HAMILTON, Bermuda—A number of key operational wins for Belmond Limited during the third quarter were not enough to quell mounting anxiety from investors.
Shares of the company, which is executing on strategic capital expenditures in core assets as well as rolling out a new brand marketing campaign, are down 27.8% year to date, as of press time. The R.W. Baird/STR Hotel Stock Index, by comparison, is up 17.5%.
“It’s as frustrating for us as it is for you,” said CFO Martin O’Grady during an earnings call with analysts on Thursday.
“This year has been particularly unlucky,” he added, citing a number of macroeconomic headwinds including the Russia-Ukraine crisis, financial volatility throughout Asia and a mosquito-borne virus that’s spread throughout the Caribbean and Central America.
“The market punishes you almost immediately in this macroenvironment,” O’Grady said.
President and CEO John Scott III—who since coming on board in November 2012 has seen shares (NYSE: BEL) fall 3.7%—also expressed frustration.
“We’ve been delivering on what we promised as an organization. … We’re making headway on our strategic front. We are executing on marketplaces and showing growth where we can. And on opportunities in places where we’ve had strong macro headwinds, we’re working hard at those properties to deliver the best results that are possible in those places,” he said.
Net earnings during the quarter decreased to $14.9 million from $16.1 million the prior-year quarter. Revenue per available room was up 2% in local currency.
Extracting value
One shareholder asked during the question-and-answer portion of the earnings call whether executives had considered extracting value through the sale of assets—trophy or otherwise.
“There’s a mixed view on that,” Scott said. “There’s a view that, ‘Don’t go run and sell a trophy asset’ if indeed the reason behind that is to put a market on the overall portfolio.”
He later added: “We believe we can do more with them than to sell. We are in no hurry based on current liquidity to sell an asset that we believe is achieving the right potential for the company.”
He urged analysts and investors to resist making broad-based assumptions about opportunities for trophy asset dispositions based on a handful of high-profile transactions in New York City or London.
“Neither markets do we have actual assets in,” he said, adding, “That’s not the right direction for us at this time.”
That said, executives are always opens to the right opportunity, Scott said.
“We have a fairly rigorous annual process at looking at our portfolio and looking at our assets within the portfolio as it relates to a few key metrics,” he said.
Whether the asset fits within the broader strategic profile of the company’s owned assets is one criterion. Another is the financial opportunity gained by collecting management fees versus that gained through sale. “And finally the (earnings-before-interest-taxes-depreciation-and-amortization) potential relative to the assets.”
The company has sold three assets during Scott’s tenure: The Inn at Perry Cabin (March 2014); Porto Cupecoy, Sint Maarten (first quarter 2013); and the Westcliff (December 2012).
Marketing Belmond
Efforts to communicate the Belmond brand, which replaced previous moniker Orient-Express Hotels Limited on 10 March, are progressing as planned, executives said.
“It is very early. We believe the brand is being well-received,” Scott said.
“Communicating that brand … is now in full effort with things like our website, things like our online direct marketing, which we have executed on very well. Under the Belmond brand we’ve been able to do special targeted promotions to targeted customer bases. … It is helping us with our direct marketing and sales efforts. It will continue to help us gain awareness of all we have to offer,” he said.
Conversion on the company’s website has increased, as has the company’s social media audience, added Ralph Aruzza, chief sales and marketing officer.
The marketing push is correlating with a healthy gain in group bookings, he said.
“We had a change in deployment of strategy starting really in the second quarter of last year in terms of how we approach the conference and incentive market. … It really spiked with the brand migration and in terms of what we did reaching out to that constituency,” Aruzza said.
Through 30 September, group revenue production increased 26%, Scott said.