Millennium and Copthorne Hotels has warned investors that the hospitality industry faces ‘intensifying’ challenges in the near future in the form of staff shortages and competition from the growth of Airbnb and serviced apartments.
The company’s chairman Kwek Leng Beng made the comments as it revealed a drop in pre-tax profit for 2018 to £106 million – down 28 per cent on 2017 in constant currency. The fourth quarter was particularly hard, with profits falling 76 per cent to £7 million.
Kwek blamed “a range of geopolitical and global economic headwinds”, including US and China trade relations, Brexit and increasing minimum wage levels in several markets.
The company also saw revenue per available room fall 7.4 per cent in London, mostly driven by the closure of its Mayfair hotel for refurbishment. Excluding that property, revenue grew 3.3 per cent. The hotel is set to reopen as the Biltmore, Mayfair in the second quarter of this year (new bedroom pictured).
Millennium and Copthorne says a particular challenge in the UK is the effect of Brexit. It claims to be struggling to recruit EU workers, “which currently comprise more than half of the London workforce”. Minimum wage increases in the UK have also reportedly added to cost pressures for the group.
Looking ahead, Beng said: “The board’s priority is to evaluate and develop new and innovative strategic plans to meet the challenges facing our fast-changing operating environment. The shortage of talent – from rank and file to senior management – is intensifying with many new hotels being built around the world, not to mention the growth of Airbnb and serviced apartments. Any hospitality business that wants to progress will need to evolve and embrace these changes to stay relevant and profitable in the immediate and medium term. Restoring profitability in our New York hotels also remains at the top of the board’s objectives.
“Meanwhile, we continue to invest in and reposition our hotels. We look forward to our Mayfair hotel being rebranded and opened as the Biltmore, Mayfair in the second quarter of this year. This is the first opening under Hilton’s new LXR Hotels & Resorts collection in Europe. This also will mark the group’s debut in the London five-star deluxe market and it is our aim to fast-track our lost earnings growth at this hotel after it re-opens.
“2019 will be another challenging year for the group, with significant capital projects underway and several large hotels earmarked for major renovations. These investments will be carefully managed and phased to deliver the right returns to shareholder and underline the group’s intention to maintain strict control of costs throughout the business.”
Millennium and Copthorne Hotels operates the Leng’s Collection, M Social, Studio M, Millennium, Grand Millennium, M Hotel, Copthorne and Kingsgate brands.
In September 2018, the group’s CEO Jennifer Fox stepped down after just three months in the role.