return to Transcripts main page
QUEST MEANS BUSINESS
Central Banks Offer Cash on the Cheap; Britain Sees Biggest Strike in Generation; 10 Days to Save the Euro
Aired November 30, 2011 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST, QUEST MEANS BUSINESS: It's a credit cornucopia. Six central banks offer up a crate of cash on the cheap.
Going all out against austerity, Britain sees its biggest strike in a generation.
And we have 10 days to save the Euro. We begin the countdown tonight.
I'm Richard Quest. I mean business.
(BEGIN VIDEO CLIP)
(END VIDEO CLIP)
QUEST: Good evening. It was another extraordinary day in the short life of the Euro and the Eurozone. The next 10 days are said to be crucial for the survival of the Zone. And they are not my words, they are the words of Olli Rehn, the European Economics Commissioner.
We will be counting down the next 10 days, looking for signs of progress or, indeed, signs of relapse. And today, the central banks administering emergency treatment. Tonight, we will give you the prognosis of what is going to happen and the actions that they took. Join me as we show you what the central banks around the world did today.
They announced a collective measure that sparked euphoria on the markets. The six central banks, the Fed from the U.S., the Bank of England, the Bank of Japan, the ECB, the Swiss, and the Banque du Canada are taking joint steps to add liquidity to the global financial engine. Fearing that things were about to seize up, these six said they will investigate and they will introduce dollar swaps, pound swaps, yen, euros, the lot.
They're making it cheaper for banks to trade in U.S. dollars - cutting it. Cutting the rate they buy by a half a percentage point. It's a temporary measure to ensure credit and soothe the nerves. The banks tried a similar plot in September. This time, the collective weight of the Fed and all the others are also making it easier to swap currencies.
Another central bank is loosening its monetary policy, too. China's central bank has lowered the reserve ratio lenders are required to keep. It will make it easier for banks to lend out money. Like a rocket, it has got the market completely and utterly excited. We've seen the biggest three-day gain since 2009.
This is the Dow Jones Industrial at the moment. It is pushing 12,000 off the best part of the session. It was up 3.7, 3.6 percent. But still a gain at the moment of four percent - of nearly 400 points. And one of the reasons, also - a report from ADP on jobs, which showed that job creation might actually be happening at a faster rate than was first thought.
On the currency markets, it was not so much the dollar that suffered, but the euro that gained. The euro really put on strength against the U.S. dollar. The dollar did gain against the pound, and the Swiss franc also against the dollar as well. Apparently, riskier currencies - some perceived to be, like the pound and maybe the dollar, are also more in favor.
And as for the European Stock Markets, they roared up, too with good gains. The best being in the Xetra DAX and the Paris CAC currant. London with banks saw very sharp gains, as did Spain, Italy, Ireland, and Greece. And, of course, when New York opened, there was a very big rally on the DOW.
It all seems the markets have jumped on any excuse for a rally. Earlier, I spoke to Alan Clarke, the Eurozone Economist, at Scotia Bank and Scotia Capital. I asked him, "When you take what happened today for the euro, why did the central banks step in now?"
ALAN CLARKE, EUROZONE ECONOMIST, SCOTIA CAPITAL: There's two or three things going on. The first is that it may be something bad going on. They may know something that we don't. There may be a European bank in trouble and they're taking preemptive action - coordinated action - to rescue that bank and stop it spreading everywhere and making another Lehman situation.
The other is that we're getting close to the year-end. And banks are increasingly unwilling to take risks. If they've made lots of money, they don't want to lose it. If they've lost lots of money, they're trading this on and taking more risks.
QUEST: But these swap lines between the banks have been in place at least since May of last year. And they've been repeatedly renewed. So all that's really happened here is bilateral lines and a reduction in the pricing.
CLARKE: That's right. I mean, they introduced it two or three months ago. Euphoria for 48 hours, and then it went away. It's become cheaper. These swap lines were one percent above, so short-term interest rates nearly half a percent. So it's cheaper and it's more realistic as a backstop to use.
QUEST: But when we see markets up three and a half percent, the DOW is up very strongly, the DAX up four percent. Isn't that, again, out of proportion to the announcement?
CLARKE: It is. I think there's other things contributing. There's some incredibly good jobs numbers in the States. Some good housing numbers in a business survey. So that's probably making people think, "Well, maybe we're not headed for such a bad global recession".
QUEST: In the U.S. side, things are still very grim in Europe?
CLARKE: Absolutely. And we've - we're already in recession in the Eurozone. The U.K., I think, is already in recession. But it will take several months before the data actually confirm that.
QUEST: We had Ecofin talking on the EFSF. Does anyone understand how this thing is meant to work?
CLARKE: I don't think so. If people are losing patience - I think what people are really hoping for is the ECB pulls its finger out and buys lots and lots of government bonds. If they do the same proportions the Bank of England did - 13 percent of GDP, maybe 20 percent in QE2 - we're talking one and a half to two trillion euros of bond buying. That will convince markets that interest rates shouldn't be as high as they currently are. But they don't want to be the first to flinch.
QUEST: And to those who say that is a recipe for inflation - there's an element that inflation will be stoked by that.
CLARKE: We know how to deal with high inflation. You can hike interest rates. You can reverse these asset purchases. But if there's a disaster, it's incredibly hard to unwind it as we saw in the aftermath of Lehman's.
QUEST: Tonight, do you believe we are one stage back from the edge of the cliff as a result of the events of today?
CLARKE: Maybe ever so slightly. There's some more (INAUDIBLE) action. But things have got to get really, really bad for the authorities to take the right action to turn to the good. So it's going to get worse before it gets better, I think.
QUEST: A rather pessimistic view and maybe one that we can take into account when you hear what Olli Rehn says.
Olli Rehn isn't getting carried away. Far from it. He is the E.U.'s Economics Commissioner. He says, bearing in mind next Friday is an E.U. Council meeting, that they have just 10 days to fix the Eurozone once and for all. Olli Rehn is in Brussels for the second day of finance minister's talks and he believes that we now have entered the end game.
(BEGIN VIDEO CLIP)
OLLI REHN, EUROPEAN COMMISSIONER FOR ECONOMIC AFFAIRS: We are now entering the critical period of 10 days to a complete and conclude the crisis response of the European Union and we have to continue to work -- especially on two fronts, both in order to ensure that we have the sufficiently credible financial firewalls to contain market turbulence. And, at the same time, we need to further reinforce our economic governance.
(END VIDEO CLIP)
QUEST: 10 days to contain and solve the euro crisis. Many of you will soon be opening your Advent Calendars if you're celebrating Christmas. Here is the calendar that we will be following. It's a CNN one at the moment, with a little bar of chocolate in it. It goes all the way to Christmas. But bearing in mind what Olli Rehn said, we don't need to go all the way to Christmas. We've just got 10 days.
So today we start down the countdown to Olli Rehn's deadline. And we will be showing you, in our 10-day quest to save the Eurozone, following Olli Rehn's views, exactly what it's all about. We begin with November the 30. We're going to show you the event of the day that might actually save the Eurozone.
The liquidity boost that came from the ECB and the Fed and all the others. Their move today, rocketing markets up some two, three, four percent. That is the answer for November the 30. The doomsday clock is ticking. I spoke to Martin Wolf from the financial times.
Bearing in mind everything you've seen, have we now entered a very dangerous period?
MARTIN WOLF, CHIEF ECONOMICS COMMENTATOR, FINANCIAL TIMES: It's very unfortunate, but it's not surprising - the hesitations, the unwillingness to cope with the immediate crisis - is that there is now, in the market, deep seated concerns about the liquidity risk and even the solvency risk for major sovereigns. And, in addition, I think quite clearly breakup risk.
People are starting to think about the unthinkable. What happens if it actually unravels? How do we protect ourselves? Well, in this situation, everything is so uncertain, we really don't want to hold much of this paper at all. And when that happens, you get into a really unrolling panic. And they have to reverse that panic, now. And that requires enormous firepower and political determination. Evident, obvious, clear political determination to do what's necessary. And I think they're just not being convincing.
QUEST: Right. Well, we do have an opportunity - we've just had Ecofin - we now have a council next Friday. Do you fear that they will fluff it and not give that leadership? And if they do, what happens?
WOLF: I think they will probably fluff it in the sense that they will make some soothing words and they'll still be, as they say, behind the curve. It won't be enough. What happens - I think, unlike some commentators, that they can continue. Obviously, countries like Italy can roll over debt if they can still borrow and they have just been able to borrow at these very high interest rates.
The ECB - the European Central Bank - can continue to fund the banking sector. It's clearly doing so on an enormous scale. And so, they can keep this rolling forward for some time. But they don't seem to be able to offer an exit. And that means, in my view, that over time, the crisis is much more likely to get worse than better.
QUEST: On that thought - when you read the sort of apocalyptic reports - breakup of the Eurozone, collapse of the euro - the euro as a currency, per se, is not going to collapse. 200, 300 million people are using it every day. So what do you fear is the worst outcome in this.
WOLF: I wouldn't completely rule out the Eurozone collapse. We are moving into uncharted territory. Extraordinary things can happen. But I suppose the greatest danger is a major sovereign debt restructuring of a disorderly kind. So say we - I'm not suggesting this is probable, but, you know - if we actually had an Italian default - an Italian restructuring - that would be a completely novel event. A G7 country - who knows where that would lead to?
The latest OECD economic outlook discusses that possibility, which is an extraordinary thing for such an official document to do. And it clearly traces out a wave of panic for the financial system, for other sovereign debt markets, and indeed, even the world if that were to happen. I think that is now the biggest danger.
QUEST: Martin Wolf joining me there from the Financial Times.
The Fed has just released the Beige Book for November. An overview of the U.S. economy. And the Fed says - excuse me - economic activity has increased at a slow to moderate pace since the previous report in all areas. Hiring is described as generally subdued. Manufacturing, they say, is at a steady pace, and banks in four districts reporting more demand for loans.
And here's the sort of thing it talks about in this report - in Boston, demand for workers grew. In Kansas City, hiring remains solid.
In a moment, the post-mortem on a fallen Wall Street giant, MF Global went bust and there's a billion dollars unaccounted for. A court's going to get to work in a moment.
QUEST: Tonight, victims of the eighth-biggest bankruptcy in U.S. history are seeking answers in a New York court. In the next hour, a hearing into the fall of MF Global will open in Manhattan when investors, trying to reclaim their cash, want to know what happened to it.
To New York and Maggie Lake, who is outside the courthouse. This is an interesting one, isn't it? MF Global - the size and scale of the bankruptcy, but also, nobody really knew what was happening until it did collapse.
MAGGIE LAKE, BUSINESS ANCHOR, CNN INTERNATIONAL: And how is that possible, Richard, with everything we've been through in the financial system? It has been a very convoluted, confusing, effort to find missing money that raises a lot of questions about the compliance that was happening at MF Global - the regulation and oversight of these markets - of commodity markets once again.
I'm here joined by James Koutoulas, he's CEO of Typhon, who was a commodity advisor, but also is a council for some 8,000 customers of MF Global. And James, you've been participating in these bankruptcy hearings. You're about to go into court again. There have been some funds, once again, that have been unfrozen - getting that money back to customers. But it's been a slow drip. Why is it taking so long and what are regulators telling you about the missing money?
JAMES KOUTOULAS, FOUNDER, COMMODITY CUSTOMER COALITION: Well, I think the accounting appears to be in shambles, all over the place. You know, you've got accounts in the U.K., in Singapore, and in the U.S. And reports are showing that the internal controls were just not there.
At the same time, you've got a trustee who's in charge of unraveling this mess. And the trustee doesn't have a lot of experience in the futures industry, which is very different than the Lehman case he previously worked on. And you couple that with the fact that the guy is paid by the hour, it's not really in his best interest to make this move quickly.
LAKE: So it's very frustrating - give me a sense of who the customers are. I mean, you know, when we hear about futures and commodities, we tend to think of very sophisticated - you know, hedge funds, here, mutual funds - but that's not the case, is it? It's also individuals whose sort of lives are caught in the crosshairs, here.
KOUTOULAS: That's right. I mean, there's retirees. There's a lot of farmers and just pure commodity users and producers like cattle ranchers, oil producers - people who rely on commodities to smooth out their cash flow. You know, farmers - I mean, they're really only getting paid after they harvest their grain, but with the futures markets, they're able to lock in prices, they're able to manage their risk.
LAKE: Now James, this is a firm. We're not talking about some sketchy sort of pyramid scheme run by some company we didn't know. This was MF Global - Jon Corzine - you know, a powerful figure in both Washington - former head of Goldman-Sachs. He has been asked to testify in front of congress mid-December. What do you want to hear from him? What are you expecting to hear from him?
KOUTOULAS: Well, those are two different things. What I want to hear for him is an honest answer saying, "Look, we messed up. We either did something illegal or we took too much risk" or whatever. Tell us the truth, Mr. Corzine. That's what I want to hear. What I expect to hear is I expect him to be a coward and to take the Fifth and to do what we've seen so many other leaders in similar situations do.
LAKE: How do you feel regulators are doing, trying to unravel this? It seems like it's taking an awfully long time. There haven't been charges pressed if there was criminal activity. We don't seem to have any answers. And this is a firm that declared bankruptcy October 31.
KOUTOULAS: Right. I think regulators are honestly trying their best. But up to this point, the best really hasn't been good enough.
LAKE: What do you think this does to confidence in the system? You know, here we are so far after we've seen so many sort of fraud cases and wrongdoing. To have a firm go up like this, some customer money be frozen and missing - what does this do to confidence in the system?
KOUTOULAS: It really hurts confidence. I mean, this is an unprecedented case where - MF Global has been around for 230 years. Segregated funds have always been sacred. A customer has never lost a penny in a SEG account. When the Refco bankruptcy happened, no one even lost a trading day. It just was transferred automatically. And for someone like Corzine to potentially be engaged in commingling and putting client money up to back house rates - if that actually happened, I mean, it's unprecedented and terrible for the industry.
LAKE: Stick with me, James. Richard, you can see, of course, we haven't had - you know Corzine declined to comment through his lawyer - all the people involved, because there is legal issues - have declined to comment. But that's the big question. You know, there's a real risk to confidence in the system once again.
QUEST: All right. Maggie, just ask James, quickly - does he expect to get any money back? When everything's added up, is this going to be a Madoff situation where litigation will bring in tens of billions, or is it all just gone?
LAKE: Right, right. I believe some of the customer money has actually been returned or is being returned. But, James, Richard is asking, "Do you expect the customers ultimately to be made fully whole by this or are we looking at a Madoff situation where people are going to be left out?"
KOUTOULAS: I do expect them to eventually be made fully whole, but, you know, there's a lot of variables there. There's variables on what we're going to court to, today, and asking the court to say customers have priority, here.
LAKE: Right. And he means priority of some of those other big-name creditors, including JPMorgan Chase. So, very complicated case, Richard, but critical once again to faith in the system.
QUEST: Maggie in New York where it does look a bit chilly tonight. Maggie Lake in the States.
When we come back in a moment - when you're the boss, no job is too small.
(BEGIN VIDEO CLIP)
FRANCIS LUI, VICE-CHAIRMAN, GALAXY ENTERTAINMENT GROUP: It's not that I want to pick up the cigarette butt on the floor. It's not my job.
QUEST: Successful business leaders show us why it pays to have an eye for detail. It is "The Boss".
QUEST: The question of success - well, when you're the boss, it means you're never too big to roll up your sleeves and you have to just get stuck in.
Francis Lui shows his Macau staff he's not afraid to tackle the most menial tasks. Over in London, it's a case of our friend Sarah Curran, who's gearing up for the holiday shopping season. She's doing so by giving her most prized clients the red carpet treatment. Both business leaders will show us tonight why sometimes you really do have to sweat the small stuff. For one simple reason - you are "The Boss".
UNIDENTIFIED MALE (voiceover): Previously, on "The Boss". Pride and joy. Sarah Curran returns to New York for the Global Fashion Awards and this time, the prize is hers for the taking.
UNIDENTIFIED MALE: And the winner is "my-wardrobe".
UNIDENTIFIED MALE (voiceover): And in Macau, where there are too many jobs and not enough people - Francis Lui tells us why holding on to your staff is key to success.
LUI: Of the 5,000 people that we have in the company who work for us up to the end of last year, 3,000 of them actually stay with us.
UNIDENTIFIED MALE (voiceover): Francis Liu has returned to Galaxy Square - a space within the Galaxy Casino Resort, which will comprise some nine 3D cinema screens and the karaoke complex.
LUI: We like this to be personal (ph). I still like it to be a little bit bigger.
UNIDENTIFIED MALE (voiceover): Today, he's taking a hardhat tour of the construction work and getting an update on progress ahead of its big opening on December the 15.
Francis is known for being a hands-on boss. Since building work began last year, he's made a point of checking in on Galaxy Square at least once a week.
LUI: I haven't seen a movie house in Hong Kong, China, or Macau that has this kind of marble floors, high ceiling area, and the technology that we're going to bring in.
UNIDENTIFIED MALE (voiceover): Back in August, Francis showed us round the 16,000 square meter space.
LUI: That is our entertainment center. Going to be one of the biggest in Hong Kong or Macau. And altogether it will seat about 1,000 people inside.
UNIDENTIFIED MALE (voiceover): Back then, the scaffolding was still up and the floor bare. Still, Francis was keen to let his employees know what he thought needed to be done.
LUI: If I have my choice, you should drywall, so that this way is thinner and the width here would be wider.
UNIDENTIFIED MALE (voiceover): Today, Francis is getting a feel for the new space - making sure it's been done to his taste and specifications.
LUI: This time, when I walk into it, all the scaffolding is already gone. The stone has been laid down. The lighting is done right. So far, so good. I think we can have a very exciting product.
UNIDENTIFIED MALE (voiceover): But Francis doesn't let the excitement get in the way. He's focused throughout and his eye for detail leaves nothing to chance. Including this -
LUI: All you guys should put in a map here to stop people doing this.
UNIDENTIFIED FEMALE: OK.
LUI: So, when I see things not done right, I want to cascade this culture to everyone that is with me to make sure that, if they see something not done right, they have to sort of say out instantly and rectify it right there and then. I have many instances where I was the one who picked up the cigarette butt on the floor. Not that I want to pick up the cigarette butt on the floor, that's not my job. But I just want to set an example how things need to be done.
UNIDENTIFIED MALE (voiceover): Francis expects his staff to have the same attention to detail as he does. A demanding Vice-Chairman who expects perfection at all times.
LUI: Well, this is going to be very important part of what we are doing.
I've been working for 32 years, already, and I know that, somehow, if you want to be really successful, you just have to pay attention to details. Because it's all these little things that add up to make sure that the project can execute well.
UNIDENTIFIED MALE (voiceover): Mayfair, Central London. In the distance, the moon lights up St. Paul's Cathedral and twinkling just behind it, Canary Wharf.
UNIDENTIFIED FEMALE: I nearly bought that.
UNIDENTIFIED MALE (voiceover): Inside, in the warmth of the Mayfair Hotel, the founder and CEO of my-wardrobe.com, Sarah Curran, is looking to make a hard sell. And, in the process, keep her most loyal customers coming back.
To do that, she's hosting an intimate party with some of My-wardrobe's VIP customers. Fronting the small gathering, the boss, herself.
SARAH CURRAN, CEO, MY-WARDROBE.COM: This event is perfectly timed for the fast-approaching Christmas season. And the team are here and on hand to give you styling tips and also gift advice.
It's important that I create that personal one-to-one relationship and it's always been a really key part of how I want the business to be. And I'm much more of a friend-to-friend style. It's really great for me to actually sort of put almost a face to the profile.
UNIDENTIFIED MALE (voiceover): The Champaign, the chance to see the items first-hand, and the opportunity to meet the face behind the business will, no doubt, encourage customers to click on to her website and buy on the spot.
CURRAN: These events are not about a hard sell. What it's about and what it does is it creates that extra loyalty. And it's these emotional touch points - so it's this sort of added service. It's the packaging, it's the way we sort of talk to our customers via, you know, the customer service. And the overall customer experience.
UNIDENTIFIED MALE (voiceover): With these intimate gatherings comes the opportunity for disgruntled customers to voice their complaints directly. And, for My-wardrobe, to improve its service. For this boss, the customer is always right.
CURRAN: As a style, it's very - it's important to have to see what she looks like - to have that visual profile in your mind. It's also a great opportunity for the wardrobe customer to give honest feedback. It's a valuable sort of way to drive the business.
UNIDENTIFIED MALE (voiceover): Next week, on "The Boss" - Sean (ph) Cornwall (ph) shares his insights on how to take a brand to the global level. And in Macau, Francis Lui gets ready for the busy holiday season.
QUEST: Hello, I'm Richard Quest. More Quest Means Business in a moment, but this is CNN. And on this network, the news always comes first.
Six central banks led by the U.S. Fed are pushing to provide liquidity to the global banking system. Europe's financial crisis has lead to a credit crunch. And the banks are in need of liquidity. Markets have surged after the move was announced. The critics say it does nothing to address the root causes of Europe's sovereign debt problems.
Britain has ordered Iran to close its embassy in London and given Iranian diplomats 48 hours to leave the country. The orders follows Tuesday's storming of two British embassy compounds by students in Tehran, an assault that Britain says couldn't have happened without Iranian government consent. Iran denied that and called Britain's embassy shutdown hasty.
U.S. Secretary of State Hillary Clinton has begun a historic two day visit to Myanmar, one of the world's most isolated countries. Mrs. Clinton is scheduled to meet with the president and the opposition leader Aung San Suu Kyi. She says she wants to see firsthand if Myanmar's political and economic reforms are sincere.
The former Ivory Coast president Laurent Gbagbo has arrived at the International Criminal Court in The Hague where he's set to make his first court appearance on Monday. Gbagbo is charged with four counts of crimes against humanity for his role in the post election violence that killed thousands of people earlier this year.
Britain's public sector workers downed tools and picked up placards today and joined protests all over the country. It was a simple message to the British government, hands off our pensions. Some protesters who were part of the Occupy London movement stormed an office building in the city center and said they were doing it in support of the strike. Police say more than 40 demonstrators have been arrested in London. Many public sector workers say they're coping with the worst of Britain's austerity measures.
The protests happened on the sidelines of what is expected to be one of the biggest strikes in the UK in years. 2 million workers, according to the Union walked off the jobs at schools, hospitals and airports. Britain's coalition government says the walk-out was a damp squid, in the words of the prime minister David Cameron. That's in a quarter of civil service joined him.
CNN's Erin McLaughlin reports from the middle of the strikers march in Central London.
ERIN MCLAUGHLIN, CNN INTERNATIONAL CORRESPONDENT: Thousands of public sector workers participating in this march. They are heading for a rally not far from here. And the center of this entire strike has been public sector pensions. Quite simply, the government wants to see these workers pay more money towards their pensions and working longer, it's something that unions say will leave their members fundamentally worked off.
UNIDENTIFIED FEMALE: My lifestyle is -- has been extremely affected. Utility bills are going up. We have a mortgage to pay. And I have to look after my daughter. I think it's asking far too much of public sector workers to take pay freezes, to have our pensions reduced just so the government can sort out the deficit without taxing other parts of the economy.
UNIDENTIFIED FEMALE: I work in a college. And we have the government last year cut one of the main sources of support for students which was the education maintenance allowance and that means that we are getting people who cannot afford to come into college. I get students calling me up saying they don't have the bus fare.
MCLAUGHLIN: Government officials say this pension pan is necessary, but the public -- the average public sector worker is living longer and therefore the current pension plan is becoming more and more expensive, that expense being borne by the average taxpayer here in the UK.
Government officials say this is an expensive distraction from the negotiating process at a time when the UK economy can ill afford it. Union leaders say this is just clearly a manifestation over the overarching anger and frustration being felt by public sector workers in the UK today.
Erin McLaughlin, CNN, London.
QUEST: Pressing business for you on this midweek addition. Best Western is going east with next opportunity, the Middle East to be precise. (inaudible) Best Western on why his chain likes Iraq after the break.
QUEST: As you know, travel, travel issues, air lines, hotels, they are things we consider to be extremely important on Quest Means Business. So tonight let's focus on Best Western, a hotel chain which likes the north of Iraq. Best Western is the world's third biggest hotel chain. It operates in 90 countries. It's building two Best Western Premier Hotels, that's the luxury brand in Arbil, the capital of Iraqi Kurdistan.
It's part of the expansion of the company into the Middle East. Best Western says it's very positive about Iraq's financial resources, as indeed one might say when one looks at the sort of money being spent.
David Kong is Best Western's president and Chief Executive. He joins me now from the company's headquarters in Phoenix, Arizona. It's -- the art in these new hotels, whether it's Russia or China or Iraq is frankly, David, one step ahead of the competition, isn't it?
DAVID KONG, BEST WESTERN CEO: We like to think so. And it's rather exciting that we're going to be the first international company to have two hotels in Iraq.
QUEST: Did you have to be convinced that the return on investment was justified at a time when the country is still fairly insecure in many ways?
KONG: Well, not at all. If you think about Arbil, and particularly Iraq in general, Arbil is the capital of Kurdistan and the fourth largest city in Iraq. And it's got tremendous oil and gas business. It's got a huge influx of foreign investment. It's got wonderful historic sites. So what do you think about it form the business travel standpoint, from a leisure travel standpoint, the hotel is out to win.
QUEST: As we look at the market at the moment, we are seeing continued pressure. Yes there are certain markets like London, perhaps even New York that can hold the rates and hold the yield, but they are the exceptions at the moment, or am I missing something?
KONG: You're absolutely right. It's always about supply and demand. And when you have a strong demand going into the marketplace and limited supply than the hotel is going to do well. The two hotels in Arbil, for example, if you think about the one in the airport it's forecast to do 85 percent occupancy at a $200 average rate.
The one that's going to be in the city center is forecast to do 90 percent occupancy at a $400 average rate. And then it's all because of the supply and demand.
QUEST: Their unique environments, though. People will flock to get a 90 percent occupancy rate, I think even you would have to admit would be somewhat extraordinary on a continued basis.
If I take your company overall, how are you finding it difficult, the difficulties? Europe has its EuroZone crisis, there's a dollar problem, there is issues in China, what are you doing to handle these crises?
KONG: Well, you're absolutely right. If you want to look at the problems around the world, there are plenty to be very concerned about, but also you've got to look at the brighter side of things. And I think this is a chance for any brand to take marketshare, because when people are scared and not willing to make the investment, this is when the strong brands can actually take marketshare by aggressively investing and sell some marketing.
QUEST: Well, yeah, now that's the point now. You put your finger on it. You take marketshare. But are you prepared to take marketshare on the rate, on the back of discounting the rates hoping that you can push it back up again in good -- in better times?
KONG: I'm not an advocate for reducing rates to win more business, because there's been studies out there, studies that that strategy does not work. Now we also have to be mindful that the internet has changed things quite a bit. The internet has made pricing very transparent. And that creates a downward pressure on rates. When people start dropping rates, it creates a negative spiral downward.
So the internet is something we have to contend with.
QUEST: If you take it all together, the hotel industry is simply fascinating. I've always said the only thing a hotel -- forget all the spas and forget all the products in the bathroom, just give me a good nights sleep in a comfortable bed. What does your research show is the single most important thing that residents and guests really look for?
KONG: No doubt a good night sleep is what people look for, but what they don't say which is equally important is the cleanliness of the room. And for that reason, Best Western is pursuing a strategy to have an ultra clean room.
QUEST: David many thanks, indeed. We'll talk again. Please come back on the program. Good to have you on Quest Means Business with us tonight.
And always remember general manager of a hotel was saying to me, Mr. Quest, did you have a good night sleep? If you didn't, then we have failed.
A powerful series of storms moving towards western Europe, winds stronger than hurricane force. Pedram is at the world weather center. Are we likely to see hurricane force winds in Europe?
PEDRAM JAVAHERI, CNN WEATHER CORRESPONDENT: Oh, I think so. Absolutely. In a few areas, Richard, these winds have been well over 100 kilometers per hour. And by the definition, yes, Saffir-Simpson Scale, named after the meteorologist discovering this scale that measures the hurricane intensity, the winds have to be greater than 117 kilometers per hour. This storm system certainly knocking on the door steps of some of those wind speed totals. And we've recorded some totals about that number here in the past couple of hours.
So take a look. Belfast right now, winds 45 kilometers per hour. Aberdeen, nearly 40 kilometers per hour. And notice the western coast there on the Irish Sea working their way towards Plymouth seeing wind speeds over 45 or so kilometers per hour. That's expected to increase here in the next few hours.
And the storm certainly rocking and rolling across portions of Ireland, working their way towards northern edge of the UK there. Very heavy rainfall and accompanied with a very strong wind. And some of those wind gust totals that we've tabulated here, there you go, 72 out of Edinburgh. Certainly coming in very close to that hurricane force winds, 112 kilometers per hour.
And again, another observation in Wales joining winds about 100 or so kilometers per hour. So rough seas right along the Irish Sea. And we know that was a concern just a few days ago when the concern out there happened with a vessel that sunk offshore there.
But take a look, this storm system begins to move to the east, impacts the area pretty severely if this stays true with the -- based on the computer models. Amsterdam off the Copenhagen, wind related delays upwards of 90 minutes possible on Thursday. And work your way into Stockholm similar story. Paris looking about 45 to 60 minutes. So very unstable atmosphere, gusty conditions. Those planes certainly going to be an enjoyable ride into the airports of your choice across western and central Europe.
And there you go, from Brussels to Berlin still looking at some moderate delays possible, mainly in the overnight hours on Thursday as we transition on into Friday.
And with all that said, I want you to notice the cool air that begins to come in. Colors of the dark blue there show you some of the coolest air in place. And follow this and see how far south it extends, because it's been a little mild, seasonally mild across portions of Europe, at least the northwestern edge of Europe. Of course, 10 or 11 degrees may not seem mild, but up to seasonal average. That's going to be a different story in the next couple of days and that cold air begins to move all the way to the south.
London, high temperature on Thursday, not bad, 11 degrees. High temperature on Friday, I wouldn't be surprise if we get up to only 6 or 7 degrees for a high temperature. And also knock off a good 5 or so degrees from Paris's high come Friday. And then you get this trend of the temperature trend we're talking about over portions of the UK and western Europe.
But quickly I want to show you what's happening over Southern California. Temperatures in Los Angeles are 15 degrees, but that's just the current reading. I want to show you the heat wave pattern that is set up here with the Santa Ana wind events named after the mountains across Southern California.
In Santa Monica on the pier. I know Richard Quest would love a vacation spot right there. It's 31 degrees on Tuesday, well above the average. And Richard, how about Beverly Hills, California, Rodeo Drive, temperatures knocking close to 30 degrees when it should be about 20 for this time of year.
Richard, that's the latest here on the weather.
QUEST: Good grief. Good grief. Well, book the tickets. I'm on the way.
Coming up in a moment, we unlock the music box. Spotify is opening up to app developers. And we'll consider the backbone of the internet when it comes to music.
QUEST: The online music group Spotify is opening up today with a streaming service announcing that anyone can build an app to access its vast collection of tunes. By doing so, of course the internet becoming a lot more musical.
Felicia Taylor in New York was at the launch and joins me now. This is all about modern things like music on the internet.
FELICIA TAYLOR, CNN INTERNATIONAL CORRESPONDENT: Absolutely.
You know, subscription music service is projected to be about a $2.2 billion business by the year 2015. And Spotify is counting on the fact that it's going to be the most relevant one in the marketplace. It already has about 10 million users, 2.5 million of which are subscribers that are actually paying for the service. And by paying for the service you get it commercial free. So you can -- and what they announce today with all these new apps, including one with Rolling Stone is that you get even more information. For instance, you can link onto the song and get the lyrics behind it and you can link under Rolling Stone and get reviews from Rolling Stone about a particular music industry or an artist, whatever it may be.
And I had an opportunity to spend just a few minutes with Sean Parker, who of course was the founder of Napster, and he's one of the major investors in Spotify. And he too is counting on the fact that this is going to be a home run. Take a listen.
(BEGIN VIDEO CLIP)
SEAN PARKER, SPOTIFY INVESTOR: Spotify is, for me anyway, realizing the original dream that Sean Fannie (ph) and I set out to do in 1999 with Napster which was always about trying to bring music to the world. It was about trying to create this plumbing that could make music truly ubiquitous across the web. And that's actually a big part of what's happening with this announcement today.
You know, Spotify is opening up, it's becoming a platform so that music can truly become ubiquitous.
TAYLOR: So this is, in effect, what Napster was intended to be?
PARKER: You know it -- we were never really given a chance to prove it, because we were this forcing event that shifted the thinking in the music industry. It's taken a decade to kind of shift that, making it ultimately to come up with a revenue model that works. And Spotify is the best chance we have for restoring the industry to growth and getting artists paid.
TAYLOR: And this actually is pleasing, obviously, to the record companies. It keeps everybody in business.
PARKER: It not only keeps everybody in business, hopefully it's going to grow their business, and grow their business substantially.
TAYLOR: And what does this do to your relationship to Facebook? Does it affect it in any way?
PARKER: So, you know, in terms of Facebook there is a parallel that can be drawn here to the transformational moment when Facebook launched their platform. This is -- you know, in essence an important proof point for us that Spotify has become one of the great platform plays on the internet, and there are not many of them.
TAYLOR: And what's next for Sean Parker?
PARKER: What is next for me? Well, I've got a new company launching called Air Time which, you know, we can talk about in the future, but you know for now I'm very focused on Spotify and trying to help make this company a success.
(END VIDEO CLIP)
TAYLOR: You know what's key about Spotify is that it actually, you know, is now legal downloading as opposed to illegal which is what Napster, you know, criticisms were in the beginning. And so this is about keeping everybody happy, not only the record labels, but also the artists as well as the content users, which their target audience is the 18 to 24, which is always the prime audience for anybody on a subscription music service.
QUEST: What I love about that interview and Spotify is that you and I and so many of you at home remember Napster, the difficulty of using Napster, and b, the problems of course when it happened. How the wheel has turned.
TAYLOR: Oh, there's no question about it. I mean, that's what's really interesting about Spotify. And they're making themselves more relevant by making the -- like I said, everything legal here. I mean, this is not offensive to anybody. And it's very easy to use. I have to tell you, it's incredibly user friendly. And now you've got all these interesting things you can do around different kinds of music. And this makes it different than Pandora, because Pandora is about radio service, this is about music from all over. And you can use it on many different platforms. So I would bet that this is going to kind of be a successful story for us to talk about a long time.
QUEST: Right, it'll come as no surprise to you, Felicia Taylor, that 2 million subscribers pay the premium rate. I am one of the 8 million freeloaders...
TAYLOR: Who doesn't, I knew it. I knew you wouldn't pay for it.
QUEST: Look, look, it's a 15 or 30 second commercial every 30 minutes, or 15 minutes. I'll take it. I can live with it.
TAYLOR: It's 10 bucks a month, Richard.
QUEST: Fine, there speaks a wealthy woman.
Felicia Taylor in New York. Send the bill to her.
Hey look, what can I say? It's free and (inaudible) I'll take it. Listen, the market is going really great. 377 points up by a gain of 3.25 percent. We had a similar strong rise. I hoped that we might have seen 12,000 on the Dow today, but I don't think with barely an hour to go it can actually push it through.
Similar gains in Europe. Best gains were seen in Frankfurt. Nearly 5 percent on the DAX Index.
When we come back in just a moment, so many events happening, so many interesting days for the euro. So clearly a profitable moment after the break.
QUEST: Tonight's profitable moment, today was all about saving the financial system and helping for the 10 days to save the euro.
When we got word of the central banks' plan to boost liquidity, European markets went right through the roof. American Wall Street followed suit. You may think a day of such strong gains is worth celebrating with a euro or two, well me thinks the markets doth celebrate too much.
This kind of coordinated action doesn't come from nowhere. This euphoric response doesn't count much either. Markets may rise, but they've fallen so far and so fast in the past.
This gift today to the markets could just as easily be a preemptive strike, a last ditch attempt to shore up banks that may be closer to collapse, or indeed deep trouble than you and I know.
Right now, the economy is like a swan. On the face of things, the calmness is there. But underneath as we saw today, the legs are frantically kicking away desperately trying to keep things moving.
Again, traders may go home tonight with healthy profits, but it's anyone's guess where we are in the Transatlantic economy and more importantly in the 10 days to save the euro.
And that is Quest Means Business for tonight. I'm Richard Quest in London. Whatever you're up to in the hours ahead, I do hope it's profitable. The news continues. This is CNN.