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Scenic Circle on the move

By Graeme Kennedy

Friday 30th May 2003

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Scenic Circle Hotels is expanding again, with plans for two more South Island properties while seeking a suitable site in Wellington and making multimillion-dollar investments to increase its conference business.

A new development, the 70-room Te Kaikoura Hotel, and a CBD office building to be converted as the Dunedin City Hotel, are both scheduled to open next year to bring the number of Scenic Circle properties to 19 in 15 locations.

The Te Kaikoura will be the whale-watching town's first purpose-built tourist hotel while the Dunedin City, on the corner of Dowling and Princes Sts, has capacity for extension to 118 rooms to complement the group's flagship hotel-casino the Southern Cross, which is undergoing a major upgrade.

The company has properties in Auckland, Christchurch, Dunedin and most major tourist centres, and sales and marketing director Steve Shearer said the group eventually wanted 20 to 25 hotels to complete its New Zealand network.

Future hotels could be opened at other tourism areas such as Coromandel and Nelson and in provincial centres including Palmerston North, which were becoming increasingly important to the corporate market.

"And we want to get into Wellington," Mr Shearer said. "We would build the corporate market with a link in the capital as major companies look for that and when they tender they will go for a chain represented in all the main centres.

"We are investing heavily to expand our corporate capabilities ­ we have spent $1.5 million on redeveloping conference facilities at the Croydon Hotel in Gore and 12 of our properties have conference capacity."

Scenic Circle is running a special-deal campaign to encourage the conference market over the low winter season.

"With the recent world events operators like us are focusing more on the local market and we have become a diverse company to avoid being exposed to a single sector," Mr Shearer said. "We have a domestic and international mix of guests and work in the corporate, conference, leisure and sport groups areas."

He said Scenic Circle was in the mid-range three to 3.5-star market with 1230 rooms to give it 7% of the total New Zealand hotel capacity. Occupancy rate was about 70% but fluctuated in some areas due to seasonality.

American Earl Hagaman, a National Business Review Rich List entrant, started the chain in the 1980s when he bought a core of five South Island hotels and expanded quickly after a growth strategy was adopted in the late 1990s to achieve a nationwide network and economies of scale for cost savings through volume buying.

The group's first North Island hotel, Hamilton's Alcamo, was followed after 2000 by the Te Pania in Napier and the Scenic Circle Hotel in the Bay of Islands.

Mr Shearer said Scenic Circle fully owned seven hotels with the rest run under management contracts with independent owners although it had an equity holding in some.

"We want ultimately to have equity in all the hotels for more control over issues such as refurbishment, marketing and branding," he said.

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