M&C checks in with more good news for hotel sector

Millennium & Copthorne has become the latest big hotel group to report a jump in profits and improved trading conditions, suggesting the industry may be in better shape than thought.

The owner of more than 100 hotels worldwide, including establishments in Aberdeen and Glasgow, yesterday reported a 53 per cent increase in full-year pre-tax profit to 128.5 million - in line with analysts' forecasts. It noted that conditions were recovering across its key markets of London, Singapore and New York.

M&C's results came a day after InterContinental, the world's biggest hotelier, showed confidence in the economic recovery by lifting its final dividend for the first time in three years and set a target for opening more hotels. Its upbeat tone chimed with recent comments from rivals, including US giant Marriott.

Countering that optimism, a study last week suggested that Scotland's hoteliers were facing a difficult year in the face of public sector cuts, interest rate rises and a weak housing market.

Accountancy firm PKF also revealed that occupancy levels north of the Border had fallen by 8.5 per cent in December, compared with a 1.3 per cent dip in England.

London-based M&C, which is majority owned by chairman Kwek Leng Beng's Singapore-based property company City Developments, said its revenue per available room - a key industry measure - rose by 14 per cent to 61.06.

The improvement was led by a 29.3 per cent surge in Singapore, 8.8 per cent gain in New York and a rise of 7.9 per cent in London.

Chief executive Richard Hartman said: "The key markets continue to be robust. We seem to be on the same trajectory that we experienced in 2010, particularly in the last two quarters. I don't foresee any problems in our key markets."

The group described its performance so far this year as encouraging, with revenue per room up 4.5 per cent in the first five weeks despite it being traditionally a quiet period for the industry.

Hartman said the firm was eyeing acquisitions and had identified "half-a-dozen" potential targets, but would strike a deal only if it would immediately boost earnings.

"We certainly look at many projects which are coming up for sale," he said. "We've got probably half-a-dozen on our desks right now for analysis, but so far we haven't found something that fits our criteria for investment."

Hartman announced his intention to retire last year when a successor is appointed and said he expected the new chief executive to be named by the end of next month.

M&C is paying a final dividend of 7.92p per share, making a total dividend for the year of 10p per share - a rise of 60 per cent.

Nigel Parson, an analyst at brokerage Evolution, said: "Trough-to-peak earnings should double and utilising the balance sheet accelerate earnings faster. We are well into an upgrade cycle and there's more to come." The firm has a "buy" rating on the hotelier's shares, which have risen by more than 60 per cent during the past year.Analysts at Shore Capital, which has a "hold" recommendation on M&C, said: "We reiterate our recommendation highlighting that despite the significant revpar growth within its core cities… the group retains a very low rate of return within the underperforming asset base, notably Europe (ex London) and the US (ex NYC)."