Elegant Hotels Group PLC (LON:EHG) Chief Executive Officer Sunil Chatrani caught up with DirectorsTalk for an exclusive interview to discuss the increase in revenue, operational progress, the current market dynamics in Barbados, attracting new visitors and what to expect in the coming year.
Q1: This morning, we saw the full-year results for the year ended 30th September, a year of progress for the company. Can you tell us what’s been behind the 5% increase in revenue for the year?
A1: The increase in revenue was driven largely by our acquisition of Treasure Beach hotel in Barbados in December 2017. Treasure is a 35-room all-suite hotel situated right next door to another one of our properties on the west coast, Tamarind hotel. Its addition to the portfolio has given us almost 300 metres of continuous beachfront on the prestigious Platinum west coast of Barbados. Despite opening a little later than we would’ve wanted, for reasons beyond our control, we’re delighted with how the renovation has turned out and we expect it to perform well as it becomes more established in the coming years.
Another factor behind the revenue increase was the renovations at House which is an adults-only property right next door to Tamarind, this is in line with our ongoing strategy of refurbishing, reposition and repricing our properties. In this particular case, some of the renovations to the public areas and the addition of a new spa allowed us to add a 6% increase in EBITDA at the property over the year.
Lastly, one of our all-inclusive properties also made a good contribution and continue to go from strength to strength. This is part of a wider trend at the moment towards the all-inclusive segment as guests, especially those from the UK, like to lock-in the cost of their holiday.
Q2: Apart from the acquisition of Treasure Beach, can you please describe for us the other areas of operational progress since we’ve last spoke?
A2: Hodges Bay Resort and Spa opened in Antigua in December 2018 which is subsequent to year-end, it’s one of the best properties in Antigua and we’re very pleased with how it’s turned out. It’s our first full management contract and first operation outside of Barbados so it’s exciting for a couple of reasons and we intend to use it as a template for further expansion across the Caribbean region.
In addition to some ‘business as usual’ type of renovations at a couple of our properties, we also added a rum vault to Colony Club towards the end of the financial year. This is the first of its kind in Barbados and features a collection of 150 rums from all over the world, it offers unique experiences such as rum pairings with a dedicated rum sommelier and multi-course dining options along with rum-themed mixology and cooking classes.
It’s this kind of renovation and high-class offering that our guests love, and it plays an important role in attracting new business as well as increasing the chances of them making a repeat booking in the future.
A little bit less glamorous but nevertheless important development during the year was the creation of a centralised warehouse which allows us to deliver savings on a large portion of our food and beverage items. We think that, together with the streamlining and centralisation of certain functions, it will result in annual savings of around $500,000 a year.
Q3: Can you talk us through the market dynamics in Barbados at the moment and I think you alluded to this earlier but has the political uncertainty here in the UK resulted in a drop-off in visitors at all?
A3: Overall, visitor numbers to Barbados has increased by 3% over the year and in terms of the UK specifically, the visitor numbers actually grew by 1% during the year. The UK now represents 32% of the visitors to Barbados which basically tells how resilient it is, it’s the main market for us.
The real growth has come from the US which saw a 9% increase in visitor numbers and now represents around 30% of all visitors to Barbados. This is partly due to the increase from Miami and Charlotte and tallies nicely with our efforts to increase our market penetrations in North America. For Elegant, the percentage of customers from the region based on room nights increased 20% from 18% in the year before which is very pleasing to see.
More generally, Barbados continues to enjoy a fantastic reputation as a safe country with great weather and a range of attractions and activities. Although this makes it a competitive market, we are confident that visitor numbers will remain resilient for the foreseeable future from the UK and elsewhere.
Q4: Now, you’re well-known for the high level of repeat business that you enjoy but how do you go about attracting new visitors?
A4: First of all, we have extremely strong relationships with our tour operators, and we work hard to maintain our excellent reputation with them. However, we’re also increasing the direct business that we’re attracting through our own website and as a result of our efforts in this area, the percentage of revenue from the tour operators decreased during the year from 80% to 78%.
As I said already, North American business is another major focus and we’ve recently appointed a marketing agency in the US to help drive customers from that region. We’re also focusing more and more on a millennial segment for whom repeat visits are less common, these customers have been shown to value experiences and sustainability. So, our property refurbishments focussed on appealing to this segment in particular and for more established guests, the level of service and quality that they have come to expect from us.
Lastly, we attach great importance to the training and development of our staff, and we have rigorous programmes in place which are key to improving our guest satisfaction scores. So, once we have attracted a new visitor, we have a high chance of them coming back.
Q5: How is the coming year looking for Elegant Hotels Group, both in terms of the underlying trading as well as your expansion plans?
A5: We’re pleased with how trading has gone since the start of the financial year and our bookings are currently tracking ahead of the same period last year. We’re very aware of the current uncertainties in the UK market and continue to monitor it closely but nevertheless we’re confident in our prospects for 2019.
In terms of our further expansion, we took a decision last year to strengthen our balance sheet before expanding further and it is likely this approach will continue into the current financial year.