A year after delisting from the London Stock Exchange, Millennium & Copthorne Hotels Ltd (M&C) has disclosed major initiatives that will prepare it for a recovery by as early as 2021 from the recent challenges caused by the COVID-19 pandemic.
However, over 4,000 jobs have been lost worldwide at the company, which owns, manages and operates over 145 hotels across some 80 locations worldwide, as a result of the pandemic.
The privatisation granted M&C greater agility and cushioned impact of the pandemic. Lessons learned and operational changes in recent months have helped to lay a much stronger foundation.
Properties across the globe have started to show 'green shoots' of improvements in occupancy and Gross Operating Profit (GOP) from the second half of 2020 which are expected to gain momentum in 2021.
London-headquartered M&C was privatised on 19 November 2019 after delisting from the London Stock Exchange at a valuation of £2.23bn. M&C operates 66 hotels (seven of which are managed by third parties) in Asia (12), Europe/UK (21), USA (18) and New Zealand (15) under the Millennium Hotels and Resorts (MHR) global brands; and 79 are under franchise and management contracts.
M&C, with an inventory of over 40,000 rooms and operations in 29 countries, is wholly owned by Singapore Exchange-listed City Developments Limited (CDL), a leading global real estate company with total assets of over S$23.8bn.
In 2019, M&C recorded revenue of £1.025bn (2018: £997m) and a pre-tax profit of £102m (2018: profit of £106m and included net valuation and impairment charges of £34m (2018: £36m. Excluding the effects of impairment losses and net revaluation gains, M&C reported profit before tax of £136m in 2019 (2018: £142m.
M&C has assessed as positive recent reports of vaccines against COVID-19, air travel 'bubbles', the recent US presidential elections and plans to hold the Tokyo Olympics in 2021 (postponed from 2020). The signing by 15 countries of the Regional Comprehensive Economic Partnership (RCEP) world trade pact also points to a brighter future for the region.
M&C recognises that in this 'new normal' hygiene is much more important when a customer chooses a hotel, restaurant or consider events; and that brands must look beyond 'personal touch' and ambience to include the promise of safety and to emphasise value for money.
The new business dynamics mean that large hospitality groups such as M&C must have sufficient working capital to weather possible prolonged uncertainty or even fresh lockdowns. Accordingly M&C management has outlined three strategic initiatives:
#1 - Engaging Customers Better; Digital Marketing and New Revenue Streams
Building on the 'We Clean, We Care, We Welcome' campaign launched in February 2020, M&C has chosen to keep as many properties open as possible throughout the pandemic. By staying open, its hotels in several regions have increased market share. Since Q4 2020, there has been a pick-up in individual bookings from small and medium corporate accounts in Singapore, New York and UK.
M&C will scale up digital marketing strategies to reach domestic retail consumers and target potential drive-in consumers residing within 300 km of hotels in certain cities in USA, UK and Europe.
To segment better its customer base, various brands now offer different price-value touchpoints. Reflecting the success of the digital strategy, online channels accounted for 80% of bookings as at end-September, up from 56% in 2019.
In the first 10 months of 2020, M&C booked 163,000 staycation nights (excluding the Middle East and North African region). At least 65% of staycation bookings were made through the M&C brand website by loyalty members. M&C expects that some parts of the corporate offline bookings, upon return, will be handled digitally as well.
In Singapore, two M&C hotels (Grand Copthorne Waterfront and Orchard Hotel) have portioned areas as pay-per-use co-working spaces since September and November 2020, respectively. Utilisation for such use has hovered at around 85%. Building on this success, this service has been launched elsewhere in Singapore in Copthorne King's Hotel and M Social, with Studio M and M Hotel next to roll out. M&C's London hotels have also re-purposed rooms for customers who want the space for work.
F&B menus have been shortened and rotated frequently to support fewer kitchen staff and reduce wastage in Southeast Asia, Taipei and in the UK. In gateway cities in North America M&C hotels offer reduced menus, focusing on signature dishes with 'sweet-spots' that combine turnover and operating margin. Singapore M&C hotels leveraged on signature dishes to compete with F&B operators.
Through these and other efforts, M&C's global occupancy rate in September 2020 has recovered to 40% from a low of 30% in June. M&C expects to close 2020 with an occupancy rate that is at least half the 73% rate achieved in pre-COVID-19 2019. Over the comparative periods, average rate per available room has increased by 23% to GBP25.4 (S$45.1) from a low of GBP20.61 (S$36.6). M&C entities have begun recovering from loss to Gross Operating Profit (GOP) in Asia (since May), New Zealand (since June), UK (since October). Global M&C GOP has been positive since July.
#2 - Lowering Global Cost Structure; Improving Efficiencies
As a major hotel operator, M&C has adopted group procurement, centralised functions and technological innovation for years. While staffing for the industry is unlikely to return to pre-COVID-19 levels, M&C's strategy is to lower the entire cost-structure through group and operational efficiencies, with staff layoffs as a last resort. Current efforts include:
i) Clustering functions such as administration, finance, marketing and communications to handle multiple properties in Singapore and across other regions; and
ii) Doubling of roles (e.g. regional GM doubling up as as a hotel GM; global function head also handling regional roles) and redeploying staff to handle multiple functions. Operations in various countries have been helped by tax relief and other Government efforts to offset wages.
Only after these efforts has workforce rationalisation been undertaken as a last resort. As at end-September 2020, total global headcount has been reduced by 36% compared to the end of 2019.
#3 - Review of Global Footprint To Align With Objectives of Parent Company
As a 100% subsidiary of CDL, M&C is able to tap the strengths of a parent with strong balance sheet and deep corporate experience. CDL exercises financial prudence such as stating investment properties in its accounts at cost less accumulated depreciation and impairment losses. CDL had grown the hospitality division over the last 25 years by acquiring entire portfolios, such as the Copthorne chain in 1995 and the Regal chain in 1999, as well as individual properties.