HAMILTON, Bermuda—2014 will represent a year of transformation for Orient-Express Hotels Limited. The company on 10 March is officially rolling out its new name, Belmond. And during the same month, it begins its foray in the world of third-party management.
“2013 was about improving and extending our core, which meant fine tuning those things which we wanted to continue to do more of, fixing those things that are not working well and growing our business,” said President and CEO John M. Scott on Friday during an earnings call with analysts.
Third-party management will be key to that future growth, he said, which is why the company late last year entered into a contract to sell The Inn at Perry Cabin in St. Michaels, Maryland, for gross proceeds of $39.7 million, or approximately $500,000 a key. Upon the disposition, which is expected to close this March, Orient-Express will commence a 10-year management agreement.
The company committed $3 million in key money to be used for agreed property enhancements, he added.
Orient-Express’s portfolio comprises 45 luxury hotel, restaurant, tourist train and river cruise properties.
“Our plan for management is a subtle and measured one. It is about quality as opposed to quantity and a focus on where we think we can add significant value for owners where we have infrastructure in terms of operations and where we see our customers with significant demand,” Scott said.
Executives are targeting third-party management agreements in key gateway, urban markets such as London, New York and Rome.
“When we talk about London, that’s certainly in our own backyard where ... we can drive significant value to the property, given the fact that we have significant business operations that originate ... as well as our operating team and our sales and marketing team being based there,” he said.,” he said.
The company has several opportunities in the works, although Scott was hesitant to offer anything concrete.
“You don’t announce things until you are ready to announce, unlike some of perhaps our competitors in the management business, (which) tend to announce anything that comes through the door,” he said.
Orient-Express, which will change its official legal name this year to reflect the Belmond rebranding, will approach management differently than those branded competitors, the CEO said.
“What makes us unique and different from what I would call the more chain-like luxury hotels is our approach to unique, one-of-a-kind assets and celebrating the individual meaning. And what we will continue to do is continue to operate these hotels in a way that celebrates that unique experience as opposed to trying to create a more chain-like approach like some of the other luxury hotel management companies,” Scott said.
The Belmond name will allow the company to maintain the unique integrity of each property while leveraging the distribution of a larger umbrella brand, he added.
The company’s management agreements will be both fees- and incentive-driven “in an effort to materially align our position with our owners,” Scott said.
Strength begets strength
Orient-Express continued its recovery during 2013 with steady growth throughout most of its portfolio. System-wide revenue per available room increased 11.3% during the year, up from $275 to $306.
The gains were driven primarily by average daily rate, which ended the year at $510 compared to $475 for year-end 2012. “Our European hotels led the way with ADR up 12% in U.S. dollar terms,” Scott said.
Occupancy, meanwhile, increased to 60% from 58% during 2012.
“We made good strides in progressing towards our comfortable peak occupancy of 64% achieved in 2007,” Scott said.
Executives are seeing relatively flat growth thus far into 2014, due in part to a difficult comparison in 2013. For the full year, they expect RevPAR growth of 4% to 8% in local currency.
“For this full year 2014 we expect that our RevPAR growth will be driven almost equally by occupancy and rate,” Scott said.
“By geography, we’re expecting the largest RevPAR growth from our owned hotels in North America, followed by Europe and then the rest of the world. RevPAR growth for our North American hotels is forecasted to be between 5% and 11%, driven partially by occupancy and rate growth at El Encanto (in Santa Barbara, California) as the hotel works to build momentum in its first full year of operations.”
RevPAR in Europe is forecast to be between 2% and 6%, driven primarily by occupancy growth. RevPAR for the rest of the portfolio is expected to be flat to up 4%.
“I am pleased with what I have seen across the portfolio in my first full year at the company,” Scott said. “The assets we have are unparalleled, and it is our people that bring these assets to life. We continue to focus on our core strategic initiatives which we believe will result in continued growth in the coming year.
“With our new brand Belmond providing a solid foundation to drive further revenue enhancements, I believe our future is bright.”