NZ tourism boom lifts fortunes of Chateau Tongariro, Wairakei Resort

Friday 14th October 2016

New Zealand's booming tourism market is helping lift the fortunes of one of the country's most iconic hotels, the Chateau Tongariro on Mt Ruapehu, with the company that owns it expecting to produce a profit for the first time in five years, and bolster earnings further next year.

The Chateau in Tongariro National Park and the Wairakei Resort in Taupo are ultimately owned by global investment company Oriental Holdings, a publicly listed Malaysian company controlled by the Loh family. The local business, KAH New Zealand, has posted losses the past four years, amounting to a total of $1.9 million, according to accounts filed to the Companies Office. However, that looks set to turn around this year on the back of an uplift in tourism, according to the financial controller for the two hotels, Jerome Dyer.

New Zealand tourism arrivals are at record levels, hitting 3.36 million in the year through August, and pushing national guest nights to their highest ever levels, boosting the accommodation sector. Dyer said both properties had seen increases in the last 18 months as more free independent travellers, known as FITs, stayed at the Chateau, and Wairakei benefited from a huge increase in the number of Chinese tour groups over a longer period.

"We have struggled basically over the last four or five years ever since the GFC back in 2009 - our revenues haven’t moved and costs have been increasing every year so it’s sort of getting back to a state of where we needed to be to get the owners to reinvest into the property," Dyer said. "Over the last few years we have shown losses but we do expect that to right itself this year and moving forward as well - 2016 will show a profit and we forecast for that to increase next year as well."

The company's local managers are in talks with the overseas owners about reinvesting into refurbishing the public areas and rooms at Wairakei Resort, which is primarily a corporate conference and international tour group destination, and upgrading the Chateau bathrooms in its heritage wing and soft furnishings in the public areas, he said.

The potential cost is still being considered, with the Chateau bathrooms likely to cost between $2 million and $3 million and the Wairakei upgrade costing anywhere from $500,000 to $15 million, depending on the scale, he said.

The company's top priority is the public areas at Wairakei Resort to help lift its level of corporate conference back to where they were before the GFC dented the market as struggling businesses cut spending, he said.

The timing is still being finalised but it would ideally start in the first half of next year and the work may be completed in stages, he said.

For the Chateau, the biggest impact from the GFC was felt in the domestic FIT market as people closed their wallets and chose not to take a ski holiday, which is the major drawcard for the Chateau over the peak winter months.

Dyer said the outlook is now positive.

"We are in the process of doing our forecasting and budgets for 2017 at the moment and forward bookings in the system are very strong, stronger than what we actually had this year, and it's getting to the point now however where demand is meeting availability so the increases aren’t going to continue at the rate they have been due to the fact that we can’t meet the demand."

Room rates, which had experienced little increase over the past 10 years, had started to creep up in the last 18 months and were likely to continue to rise as the company had no plans to expand its hotels, he said. Wholesale rates for international groups were the most likely market segment to see an increase amid tight accommodation supply in the Taupo area, he said.

The looming investment ahead means the New Zealand company is unlikely to pay a dividend to its owners anytime soon.

"We do have our own cash reserves but what we are talking about would take us higher than what we have so at this stage we won’t be paying any dividends this year or next year I would say until that is fully fleshed out and the picture of that in terms of what we would be looking at capital wise becomes clearer."

The company's accounts showed it last paid an annual dividend of $500,068 in 2013.

BusinessDesk.co.nz

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