Mandarin Oriental foresees reduced profits from closure of Excelsior as iconic hotel goes for redevelopment

Mandarin Oriental International, owner of the iconic waterfront Excelsior hotel, reported a 19 per cent rise in underlying profits last year bolstered by strong performance at its Hong Kong properties.
But the luxury hotel chain operator admitted that the closure of the Excelsior would largely dent its profits this year, which contributed nearly 40 per cent to its overall underlying earnings in 2018.
Mandarin Oriental posted underlying earnings of US$65.1 million for 2018, compared to US$54.9 million a year earlier.
Total revenue derived from hotels under its management edged up 1 per cent to US$1.4 billion.
"The outlook for 2019 remains positive," Ben Keswick, chairman of Mandarin Oriental, said in a statement. "The planned closure of The Excelsior for redevelopment in March 2019, however, will substantially reduce the group's underlying profit."
The Mandarin Oriental luxury hotel in Central, Hong Kong. Photo: Dickson Lee
In October, Mandarin Oriental announced it would shut down The Excelsior at the end of March for redevelopment into an office tower.
The 869-room, four-star hotel, built on the very first plot of land sold when Hong Kong became a British colony, has uninterrupted views over Victoria Harbour.
The owner expects to boost the asset value by about half to US$5.2 billion after converting the hotel into a 26-storey commercial office building.
Mandarin Oriental said the redevelopment is expected to be completed in six years and cost US$650 million.
Keswick said full opening of the newly renovated Mandarin Oriental Hyde Park, London, renovations of hotels in Bangkok and Madrid, together with the company's new hotels under development would result in a long-term growth.
It was originally due to open in mid-2018 after the completion of a 22-month renovation programme.
Mandarin Oriental said the impact of the fire in London was mitigated by insurance proceeds.
Seven new management contracts were signed in 2018 and new Mandarin Oriental hotels are expected to open in Ho Chi Minh City, Grand Cayman, Moscow, Muscat and Phuket over the next five years.
"Expanding the Mandarin Oriental portfolio is a key priority over the coming years," the company said in the statement.
Mandarin Oriental put the Excelsior up for sale in June last year, but called it off three months later.
The hotel at the time was estimated to be valued at more than US$3.8 billion.
The luxury hotel chain operator has received approval from the government for a mixed-use commercial building with a gross floor area of about 683,500 square feet.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2019 South China Morning Post Publishers Ltd. All rights reserved.
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