Millennium & Copthorne Hotels NZ Ltd managing director BK Chiu said today the Government’s new border entry restrictions due to the Covid-19 virus would have potentially longlasting effects on its hotel trading & operations.
The Government announced the requirement for all arrivals into New Zealand to self-isolate on Saturday.
“While we support & understand the measures that the Government has taken to protect the health & wellbeing of New Zealanders, the fact remains that we now face an existential crisis for all of our hotels, all of our staff & our shareholders,” Mr Chiu said.
“While the current restrictions apply until the end of March, the response in other countries suggests that it will continue for a lengthy period and we have made our forecasts & assumptions on this basis.”
Near-term financial outlook:
“2020 actually started well, with positive trading results in our peak months of January & February. But what we have seen in the past 2 days is another wave of cancellations across all of our market segments and at all of our hotels.
“Those cancellations are both international & domestic and are for March, April, May & June. The restrictions on public gatherings announced on Monday will also substantially affect our conferencing & meetings business for the rest of the year and possibly into 2021.”
Millennium & Copthorne is now forecasting that the level of hotel revenue loss for the first half of 2020 would be about $24 million based on its current information: “If the current trading patterns continue into the second half of 2020, it is anticipated that the 2020 full-year result for the hotel operations would run at a loss.”
Mr Chiu said the company’s insurers confirmed yesterday that these losses wouldn’t be covered by business interruption insurance as the hotels aren’t closed by Covid-19.
Millennium & Copthorne has suspended any profit guidance for 2020 indefinitely, with immediate effect.
However, Mr Chiu said the company hadn’t closed any hotels and didn’t anticipate doing so.
“Our intention is to keep our hotels open where possible and retain a level of staff & resources required to operate to the level of business that they have. So we may close off floors or building wings & other facilities which are not being used, but there will be someone to check you in & out.
“Our hotel restaurants & bars will either close or operate under reduced hours in the near future. This will also impact hard on our hotel revenues.”
Effect on employees:
Mr Chiu said the impact on employees across all the company’s hotels & corporate offices would be significant: “We will need to make some very difficult decisions about all of our operations & employees in the very near future, certainly over the coming weeks.
“There will be reduced hours, there will be job losses. We will engage with our employees at all of our hotels & our corporate offices and look to agree on viable options to retain as many jobs as possible and to ensure that we have a business to manage in the future when this crisis passes. A range of options are being explored.”
Other cost savings & mitigation measures:
Earlier in the year, Millennium & Copthorne implemented a range of cost reduction & cost management measures in response to anticipated market demand. Mr Chiu said these would be expanded across all its business units and include the deferral of some capital projects which aren’t business-critical.
On the Government’s Covid-19 economic response package, Mr Chiu said:
“We will look into the package in more detail in the next few days. The package’s wage subsidies are helpful, especially for smaller tourism operators & accommodation providers, and is welcome from that standpoint. The reintroduction of depreciation deductions may be helpful to Millennium & Copthorne.”
He said the company’s board had confirmed that the 7.5c/share dividend announced on 10 February would be paid in May as announced.
The annual meeting scheduled for 26 May “will proceed, but will likely be “a hybrid/virtual meeting instead”. Shareholders will get the details in the notice of meeting at the end of April.
“The actions we are taking now, while severe, are necessary to ensure that Millennium & Copthorne can recover, rebuild & remain true to our intergenerational aspirations.”
CDL sales “still in line with forecasts”
NZX-listed Millennium & Copthorne subsidiary CDL Investments Ltd said today its property development operations “are not currently affected by the Covid-19 entry & self-isolation restrictions imposed by the Government last Saturday, and land development work is continuing.
Mr Chiu said sales at its subdivisions were proceeding in line with forecasts and no new profit guidance was justified. The board had also reaffirmed payment of the 3.5c/share dividend declared in February.
Attribution: Company releases.