M&C Hotels CEO Quits After Four Months as Pandemic Drags Firm Into the Red

The sudden departure of Millennium & Copthorne Hotels CEO Clarence Tan, after helming the hospitality arm of Singapore-based real estate giant City Developments Limited for just four months, puts the spotlight on the challenging environment for hoteliers amid the COVID-19 pandemic.

Tan, who was managing director for Southeast Asia and Korea at InterContinental Hotels before joining the London-based firm, expressed optimism when he took the helm in March just as the coronavirus began showing up worldwide. “I believe that we will be able to overcome this difficult period and set a firm foundation to further grow our hospitality business,” he said at the time.

Since that time the global travel industry has headed into a downturn with analysts predicting a global decrease in leisure travel of up to 80 percent this year, compared to 2019.

M&C Warns of Losses

Despite the uncertainties brought on by the pandemic, Tan had said in March that he was looking forward to his new role at M&C as it presented  “a significant opportunity to reshape M&C’s strategies and reposition the business.”

Since then, CDL’s hotel operations, which are spread across 150 properties around the world, have been dampened by the worsening impact of the pandemic. M&C warned on 16 July that it will likely report pre-tax losses of between S$120 million ($86.6 million) to S$140 million in the first six months of the year, compared with a S$76 million profit a year ago.

“Covid-19 has triggered a major downturn in the travel and hospitality industry,” said Margaret Yang, a strategist at IG Markets in Singapore. “That’s probably the reason he quit.”

Covid-19 Weighs Down Hotel Business

Notwithstanding aggressive cost-cutting measures implemented by the group, CDL said its hotel operations have been weighed down by the Covid-19 pandemic, adding that revenue per available room will likely drop between 50 percent to 60 percent in the first half.

M&C, which CDL took private in 2019 by buying out the then London-listed entity in a deal which closed late last year, operates and manages over 145 hotels in key gateway cities in Asia, Europe, the Middle East, New Zealand and the US.

Less than six months later, global tourism collapsed after governments enforced travel restrictions and social distancing measures to curb the further spread of coronavirus. The Organization of Economic Cooperation and Development expects international tourism to tumble by 60-80 percent this year.

CDL told Mingtiandi the company isn’t actively searching for Tan’s replacement and that the group’s executive chairman Kwek Leng Beng “will continue to lead and guide M&C’s senior management team through this challenging period.”

Repositioning M&C Assets

Plans to reposition some assets are underway despite the management change at M&C. Last week, CDL Hospitality Trusts completed the sale of its entire stake in Novotel Singapore Clarke Quay. The move paves the way for the redevelopment of the Liang Court commercial complex into a hotel and service apartment project to be developed by CDL and its partners CapitaLand and Ascott Residence Trust.

Following the buyout, the SGX-listed developer said it planned to enhance its control of M&C, which has seen its earnings buffeted by competition from Airbnb and online travel agencies. CDL said then that its shareholders would only benefit from the repositioning and sale of M&C assets if the company was delisted.

Among the hospitality properties in the M&C portfolio are the Millennium Biltmore Los Angeles, the Millennium Hotel Mayfair in London and the Copthorne Hotel Dubai as well as the W Hotel and Saint Regis in Singapore.

Sufficient Liquidity to Weather Crisis

While acknowledging the tough times ahead, CDL said when it issued the profit warning this month that it has “sufficient liquidity to weather the crisis.” The group currently has total cash and credit facilities exceeding S$5 billion.

Those resources will come handy for what some analysts expect to be a prolonged economic downturn going forward.

“The outlook for the travel and hospitality industry isn’t very bright,” IG Markets’ Yang said. “The impact of this pandemic will be prolonged. Even if travel restrictions are lifted, people will continue to postpone their travel plans.”