Top chains brace for market slip

EAST Asia's five-star and luxury hotel groups are expected to experience slow growth for the year as they battle over supply of rooms and falling arrivals from the US, Europe and Japan.

Poor interim results reported by the Mandarin Oriental Hotel Group last Thursday gave a strong indication of the kind of earnings to be expected from luxury properties.

The group disappointed the market when it reported a meagre 1.56 per cent growth in attributable profits to US$19.5 million for the first half of the year.

The result was well below market expectations as analysts had forecast an interim growth of between 15 and 18 per cent.

Mandarin chairman Simon Keswick said the group's performance was offset by weakness in other hotels in other markets.

According to Sun Hung Kai analyst Brian Oung, the short-term outlook for luxury hotel chains was not encouraging.

''There will be growth, but not at spectacular level as the main clientele of such hotel chains are from America, Europe and Japan,'' he said.

''Arrivals from such countries are not expected to grow as their economies are still undergoing recession.'' Bangkok, Macau and Jakarta are suffering from soft markets as a result of oversupply, with Bangkok the worst hit as the city experienced a hotel construction boom about two years ago and is now languishing in an oversupply of rooms.

Mr Oung said it would take another year or two before visitor numbers from the long-haul markets started picking up.

''The period is about the same as the time the US, European and Japanese economies are expected to take to recover,'' he said.

''When the major economies recover, the destinations will be able to absorb the oversupply.'' Among the leading luxury chains which operate substantial properties in the region are Regent and Hyatt.

These chains are particularly prominent in Thailand, Singapore and Indonesia.

Mr Oung said there was not much which could be done to increase visitor arrivals from long-haul markets.

Mandarin Oriental managing director Robert Riley last week said it was difficult to change the market mix of arrivals in destinations like Bangkok.

Mr Oung said: ''Not much can be done except perhaps to be more aggressive in marketing a hotel's food and beverage outlets to locals.'' He said food and beverage outlet sometimes accounted for up to 50 per cent of property earnings.

''There is no point for a hotel to wait for the foreigners to come,'' he said.

''This [attracting local custom] was what the Hong Kong hotels did during the downturn in the hotel industry and it worked for them.''