Mandarin occupancy not yet ‘pre-
crisis’ Mandarin Oriental, which reported a 68% rise in Ebitda for the first half to $57.8m (£37m), said that, while demand had grown in the period, occupancies had yet to reach the levels seen in 2008, limiting the capacity to raise rates.
The group was nonetheless confident that its combination of luxury in markets with limited supply would benefit it in the long-term, despite some short- term concerns over financing issues affecting its current devel- opment pipeline. Growth was driven by demand
in Asia, particularly Hong Kong, on the back of increased corpo- rate demand. Mandarin Oriental London showed strong results, maintaining occupancy and increasing rate by 2% to $654 from $641, despite the impact of its renovation. Across the portfolio, the group said that strict cost control meas- ures continued to be enforced, and the hotels had “successfully maintained or enhanced their rel- ative market positions”, although, in areas with over-supply, such as Tokyo and Jakarta, the group saw performance affected. CFO Stuart Dickie said that Europe, where revpar was up by 6% (4% in local currency) to to $379, “continued to benefit from more resilient demand and limited supply”. Total revpar was up by 19% to $193. Across the markets, in Asia
revpar was up 28% to $150 and increased by 14% in the Ameri- cas to $250. The company said that some of its 16-strong pipeline was facing delays because of financing dif- ficulties and it would continue to review the status of these projects with the developers. However, Dickie added: “The
strategy of operating both owned and managed hotels remains at the core of our business and we continue to review an increasing number of opportunities in key city centre and resort destina- tions around the world.” While the pipeline has slowed, the company has bolstered its F&B and spa offerings, a point of differentiation for the brand, which has 10 Michelin-starred restaurants across its portfolio. The London property opened Bar Boulud during the period and is due to see Heston Blu- menthal’s first London restaurant open in the autumn. Mandarin Oriental Munich also added a rooftop bar and cafe. The group’s mid-term goal is to open 10,000 rooms, which, including its current development pipeline, it has now achieved. The company now has around 7,500 open and over the next 12 months it will open two hotels, one in Marrakech and one in Paris. The latter, as a location with very high barriers to entry, is typical of the group’s ideal expan- sion focus. Dickie said: “The hotels indus-
try remains an attractive sector in which to grow a luxury brand. Long term demographic trends continue to support our strategy of creating luxury services and facilities. Our future position will be supported by limited supply in the markets in which we operate.” The group is also expanding its Residences offering, currently
with 14 projects open or under development, which provides it with one-off branding fees. Simon Keswick, chairman,
said: “While a full recovery is dependent on global economic conditions, the group’s perform- ance is expected to improve as rates and occupancies continue to move towards pre-crisis levels.” Revenue for the period was up
22% year-on-year at $474.2m. Profit fell 82% to $13.5m, compared with $74.2m in the first half of 2009 which included a gain on a property disposal in Macau. Gearing increased from 5% in December 2009 to 7%, as debt grew from $116m to $147m. The group said that it had hedged 50% of its debt and said that it had no ‘significant’ refinanc- ing due in the next 16 months, putting it in a strong position to take advantage of investment op- portunities.
HA Perspective: Like all luxury hotels, Mandarin succeeds in cities where supply is constrained and there is robust international demand. Its challenge is finding sites in such cities. Even comparatively “old
world” markets can sometimes yield negative surprises, such as Tokyo. So particular care is need- ed in territories such as China or the Gulf where the company has a number of projects coming to fruition. Sensibly, most of this expan- sion is via management contract. But even so, the company needs to be wary of opening and disap- pointing owners. The delay to its Beijing hotel caused by a fire might prove a blessing from a business perspec- tive as the Chinese capital’s luxury hotels might have begun to recover by the time of opening.
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