Elegant Hotels Group PLC (LON:EHG) Chief Executive Officer Sunil Chatrani caught up with DirectorsTalk for an exclusive interview to discuss their half-year results statement.
Q1: You’ve announced some decent increases in revenue, RevPAR daily rate and occupancy today, what’s behind those positive numbers?
A1: Well, the revenue increase was driven by good performance by Colony Club, Waves, Treasure Beach as well as Daphne’s which was actually closed for refurbishment during some of prior comparative years.
In addition, Treasure Beach, which is our newest hotel which we acquired in May last year and which opened in December, contributed a modest amount of new revenue in the period, although less than originally anticipated due to its opening later than was expected.
The increase in ADR, or average daily rate, was largely driven by Waves. This is one of our all-inclusive properties which was able to add over 20% to its rates as the property becomes more well established having been acquired in 2016.
From the occupancy side, this was driven primarily by Colony, House and Turtle. In the case of The House, the increase was due to, at least in part of it anyway, to the recent refurbishment that we did at that property.
This represents the latest example of our ability to improve the financial performance of our hotels through our 3-step programme of refurbish, reposition and repricing.
Q2: Now, it sounds like the market conditions are becoming a little less volatile in Barbados after quite a long period of uncertainty. Can you talk us through the latest dynamics of the operating environment over there?
A2: It appears that market conditions in Barbados are stabilising after several challenging years, however we’re certainly not saying that everything is now fine and that the market is entirely going our way.
There continues to be a trend towards the value accommodation and the value segments, but this has now been offset by the increase in visitors to the island. The fact that the Sterling has improved significantly recently is good news for us as our rates as priced in US dollars, so prices have effectively been lowered for UK guests who still account for 72% of the room nights with us. As a result, our advanced bookings for the next fiscal year are currently higher than they were at the same time last year.
In addition to that, our efforts to target the North American market more effectively appear to be paying off, room nights from that region now account for 17% as opposed to 16% at the same time last year. Waves Hotel is a good example of how we’ve managed to do this, we have just proved to be particularly popular with guests from that region. More broadly though, recent data from the Barbados Tourism Marketing Inc shows that arrivals from North America has increased by 3% in the last quarter of 2017.
So, all in all, the market for us is a little more settled than it has been for a while.
Q3: I think you touched on this earlier, but can you talk us through the recent acquisition of Treasure Beach? Are you happy with how it’s turned out following the recent refurbishment?
A3: Yes, we’re excited about the prospects at Treasure Beach. It’s a 35-suite hotel, it’s an adjoining property with Tamarind which in turn is situated next to Daphne’s and the House. As a result, 4 of the hotels are now accounting for a continuous 300 metre stretch of prestigious west coast of Barbados, as we refer to as the ‘Platinum Coast’.
Having acquired it in May, we immediately closed it and carried out an extensive refurbishing project. It re-opened in mid-December which was a little later than we’d originally planned due in part to the extreme weather events in Miami which delayed imports of materials. Unfortunately, that meant that it missed our peak season and therefore produced lower than expected revenue in the period.
However, we’re delighted how it’s turned out, it is a high-quality product and we expect it to perform well in 2018 and 2019.
Q4: Is Elegant Hotels’ underlying strategy of refurb, reposition and reprice still valid for the current environment in Barbados do you think?
A4: Absolutely, we certainly believe it is, the latest example of it was at The House which is a luxury adults-only property. The public areas were refurbished at the end of the last financial year which has enabled us to improve occupancy by 4 percentage points as well as increasing its rate.
There are a number of examples of us achieving significant performance uplift through refurbishments within our portfolio and it’s also an important aspect of our M&A strategy.
There’s a lot more to go after, within our current properties, and we see an opportunity to enhance its profitability of several of our hotels through a select and refurbishment programme, some of which were last refurbished as far back as 7 years ago.
Q5: What’s the outlook like for the remainder of this year and what are Elegant Hotels Group’s strategic priorities?
A5: We’ve continued to trade in line with market expectations since the end of the period and our booking pipeline for the remainder of the financial year looks good. As I’ve already mentioned, market conditions in Barbados also appear to be stabilising after a number of challenging years, we’re therefore comfortable with the FY18 outlook versus market expectations and confident in the group’s longer-term prospects.
In terms of strategic priorities in the near-term, construction of Hodges Bay in Antigua is nearly finished, and we’re excited to be adding to our portfolio under management contract.
We’re also continuing to assess a range of further expansion opportunities, both on and off island as well as making strategic improvements to drive the profitability of our existing portfolio.