Interview with Bob East, CEO, Mantra Hotel Group, Australia

Mantra Group’s Board of Directors confirmed that the company will maintain its current ownership and shareholder structure. Given the company’s financial success to date and forecasts for continued growth, the decision has been made to further grow and develop the business by maintaining the current shareholders and leadership team, under which the company has prospered to date. A number of considerations were made by the Board on some extremely competitive offers, but to do justice to a profitable asset like Mantra Group, we set a very high benchmark.I am keen to see the business continue to succeed with every confidence the current structure would facilitate further expansion and development. The Executive team and staff across the Group have continued with a ‘business as usual’ approach throughout this process and maintained momentum across the network – this approach will now pay dividends as we get on with servicing our guests and continuing to improve and grow our product to round out another successful year.Indeed Mantra recorded excellent end of financial year results in 2011/2012. How did the group manage to combat the volatility in global demand together with a strong Australian dollar and drive this growth?We were very pleased with our EOFY results - a 9% growth in EBITDA (YOY) to reach AU$60.6 million (€48 million), reflecting a successful 2011/2012 financial year across both CBD and resort markets.Overall room revenue across the Group’s Australia and New Zealand network (over 110 Peppers, Mantra and BreakFree hotels) increased by 6.2% on 2011 reflecting a growth in RevPAR of 5.8% across the Group’s 22 CBD properties and 5.2% across over 85 resort properties while average daily rate (ADR) grew by 1.7%.We rolled out some dynamic marketing campaigns domestically and capitalised on a growing mining resources boom and an increase in Asia inbound tourism to achieve these results. The Australian dollar certainly gave us challenges, but I’ve always maintained that whilst people will travel overseas, the ease of a domestic holiday and the diversity of experiences on offer across Australia is always an attractive option.Where did most growth for the group come from?The impact of the continuing growth of the mining and resources sector was most prevalent in Perth which saw 32% room revenue growth from 13% occupancy and 12% rate increase. Similar impact was felt in Brisbane – combined with a strengthening conferencing market - with 11% room revenue growth, 13% in occupancy and 3.5% rate increase; and in NT where 3.7% room revenue growth was driven by increased occupancy.What will the end of the 2012/2013 financial year likely reveal? We expect Darwin will experience significant growth – both in terms of rate and occupancy - as the mining resources boom in that region and off shore destinations that use Darwin as a hub will really start to make an impact on the market. The leisure market has started to bounce back particularly in North Queensland which has also been buoyed by the growing numbers of Chinese tourists who are now looking beyond just Cairns to holiday and heading further afield to Palm Cove and Port Douglas. Growth in CBD areas is still likely to be challenging and the market will remain flat.How committed is Mantra in terms of development for the interim to mid-term? We have finished the year strong in regards to our development pipeline. Extremely pleased to announce Mantra Group’s first foray into Asia with the opening of Mantra Nusa Dua in Bali in December. So Australians, already familiar with the Mantra name and product, will now be able to enjoy the same experience in a much loved travel destination.We have quite an aggressive development strategy for Indonesia, as well as projects in the pipeline in Papua New Guinea and regional Australia to service the mining resources industry. And we’ve just announced that we will open our first Peppers CBD property in Brisbane’s Fortitude Valley – Peppers Dunmore Brisbane – in 2014.How will this then change the group’s overall branding, marketing and distribution strategies?Domestically we will continue with or current branding strategies for all 3 brands. That is, a focus on gourmet food and wine experiences with Peppers brand; a continuation of the brand ambassador relationship with Australian Tennis Legend Pat Rafter and our Mantra brand; and a family friendly focus for BreakFree.Internationally we will need to adapt the Mantra campaigns in countries where Pat Rafter is not well known and tap into a more regionally specific concept, however we do have branding communications all ready to run. Distribution will continue with our current partners with emphasis on digital solutions.Which of your brands/segments do you see most growth potential? Both Peppers and Mantra offer diverse opportunities for new developments or existing acquisitions. Both brands lend themselves well to CBD and resort product – Peppers in particular has diversified from its beginnings as a group of small boutique retreats to now include expansive coastal resorts and soon to be CBD hotels. Mantra is an excellent four-star quality option that will suit expansion in to regional areas as well CBDs.How do you evaluate potential of the Australian-New Zealand market for development, and which particular locations have most scope for your group?There will be limited growth however we are confident of adding new properties to our portfolio in both CBD and regional areas.How many properties and rooms do you hope to target and by when?Domestically we aim to secure between 4 and 7 new properties a year. Off-shore will see our expansion into Indonesia start to slow gain momentum with a further 10 properties forecasted to join the portfolio across the next 3 years. Additionally we will continue to secure compatible projects within the Asian Pacific region on an opportunistic basis such as our recent Fiji and PNG signings.