• Luxury operators go for growth

Belmond described “frequent and significant” hurdles to its business in the form of hurricanes in the Caribbean and political instability in Burma but remained committed to its five-year growth strategy.

The comments were made as Michael Wale, former Starwood Hotels & Resorts colleague of Belmond CEO Roeland Vos, joined Kerzner as CEO, promising accelerated expansion of its Atlantis and One & Only brands.

At Belmond, the company reported a 7% drop in full-year Ebitda to USD124m, with Roeland Vos, president & CEO, telling analysts: “I’m naturally disappointed that the financial results do not reflect the hard work that our teams have put in. 2017 was a tough year for our business, we face frequent and significant hurdles… owing to circumstances beyond our control. While we acknowledge adjusted Ebitda was down overall due to decreased results from our trains businesses and planned investment in brand awareness activities, we are encouraged that our business drove a steady increase in revpar.

Vos said that the “difficult year” was behind the group, which was expecting “a much brighter year ahead” with “solid top and bottom line growth in line with our strategic objectives”.

The group’s five-year strategy sees target an Ebitda contribution from footprint expansion by 2020 of USD60m. Last month saw the company buy the Castello di Casole hotel in Tuscancy for USD48m, with plans to invest USD7.3m in a phased refurbishment.

Vos said that Castello di Casole, along with Belmond Cap Juluca in Anguilla, which it bought last year and the projected management fees from Belmond’s Hotel Cadogan, due to reopen this year, represented roughly one-third of the five-year goal.

The group is currently looking for a buyer for Belmond El Encanto, in California, which Vos said had seen “strong interest from a number of highly qualified potential owners” and which it plans to retain on a management contract.

The group reported same-store revpar up 1% for the year, but up 6% for the fourth quarter, with growth between 2% and 6% for the full year.

At Kerzner International, the group has named Michael Wale as CEO. Wale was most recently president for Europe, Africa & Middle East at Starwood Hotels & Resorts, overseeing the operations for almost 250 hotels and resorts in 60 countries.

His Excellency Mohammed Al Shaibani, executive director and CEO of Investment Corporation of Dubai, and chairman of Kerzner Internationa, said: “I am thrilled Michael has joined us at this very important time as we continue our accelerated growth and further expansion of our existing brands, Atlantis and One&Only.  We are also aggressively introducing new brands and experiences around the world, from China to Africa to Europe and beyond.”

Wale added: “Both Atlantis and One & Only have established strong global consumer recognition and loyalty and are perfectly poised for further innovation and strategic growth.”

The company has moved into management, most recently entering into a partnership agreement with Dolphin Capital Partners and Dolphin Capital Investors for the development of One&Only Kéa Island resort in Greece, inclusive of long-term management.

The site will include 75 resort villas, as well as One&Only private homes available for purchase and will be the second One&Only resort in Europe. Last year saw the group expand the flag beyond beach resorts with One&Only Nature Resorts, One&Only Urban Resorts and One&Only Private Homes, announcing two nature resorts in Africa.

The group has three hotels being developed under the Atlantis brand, with a resort in Dubai expected to complete in the third quarter of 2019, the Atlantis Sanya in China and the Atlantis Ko’Olina in Hawaii. The properties will be managed by Kerzner International.

The fourth Atlantis-branded site, in the Bahamas, was sold to Brookfield Asset Management in 2011 as part of a debt restructuring, with Kerzner retaining the management contract. Kerzner further solidified its financial footing in 2014, when the Investment Corporation of  Dubai of Dubai acquired a reported 46% stake in the company for an undisclosed fee. Istithmar World, a unit of state-owned conglomerate Dubai World, owns a further 25% stake in the company, with additional holdings through affiliates of Goldman Sachs and Colony Capital.

HA Perspective [by Katherine Doggrell]: In these days of scale, scale, scale and 30-strong brand portfolios, it becomes almost impossible to imagine the role of these small luxury groups in the wider hotel sector. Belmond acknowledged that, if it was to achieve its 2020 goal, it was going to have to invest its own money, but, as time ticks on, it is only a third of the way there.

And this brings us to the talk of IHIF, the possible sale of the group to IHG, a company severely lacking in anything on the luxury level above InterContinental, a brand which can lay claim to a few stunning properties, but a vast swathe which still feature clock radios as a room adornment.

So, the deal makes sense for both parties. As a listed entity, Belmond’s market cap (at the time of writing USD1.4bn – IHG was GBP8.5bn) makes it a costly buy, but it remains asset heavy (with 29 hotels, including the Cipriani), which could be sold after the deal to offset any cost. The group has been pursuing a strategy of selling non-core assets and pursuing growth through management contract and has raised over USD87m in the past four years.

Should the deal go ahead, IHG will be left with Belmond’s current leading source of perplexion – building the Belmond brand. Here at Hotel Analyst there was some speculation that, when AccorHotels took control of the Orient-Express brand last year, some Belmond owners would jump ship to reclaims the iconic flag for their properties. So far this has not been the case, but with the turmoil of the takeover, now may be the time to consider which platform they wish to be plugged into: IHG or AccorHotels.

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