A mixed quarter for Orient-Express
02 MAY 2014 7:17 AM
Currency depreciation, world events and property renovations combined to mute first-quarter performance for Orient-Express Hotels.
HAMILTON, Bermuda—A combination of internal and external factors accounted for mixed quarterly performance for Orient-Express Hotels Limited, executives told analysts on Thursday during the company’s first-quarter earnings call.
Revenues for the quarter were $101.8 million, down $200,000 from the same period last year. Adjusted earnings before interest, taxes, depreciation and amortization was $700,000, a decrease of $3.8 million over the previous year. The company recorded a net quarterly loss of $20.8 million, versus a $47.2 million loss a year before.
Revenue per available room for the company’s hotels was up 5% in local currencies but down 2% in United States dollars.
Shares of Orient-Express fell 2% in trading on Thursday and are down 15% year to date, as of press time. The R.W. Baird/STR Hotel Stock Index is up 5.1% year to date.
Depreciation of several world currencies contributed to the decrease in revenues and RevPAR. According to company executives, currencies of several countries—including Brazil, South Africa and Russia—experienced double-digit depreciation during the quarter.
“Results for our seasonally less-significant first quarter included strong local currency performances which were partially offset by macro challenges at several of our properties as well as anticipated negative year-over-year variances associated with planned renovations during the slower quarter,” said John Scott, president and CEO.
In late 2013, the company closed the Belmond Miraflores Park in Lima, Peru, for a $7.5-million renovation of the 81-room hotel. The property reopened 16 April ahead of the hotel’s peak season, and Scott said current forecasts indicate the hotel will generate a 16% increase in average daily rate in May compared to the previous year.
The global stage
Other global events affected the company’s quarterly performance, Scott said.
“We continue to monitor the crisis in the Ukraine, and while it didn’t have a material impact on the first-quarter performance of the Belmond Grand Hotel Europe (in St. Petersburg, Russia), it did contribute to the 15% depreciation in the Russian ruble, impacting U.S. dollar translation for the hotel’s results,” he said. “Continued tension in the region has led to a decline in travel into Russia from several markets, primarily the U.S. and European Union. To date for the remaining three quarters, we’ve received cancellations of 1,900 roomnights, or $700,000 in revenues.”
In addition, a warning against travel to the Caribbean island of St. Martin due to a mosquito-born virus disrupted business at the Belmond La Samanna on the island. Scott said it resulted in cancellation of 400 roomnights equating to $450,000 in revenue.
On a positive note, Scott said he anticipates the company’s hotel in Rio de Janeiro will see strong business from mid-June through mid-July from the World Cup football tournament in Brazil.
He said the company expects occupancy at the Belmond Copacabana Palace to be near 100% during the period with ADRs up 40% over 2013.
An eventful quarter
Orient-Express executives were busy in the first quarter in a number of areas. In February, the company introduced to investors its new brand name, Belmond. In March, the company rolled out the name change to consumers and the travel trade.
“In conjunction with the introduction of Belmond, we launched our first collection-wide promotional campaign to introduce the market to our portfolio and to drive incremental business during periods of need,” Scott said. The campaign included email messages to existing guests and a social media marketing campaign.
“The campaign received 4.3 million Facebook impressions in the first 10 days following the launch, and the promotion has so far generated $3 million in incremental room revenue,” Scott said.
During the quarter, the company closed on the $39.7-million sale of Belmond The Inn at Perry Cabin, a 78-room property in St. Michaels, Maryland. As part of the sale, Orient-Express gained a 10-year management contract for the property.
“The sale was significant for several reasons,” Scott said. “It was consistent with our goal to sell non-core assets and use the proceeds for investment projects in our core portfolio that we expect will generate high returns. This was also our first third-party management contract, an important development in our strategy to grow our management business.”
In March, the company secured a $657-million credit facility that consists of a $552-million seven-year term loan and a $105-million five-year revolving credit facility. The company will use the funds to refinance the mortgages on most of its properties.
“This loan provides us with a more transparent capital structure; it extended our maturity profile; and it increased liquidity for the company,” Scott said.