Covid19 hotel development analysis: Minor Hotels [Infographic]

Covid19 hotel development analysis: Minor Hotels
[Infographic]

Minor International’s share price halved in a month as Covid19
concerns mounted. (Picture: Michael-Peter Wiesiolek)

In this in-depth look at Minor Hotels, TOPHOTELPROJECTS provides
an exclusive analysis of its hotel development pipeline and
investigates how Covid19 has affected the group so far.

The Covid19 pandemic has had a huge impact on the global
hospitality sector, with countless businesses forced to adapt to
countries imposing stringent lockdowns and travel restrictions in
an effort to get the outbreak under control.

Part of
Minor International
(MINT), one of the largest hospitality and
leisure companies in the Asia-Pacific region, Minor Hotels has
certainly not been immune to the crisis. The Bangkok-headquartered
hotel owner, operator and investor boasts a portfolio of over 530
properties, spread across more than 50 countries, and its
high-profile brands include the likes of Anantara; Avani; Elewana
Collection; Oaks Hotels, Resorts & Suites; NH Hotels; NH
Collection; nhow and Tivoli Hotels & Resorts.

In this report, we check out Minor Hotels’ ambitious
development pipeline, and consider how MINT’s response to
coronavirus has evolved over the course of 2020.

Minor
Hotels’ remarkable expansion drive

MINT, which also has a significant presence in the restaurant
and retail markets, has expanded its hotel portfolio considerably
in recent years, not least thanks to the blockbuster acquisition of
NH Hotels Group, a deal that its founder and chairman William
Heinecke hailed in October 2018 for having “transformed MINT into
a truly global hospitality company”.

This emphasis on growth is also reflected in Minor Hotels’
development pipeline. Delving into the current status of Minor
Hotels’ projects, as indicated on the
TOPHOTELCONSTRUCTION
online database, we can see that the hotel
group currently has 49 projects in progress, with a further ten on
hold and just two cancelled as of 2 June 2020.

In terms of how Minor Hotels’ active projects are split by
brand, it’s apparent that the group’s most prolific engine of
growth is Anantara, which has no fewer than 16 schemes in the
works. This places it just ahead of Avani (15) and NH Hotels (11),
with all of the other brands in single figures:

Of course, the Covid19 pandemic has not yet run its course, and
it’s possible that Minor Hotels will decide to pause or scrap
more projects if the situation on the ground deteriorates. However,
it’s interesting to note that the vast majority of its
developments are still proceeding despite all the uncertainty
around the world, suggesting that the group remains confident in
the underlying business case for its schemes – and ultimately
that travellers will want to stay in its hotels once more after the
crisis subsides.

MINT’s share price halves in a month

Minor Hotels’ commitment to realising the projects in its
development pipeline seems all the more impressive when you
consider the enormous impact that Covid19 has had on the share
price of MINT, which is listed on the Stock Exchange of
Thailand.

At the beginning of 2020, before the true scale of the
coronavirus threat was known, the company’s share price actually
remained fairly steady at around 35 Thai baht ($1.12) per share.
From mid-February onwards, however, the value plummeted – the
price more than halved in a month, dropping from 32.75 Thai baht
per share on 19 February to just 15.40 Thai baht per share on 19
March.

Since then, investor confidence has gradually returned, although
not to pre-crisis levels by any means. As of 8 June, MINT’s share
price stood at 23.20 Thai baht per share, approximately two-thirds
of where it stood at the start of the year.

How MINT initially responded to the pandemic

While investors may have been worried about MINT’s prospects
during the pandemic, it’s probably fair to say that the company
itself has struck a relatively upbeat note throughout the crisis.
But this is not to say that MINT’s messaging has remained the
same over the course of 2020 since, in common with most businesses
around the world, it significantly underestimated how much Covid19
would affect day-to-day activities at the outset.

On 21 January, for example, the company issued a press release
stating that “we are fully confident that with the early
identification and report of the first cases, the proactive
precautions on health screening and the necessary steps being
taken, the World Health Organization and the China’s authorities
[sic] will be able to control the virus”, and noted that “Minor
Hotels has not experienced any significant cancellations, impact on
advanced booking and the group’s operations”.

MINT steps up its response to Covid19

By 27 February, MINT was acknowledging in a Management
Discussion and Analysis document that it “expects a short-term
impact on its hotel business from Covid19, and a strong recovery
when the situation moderates”. At the same time, it pointed out
that the company is “well-diversified in terms of geographies”,
and advised that Minor Hotels would be switching to target domestic
tourists in those countries where international travel demand was
decreasing.

The picture looked very different, however, on 23 March when the
company opted to notify investors about the impact that Covid19 was
having on operations following the Bangkok Metropolitan
Administration’s order to temporarily close high-risk venues, as
well as the lockdown measures implemented by many countries where
it operated. Shareholders were told that “several drastic
cost-cutting initiatives…are being implemented across business
units and support functions, and across geographies” in an effort
to minimise the impact on revenue and profitability. Among the
measures being taken were a substantial reduction in marketing and
advertising costs for “low-activity businesses, in particular the
hotel business in Europe”, and the suspension of all significant
capex investments, which would now only proceed when an obligation
occurred.

MINT reflects on the fallout from coronavirus

Then on 23 April, MINT founder and chairman William
Heinecke
gave a revealing interview setting out his views on
the global situation, as reported by Bloomberg. During the
conversation, he warned that “this is not an economic recession,
it’s a depression”, describing the fallout from Covid19 as the
worst crisis he had experienced in his decades-long career running
hotels. He then went on to say that once the pandemic settles down,
domestic tourism was expected to recover before international
travel, and predicted that customers in future would opt for brands
that can take the necessary health, food and safety precautions,
which might mean them shunning private apartments or personal
online accommodation listings.

Three weeks later, on 15 May, MINT revealed the true extent of
the “unprecedented and highly challenging Covid19 pandemic” on
its finances, reporting net losses of 1.77 billion Thai baht ($56.6
million) in Q1 2020, compared to net profits of 583 million Thai
baht a year earlier. The company, which generated total revenues of
129.89 billion Thai baht in 2019, said: “With the lockdown of
many cities and countries across the globe, global tourism slowed
dramatically in March 2020 and many hotels, restaurants and retail
outlets were required to temporarily close, directly impacting all
three of MINT’s businesses.”

Looking ahead, however, the business also detected grounds for
optimism. “As the Covid19 pandemic eases… MINT is confident
that it will emerge from this period a stronger company,” it
said. “The global hotel, food and retail industries will change
in response to the lessons learned from the pandemic and MINT will
play a leading role in shaping and leading them. Its strong brand
portfolio, agility and passionate leadership and team serve as the
foundations that will guide MINT through the pandemic and propel it
to success for many years to come.”

ABOUT THE CHAIN

Source: FS – All-Hotels-Blogs
Covid19 hotel development analysis: Minor Hotels
[Infographic]