Mandarin Oriental to nearly double global portfolio by 2013

Our focus this year is on emerging markets considering nearly 20 per cent of our global revenue is generated from the Middle East, China and India Christoph Mares, Mandarin Oriental. (AFP)

Luxury hospitality major Mandarin Oriental is looking to nearly double its international portfolio by 2013, with a total of 41 properties. Of these hotels, five will be located in the Middle East.

The group, which recorded a net asset of $2.1 billion (Dh7.7bn) in 2009 – down $1bn from 2008 – will manage its first regional property by August 2013 on Abu Dhabi's Saadiyat Island.

"The Abu Dhabi property will feature 160 hotel rooms, 35 serviced apartments and another 50 branded Mandarin Oriental residence that will be offered as freehold," Christoph Mares, Director of Operations Europe, Middle East and Africa, told Emirates Business.

Without revealing the project's total investment, Mares said the hotel was going ahead as planned, without any construction delays resulting from last year's economic downturn.

"However, our plans for opening a hotel in Dubai, in partnership with Nakheel is not going ahead," he revealed, adding: "Although we do hope to work with them in future to open a hotel in the emirate in future."

Healthy balance sheet

Last year's recession saw the Mandarin's group-wide revenue per available room or RevPAR decline by 16 per cent, stated Mares, with the average room occupancy at 68 per cent. "The figure was relatively low because of the microeconomic situation in Hong Kong, with the China market being buoyant. The key hotels were less affected, while boutique properties declined to the tune of nearly 25 per cent," he said.

The Mandarin group, which is listed primarily in London with secondary listings in Bermuda and Singapore, posted a figure of $530 million on the balance sheet.

"Even though our assets were down $1bn from 2008's $3.1bn, this is largely attributed to the fact that we down-valued the real estate component of our six fully- owned properties by $800m," revealed Mares.

"We currently have $530m on the balance sheet and we can acquisition if we feel like it in key gateway destinations," he added.

Mares, however, said that acquisitions can become quite challenging when many "cash rich bidders come equipped with their war chests".

"When you have big groups such as the Hilton, the Marriott and Starwood to face off, along with Middle East wealth funds such as the Abu Dhabi Investment Authority, you need to proceed carefully to ensure you don't pay a price that you are unable to recoup in the long run," he said.

Future growth

Aside from opening hotels across the UAE, Mandarin's regional focus encompasses cities such as Doha, Bahrain, Riyadh and Jeddah in Saudi Arabia, Oman, Amman and Cairo. Some would say these markets are already facing a glut in hotel rooms, but Mares looks at it differently.

"There may be a glut in markets such as Dubai, but newer properties are taking over from the ones that are old and tired. It has already begun. The fight for market share is quite aggressive," he said.

Mares added: "Our focus this year is on emerging markets considering nearly 20 per cent of our global revenue is generated from the Middle East, China and India. We currently have 25 hotels that are in operation, with another 16 in active pipeline."

Talking about the survival of the luxury hotel model in this economic climate, Mares said that the spending power in this segment had not changed. "The Mandarin brand is on the same boutique level as a Four Seasons or a Ritz-Carlton hotel. The market we cater to still hasn't shown a dramatic change on the leisure traveller front, albeit on a corporate level, properties are fighting over preferential rates."

Mares believes that this price war should stabilise by 2011, returning to the same level, if not higher, of 2008.

"It will take two to three years for room rates to level out, depending on which market you are in," he said.

"While they will equalise in most places, markets such as Moscow, Paris and London will rise considering there is very less development and more demand."


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