Millennium & Copthorne NZ Ltd director Graham McKenzie told the company’s online annual meeting yesterday 910 of the company’s 1300 employees would lose their jobs as a result of the Covid-19 changes to its business.
NZX-listed Millennium & Copthorne and CDL Investments Ltd, both controlled by the Hong Leong Group of Singapore, held their annual meetings online, each chaired by a New Zealand-based director rather than Sydney-based chair Colin Sim, and with presentation detail by managing director BK Chiu.
Mr Mackenzie said: “The continued closure of New Zealand’s borders, which we understand is necessary to keep New Zealand & New Zealanders safe, will nevertheless have a huge impact given that about half of our pre-Covid business was from overseas. There will not be a sudden recovery. Flights will resume slowly and international visitors will be understandably cautious. Even a trans-Tasman bubble will be some time away.
“Conferencing & meetings will also not be as they were. Our restaurants & bar areas will need to change to accommodate new rules on seating & safe distancing. The whole guest experience will be very different.”
Mr Chiu, in his presentation, pinpointed 2 other issues confronting the hotel company, tourism’s role in the economy & bed taxes.
On the overall economic state, Mr Chiu said: “Does it have to take pandemic carnage going viral to show the wide & deep linkages tourism brings to the NZ economy? From airlines, airports, rental vehicles, taxis, shuttles, travel agencies, tour operators, petrol stations, cafes, restaurant, retail, accommodation….. to tourist attractions in cities & rural towns.”
And on bed taxes: “Where is the fairness & wisdom in public policies relating to local council rates?”
On the accommodation providers targeted rate (APTR), Auckland: “We commend the council’s proposal to suspend the APTR for part of this rating year & next. But we urge it to abandon the APTR.”
On the Queenstown bed tax: “An ill-advised, poorly researched & discriminatory local body tax.”
Graphs highlighted the strangling effect on the hotelier of the Covid-19 pandemic.
April trading (April 2019 in brackets):
Hotel revenue, down 33.6% to $31.6 million ($47.6 million)
Occupancy, down 35.5% to 57.5% (89.1%)
Average room rate, up 4.1% to $183.58 ($176.40)
Revpar (revenue/available room), down 32.9% to $105.47 ($157.11)
Covid-19 & border closure impact:
Occupancy & average room rates, January-April 2020 (2019 in brackets):
January: 89.8% (87.5%), $184.10 ($178.55)
February: 87.7% (91.9%), $186.82 ($189.01)
March: 53.2% (91.0%), $176.71 ($177.39)
April: 1.5% (83.7%), $219.94 ($159.97)
The relevant Covid-19 lockdown dates were:
20 March, borders closed to all visitors
26 March, alert level 4
27 April, alert level 3
14 May, alert level 2.
Mr Mackenzie said Millennium & Copthorne had sufficient cash to meet obligations. Its debt:equity ratio was 11.7% in April, and the company had no plans to increase bank borrowings or raise capital.
Despite a sobering economic outlook, Mr Chiu said well designed, constructed & located residential sections were in demand.
CDL lifted sales from $14.9 million in 2019 to $18.8 million.
He conceded: “Economic downturn & unemployment will eventually impact demand for residential property. However, a low interest environment, lower mortgage rates, removal of 20% loan:value ratio are all positive for home ownership aspirations.”
Mr Chiu said section sales were tracking positively in the new financial year, and CDL also had sufficient cash to meet obligations.
For the group, the directors said Millennium & Copthorne would resize & rescale its model of hotel operations, and actively market the Zenith apartments at King’s Cross in Sydney.
They said the hotel operation would make a loss this year, but overall the group would make a profit.
Wong Hong Ren dies
At the opening of the annual meetings, the directors noted the passing of former chair of the New Zealand companies, Wong Hong Ren, who retired from them in 2017.
Mr Wong was closely involved in CDL Investments & Kingsgate International Corp Ltd, and later Millennium & Copthorne, from the initial investment by Hong Leong in the shells of 1987 sharemarket high-fliers Euro-National Corp Ltd & Kupe Group Ltd.
He was chief executive & executive director of the international Millennium & Copthorne Hotels Group until he retired from them in 2015.
Attribution: Company releases.