The closure of the Millennium Hotel London Mayfair last year for refurbishment ahead of its relaunch this spring knocked £12m off Millennium & Copthorne's operating profit.
In the group's full year and fourth quarter results to 31 December 2018, the hotel group said the closure of the hotel in July 2018 resulted in the reduction of the group's revenue and operating profit of £20m and £12m, respectively.
Owner Millennium & Copthorne Hotels (M&C) closed the 336-bedroom hotel, which has been one of its biggest revenue and profit contributors, to undergo a £50m redevelopment. It was announced the hotel will be relaunching as a 308-bedroom property under Hilton's luxury LXR Hotels & Resorts brand as the Biltmore, Mayfair.
The group's pre-tax profit for 2018 decreased by £41m to £106m; while total revenue increased by £10m (1%) and hotel revenue increased slightly by 0.6%. The group's revenue per available room (revpar) for 2018 increased by 0.7% to £81.57, while like-for-like group revpar increased by 2.4%.
M&C also said concerns about Brexit have affected the group's UK hotels, especially in London, where the hotels started to face difficulties in recruiting EU workers; while the minimum wage increase that came into force last year has further added pressures to the group's increasing labour costs.
The group's London revpar dropped 7.4% with occupancy and average room rate down by 2.9% and 4%, respectively, mainly due to the Mayfair hotel closure.
Chairman Kwek Leng Beng said: "The hospitality industry faced a range of geo-political and global economic headwinds in 2018, many of which look set to continue in the current year, including US/China trade relations, Brexit and increasing minimum wage levels in many jurisdictions."
"We look forward to our Mayfair hotel being rebranded and opened as the Biltmore, Mayfair in the second quarter of this year. This is the first opening under Hilton's new LXR Hotels & Resorts collection in Europe. This also will mark the group's debut in the London five-star deluxe market and it is our aim to fast track our lost earnings growth at this hotel after it re-opens.
"2019 will be another challenging year for the group, with significant capital projects under way and several large hotels earmarked for major renovations. These investments will be carefully managed and phased to deliver the right returns to shareholders and underline the group's intention to maintain strict control of costs throughout the business."
Millennium & Copthorne Hotels owns and manages more than 130 hotels, across four brands: Leng's Collection, M Collection, Millennium Collection and Copthorne Collection. M&C saw the departure of three directors, including chief executive Jennifer Fox, in the latter half of the year and the search for a permanent CEO is ongoing.Get The Caterer every week on your smartphone, tablet, or even in good old-fashioned hard copy (or all three!).