Managing director of Millennium and Copthorne Hotels New Zealand Ltd, BK Chiu explains to shareholders how his company lost a hotel.
Tucked away in the New Zealand Herald was a bizarre story about a Kiwi hotel company that appears to have had one of its hotels stolen from under them.
Millennium and Copthorne Hotels New Zealand Ltd (MCK) 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.
Disappointingly, profit was down 30% and total revenue of $108 million was down from $123.7 million last year.
Trading conditions have been described by the hotel's MD, BK Chiu 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."
Although MCK may blame market conditions with the hotel sector losing 111,000 guest nights last year, the progress of the company has been described "at best pedestrian and at worst, very disappointing."
In 2007, MCK were not confident of future growth in the New Zealand hotel sector and decided to chase better returns overseas. MCK entered into a joint venture with a Chinese property developer and purchased shares in a hotel in Hainan Island off the southern coast of China.
In a strange twist it would appear that MCK's joint venture partner sold the Chinese hotel along with other outside shareholders and has scarpered off with the proceeds.
Leaving themselves exposed and having a hotel stolen from under them has left MCK out of pocket by about $26.1 million. It would appear that this is not the first time MCK have taken a hit - we suggest that you read the New Zealand Herald article HERE.
This is not a good look for the hapless NZ company. Was this bad luck or bad management? Could the MCK directors have been naive in Chinese business practices? Were the complexities of business arrangements, structures and operating in another market also beyond the abilities of the directors?
The Annual meeting held last Wednesday would have been a grim affair as MCK directors fronted up to angry and bemused Kiwi shareholders.
We intend to purchase the smallest parcel of shares possible in MCK, just for the entertainment value of attending their annual meeting next year.
