M&C Hotels Fears Post-Olympic Hangover For London

May 4, 2012

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Hotelier Millennium & Copthorne fears a post-Olympic hangover could hit growth in London, which along with buoyant Asian markets, offset weakness in mainland Europe in the first quarter.

"The fourth quarter... will be something we have to watch very closely for the impact on London. That will be the key place for us to watch," Wong Hong Ren, chief executive of the operator of over 100 hotels worldwide, told reporters.

Wong said M&C was seeing strong demand for its London hotels during the Olympic period, but was worried that later in the year the impact of Europe's economic woes would deter cash-strapped Europeans from visiting the UK capital.

London-based M&C, which posted a 31.5 percent rise in first-quarter pretax profit, said it is looking to diversify its customer base as visitor numbers from Greece, Spain, Ireland and Italy slump and show no signs of improvement.

"We are watching these spots very carefully, especially places like Spain, which is a traditionally important market for shopping (in London) in December," Wong said.

M&C said revenue per available room (RevPAR), a key industry measure, rose by 5.6 percent on a like-for-like basis, driven higher mainly by pricier rooms.

Revenue per available room increased by 7.7 percent in Singapore and 7 percent in London. But the strongest growth came out of the 'Rest of Asia' region, including hotels in Seoul, Kuala Lumpur, Jakarta and Beijing, where RevPAR increased by 21.6 percent.

However, the 'Rest of Europe' region under-performed, with RevPAR declining 5.4 percent as nearly half of all euro zone economies struggle to get out of recession and the outlook remains bleak.

"We have to work hard to diversify our customer base in order to handle these contingencies," Wong added.

The group, which is majority-owned by chairman Kwek Leng Beng's Singapore-based property company City Developments, made a pretax profit of GBP£25.9 million (USD$41.9 million) in the three months to 31 March, an increase on GBP£19.7 million profit made during the same period in 2011.

"Looking forward, we expect continuing healthy progress in London, Singapore and certain other Asian destinations and we are focusing on improving performance at our US properties," Kwek said in a statement.

OLYMPIC BOOST

Wong said M&C expected its London hotels to receive a boost from the Olympics Games this summer.

"For the London Olympics we are getting strong inquiries at the moment... the early indication is that demand from Asia has been very strong," he said.

However, Wong also expressed concerns that some Asian customers may be priced out of coming to London for the Olympics as airline capacity comes under strain.

"We do hope that airlines will put on more planes," he said, "Flight ticket prices have shot up during that period and a lot of people can't afford to travel to London."

With cash reserves of GBP£388 million and lower debt levels, Kwek said M&C is looking to acquire hotels across the world.

"We have been actively seeking such opportunities since the second half of last year, but vendors' price expectations in key gateway cities are still too high," he added.

Although Kwek believes it is too early to predict how the company will perform in 2012, he said trading to-date had been in line with management expectations.

(Reuters)