• Luxury growth through management

Belmond, which was acquired by LVMH at the end of last year, was confident going into 2019, with the group’s first London hotel under management now open.
Mandarin Oriental also hailed growth through management contracts, signing seven last year
At Belmond, in addition to opening the Belmond Cadogan in London, the group reopened the Belmond La Samanna in St. Martin and the Belmond Cap Juluca, in Anguilla.
Roeland Vos, president & CEO, said: “The strong growth momentum we generated throughout 2018 continued into the last three months of the year.” Commenting on the sale to LVMH, Vos added: “We believe the consummation of this deal will maximise value for our shareholders. We believe that this deal represents an exciting new chapter for our company and we are pleased that the merger proposal was approved by the overwhelming majority of our shareholders.”
Performance was mixed across the regions, with revenue in the fourth quarter down by 10% in Europe and up 21% in North America and increasing by 3% in the rest of the world.
For the fourth quarter, the company reported adjusted Ebitda up 41% to USD22.6m on the year, with revpar coming in towards the top-end of its previously guided revpar range of 3% to 7%, closing the quarter with a 6% rise over last year. Full-year adjusted Ebitda climbed 18% to USD146.9m and full-year revpar was up 5%.
In light of the impending transaction with LVMH, which was expected to close in the first half of this year, the group did not issue any guidance.
There was no comment from LVMH, which paid USD2.6bn for the company and said at the time of purchase that it had no plans to sell any of the group’s hotels, talking instead of the importance of aligning operations with real estate in the luxury sector.
CFO Jean-Jacques Guiony told analysts: “The priority is to develop the brand, to improve the profitability of these exceptional properties and to nurture collaborations with the other LVMH brands. The Belmond brand is emerging. It’s much better known than it used to be, but it’s a fairly new name in the industry. Some investments have been made. Some investment will be made. If we have hotel management agreement opportunities, we will look at them. And if we end up having opportunities to enlarge the portfolio of owned assets, why not?”
At Mandarin Oriental, the group reported a 13% increase in underlying Ebitda for the year to USD179.1m. The group signed seven new management contracts and Mandarin Oriental hotels were scheduled to open in Ho Chi Minh City, Grand Cayman, Moscow, Muscat and Phuket over the next five years. In Barcelona, a standalone branded Residences by Mandarin Oriental was scheduled to open in 2020.
During the course of 2018, the group also took over the management of a luxury resort on Lake Como in northern Italy and in 2019 opened its first two hotels in the Middle East, in Dubai and Doha, and announced an agreement to brand and manage Mandarin Oriental Residences at 685 Fifth Avenue in New York, scheduled to open in 2021.
Looking back across the year, in Asia, results across the region were described as “generally higher”, with good performance in Hong Kong and a strong year in Jakarta. In Europe, the Paris hotel delivered a better performance than the previous year, , although results during the final quarter of the year were affected by demonstrations in the city. Following the fire in June last year, the company said that repairs at Mandarin Oriental Hyde Park, London were progressing well, and the hotel re-opened its public areas and facilities December.
In America, the performance of the Washington D.C. hotel was slightly lower than the prior year, when it benefited from the Presidential Inauguration, but overall results for the region were broadly in-line with 2017. Termination fees were received in respect of the hotels in Las Vegas and Atlanta which the group ceased to manage following a change in the ownership of each property.
Ben Keswick, chairman, said: “The outlook for 2019 remains positive. The planned closure of The Excelsior for redevelopment in March 2019, however, will substantially reduce the group’s underlying profit. Results will benefit from the full opening in the spring of the newly renovated London hotel, partially offset by the impact of the renovations in Bangkok and Madrid. These major investments, together with the group’s pipeline of new hotels under development, will position the group for long-term growth.”
Fellow luxury group, EIH, which includes Oberoi Hotels, also reported results, for the third quarter, reporting Ebitda up 52% to Rs. 145.49 crore (USD20.5m )and net sales up 22.61% to Rs 443.92 crore. During the year the group announced plans to open a wild life resort near Maasai Mara National Reserve in Kenya and a hotel in Koh Tan Island Thailand, both under management contracts. The company said that it was planning to reverse its 70:30 ratio of owned to managed hotels to become more asset light.

HA Perspective [by Katherine Doggrell]: Scale is all around us these days, as we have seen elsewhere this week at Marriott International and while that’s all fine and dandy if you’re talking Travelodges, the luxury hotel groups, particularly at the Oberoi, Belmond, Mandarin Oriental end of the market, have been reluctant to relinquish the control enjoyed as an owner.
At Belmond, LVMH has realised this, making it a good pick as the new owner. While there is no heritage to be protected in the Belmond name, the luxury group is confident that it can create something which will eventually carry the heft of Orient Express and it is not going to risk that by expanding rashly.
Elsewhere, while rash expansion is almost impossible in the luxury segment given the development time and the volume of marble which needs to be shipped around the world, management contracts are the new popular choice for the luxury end of the market. While a move into franchising remains unlikely, they are confident that standards can be maintained and, with distribution being less of an issue the closer you get to iconic, they are not under pressure to sell out to the global operators and their pipeline demands and risk further challenges to their standards. Owners with a spiffy hotel going spare, apply here.

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