NZX-listed Millennium & Copthorne Hotels managing director BK Chiu says the company faces an “existential crisis for all of our hotels, all of our staff and our shareholders”.
He forecast that the level of hotel revenue loss for the first half of 2020 would be approximately $24m, based on current information.
If the current trading patterns continued into the second half of 2020, he anticipated the 2020 full year result for the hotel operations would run at a loss.
The company received confirmation from insurers that the losses were not covered by business interruption insurance as the hotels were not closed by Covid-19.
The company had suspended any profit guidance for 2020 indefinitely.
BK Chiu said Millennium & Copthorne did not anticipate closing any of its hotels at present.
“Our intention is to keep our hotels open where possible and retain a level of staff and resources required to operate to the level of business that they have.
“So, we may close off floors or building wings and other facilities which are not being used but there will be someone to check you in and out.
“Our hotel restaurants and bars will either close or operate under reduced hours in the near future. This will also impact hard on our hotel revenues,” he said.
“We will need to make some very difficult decisions about all of our operations and employees in the very near future, certainly over the coming weeks.
“There will be reduced hours, there will be job losses. We will engage with our employees at all of our hotels and our corporate offices and look to agree on viable options to retain as many jobs as possible and to ensure that we have a business to manage in the future when this crisis passes.”
Consultation with employees would begin before the end of the week.
Other cost savings and mitigation measures would include deferral of some capital projects which are not business-critical.
Chiu welcomed the Government’s economic response package announced on Tuesday.
“The wage subsidies are helpful especially for smaller tourism operators and accommodation providers and is welcome from that standpoint. The reintroduction of depreciation deductions may be helpful to Millennium & Copthorne.”
The year had actually started well with positive trading results in the peak months of January and February, BK Chiu said.
“But what we have seen in the past two days is another wave of cancellations across all of our market segments and at all of our hotels. Those cancellations are both international and domestic and are for March, April, May and June.
“The restrictions on public gatherings will also substantially affect our conferencing and meetings business for the rest of the year and possibly into 2021.”
The dividend announced in February would be paid to shareholders in May as announced.
The annual meeting scheduled for May 26 would proceed but will likely be a hybrid or virtual meeting instead, BK Chiu said.
“The actions we are taking now, while severe, are necessary to ensure that Millennium & Copthorne can recover, rebuild and remain true to our intergenerational aspirations.”