Sunday, February 21, 2010

Hotel Trade

Although the motel sector took the biggest hit for the 2009 year, the hotel sector was down 111,000 guest nights with international guest nights falling by 3 percent. 

It is interesting to see what effect this has had with the end of year financial results being reported at the moment. 

Millennium and Copthorne Hotels New Zealand Ltd owns, leases, manages and franchises a portfolio of 30 hotels in New Zealand under the Millennium, Copthorne and Kingsgate brands. The Company, that has hotel assets with a net book value of $326 million recorded a modest profit of $12.4 million for the year to December 2009.

Profit was down 30% and total revenue of $108 million was down from $123.7 million last year.

Trading conditions were described by the hotel's MD as "one of the firm's most difficult trading years in recent times. We remain cautious about the trading prospects for 2010 as a sustainable recovery and an increase in tourism numbers is still some way off."

Millennium and Copthorne Hotels will be paying a 1.2c a share dividend.

With optimistic announcements of new hotel developments gathering momentum as we count down for the Rugby World Cup, we think it is time to pause and reflect on the immortal words of Sir Bob Jones:
"Talk to hotel owners and you will find they live on eternal optimism. Always they'll explain about next year, how the new marketing plan, the new chain alliance, the new wing, the refurbishing plan will make them come right. But with hotels next year never comes. In an unfettered competitive environment, hotels like airlines are programmed to lose money and over any sensible period of assessment, say ten years, they all do."
The players become captivated by what they are doing. When assessed over any period of time they never make any money but the owners don't care that much. They become satisfied with mere survival so long as they can carry on. And of course, once involved, they're locked into their financial predicament compensated only by their addiction.

Some major players - the big names, Sheraton and the like - are in fact awake to the realities. Consequently they no longer own hotels. Basically they're a franchise operation, renting their name, offering a pooled marketing service and clipping the actual hotel owners ticket for a piece of their turnover, only they are not hoteliers as everyone assumes but hotel provisioners. They all started out as hotel owners but eventually they woke up. Generally the actual hotel owners wouldn't swap place with them as they love owning their hotels so much. Owning a hotel is a highly addictive pursuit and for some affluent individuals an ego gratifying hobby.
Hotel owners envisage themselves in a sparkling chandaliered hotel lobby; greeting celebrities, politicians and the like when they arrive. The cruel reality is that the owners spend most of their time in backyard financial crisis meetings."

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