Mandarin Oriental banks on luxury segment bookings trend

LUXURY hotel group Mandarin Oriental International Ltd says it may see weaker demand this year, particularly in the United States, though it should be bolstered by the limited supply of luxury hotels - its strategic focus - in certain cities.

While the US could see a softening as the year progresses, key cities like New York, London, Hong Kong and even Singapore are not characterised by oversupply, said John Witt, CFO for Mandarin Oriental, in a phone interview with BT.

'Our strategy is to focus on the luxury segment. We've seen a solid start to the year. Future booking trends are encouraging,' he said. The continued propensity for travel as well as the group's new hotel projects will be growth drivers especially since it has 'significant hotel ownership interests' in both Asia and Europe.

And while the short supply of labour can be a challenge, it is a 'challenge we're meeting quite well', said Mr Witt, adding he has not seen any exceptional pressure.

The company is looking to nearly double in size from its current 21 hotels to about 40 hotels over the next few years as new projects come onstream. Last year, the group announced eight new hotels including in Beijing, Guangzhou, Taipei and Milan. The new projects will help the hotel operator achieve its mid-term goal of 10,000 rooms, which allows Mandarin Oriental to achieve 'critical mass as a luxury brand', said Mr Witt.

The group's original flagship, Mandarin Oriental Hong Kong, reopened in September 2006 - after a nine-month, US$150 million renovation - which helped contribute to revenue. In its first full year of operation post-renovation, the hotel achieved an occupancy of 74 per cent and an average rate of US$399, 50 per cent above the 2005 rate.

The group's net profit for FY2007 ended Dec 31 was US$108.2 million, up 35 per cent from US$80 million the previous year. Revenue amounted to US$1.007 billion, a 19 per cent growth from US$850 million in FY2006. Earnings per share for FY2007 was 11.16 US cents, compared with 8.28 US cents previously. A final dividend of 5 US cents per share has been recommended, bringing the total annual dividend to 6 US cents - double that of the year before.

Source : Business Times - 10 Mar 2008