Hotel Analyst
Orient- Express looks outside of
Europe A strong performance from its Brazilian properties helped deliver a positive first quarter for Orient-Express, though losses in the quarter were up compared with 2011.
The luxury hotel group traditionally sees negative numbers in the quarter, as some of its resorts are closed for the winter season. Bookings are ahead of last year,
but the company did warn that in its luxury end of the market, European markets are not yet clear of the downturn. And there is still no news of a new chief executive to replace Paul White, who left in 2011. “We are now beginning to see
some softening in demand coming out of the sluggish economies of the UK and Europe,” warned chairman and interim CEO Bob Lovejoy. “That said, booking pace is currently about 10% above the same figure last year at this time.” First quarter revenues were
up 10% to USD107m, while net losses were up to USD16.2m from USD13.6m in the first quarter of 2011. The company has improved
both revenue and Ebitda for nine consecutive quarters. A strong performance in Brazil led to a 12% increase in revenues from South American hotels. The company reported revenues up 9% in Asia Pacific, and a 7% improvement from US and European properties. The company has undertaken a
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number of refurbishment projects, notably at its Italian properties including the Cipriani in Venice. In the upcoming quarter, Orient- Express will be opening its all- suite Palacio Nazarenas in Cuzco, Peru, and will be refurbishing all 121 rooms at the Copacabana Palace in Rio de Janeiro. “We will continue to focus the company’s resources where our high end product strategy can produce attractive financial returns,” promised Lovejoy. Owned hotels in Europe
delivered a 7% increase in revenue to USD15.8m, helped by the earlier opening of Italian properties. Occupancy was up to 33% from 29% a year previously. Likewise, revenue in the US was up 7%, thanks to an improvement in room rates. In southern Africa, revpar
was up 14% in local currencies, but revenue remained flat at USD8.8m. In South America, the company’s two Brazilian hotels had their best ever quarter. A 25% increase in room night sales to domestic customers lifted combined Ebitda to USD8.3m, and helped regional revpar to increase 16%. Orient-Express has been without a chief executive since Paul White announced he was leaving in the middle of 2011, and Lovejoy said the search continues. Following the results announcement, in May, and with still no appointment, Lovejoy passed the interim role to fellow board member Philip Mengel. “The board has conducted an extensive search over a number of months. But to date, the board has not selected anyone. We feel the company’s management team is doing a first class job, and the company is making excellent progress.” However, there are moves to
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strengthen the board, with two new independent nominees, both with luxury brand experience: Ruth Kennedy, from Kennedy Dundas and Jo Malone, creator of the eponymous perfume brand.
HA Perspective: The proportion of European guests staying at Orient-Express’s hotels is in decline. The slack is being taken up by emerging markets with Asia up one percentage point increase from Asia and two percentage points from South America. The proportion of guests from Brazil is now as high as from the UK. The company clearly sees
emerging markets as a key growth area. It has opened a sales representation office in Dubai, is heading to India and has doubled its sales force in Brazil. Partly the shift reflects the
enduring recession in Europe. Demand from the US, for example, has recovered and is currently outperforming the rest of the world outside of Europe. But, with increased sales focus
on markets outside of Europe and North America, the guest mix looks set to swing towards emerging markets. The proportion of revenues from European guests slipped to 36% in the first quarter, down a full percentage point from a year ago. This relative decline seems set to continue, with or without the help of a Eurozone meltdown.
Hyatt makes
Mexico pitch Hyatt saw revpar up, but profits flat in the first quarter, as the company concurrently announced a major investment to take the Hyatt Regency brand into Mexico City.
Having successfully integrated last year’s acquisition of the LodgeWorks portfolio, which is performing ahead of expectations, Hyatt management also raised the prospect of making further strategic investments to help drive its brands forward. Although fully 70% of Hyatt’s pipeline outside the US is currently in China and India, Europe was mentioned as one possible region for targeting acquisitions. The first quarter saw revpar
up 8.1%. Revenues were up to USD958m, from USD875m in Q1 2011. North American hotels led the improvement, while international hotels delivered a 5.7% revpar uplift. During the quarter, the company opened six new hotels – four in the US, and Park Hyatts in Ningbo and Hyderabad. Elsewhere, the Park Hyatt Sydney re-opened after refurbishment. “Occupancy lift has been significant year-over-year, and we’re looking forward to rate growth later in this year,” said president and CEO Mark Hoplamazian. “The industry dynamics are generally very good. In the US, supply is obviously still at a relatively low level. We’re seeing a lot more intra-country and intra-regional travel in places like China and India. And that is having an impact on how we’ve gone to market and how we think about driving presence in those markets.” In Mexico, Hyatt is buying
a Mexico City landmark, the Hotel Nikko Mexico, paying USD190m. A further USD40m has been committed for a three year improvement programme that will upgrade conference and event space. In the meantime, the hotel will
reopen as a Hyatt Regency, with the number of rooms reducing
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