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CDL's New Zealand unit forecasts NZ$24m hotel revenue loss for H1 2020

CITY Developments Limited (CDL) subsidiary Millennium & Copthorne Hotels New Zealand has forecast around NZ$24 million (S$20.4 million) in hotel revenue loss for the first half of 2020.

This comes as the New Zealand government rolls out new border entry restrictions due to the novel coronavirus outbreak, which apply until the end of March.

The potential losses are not covered by business interruption insurance because the hotels have not been closed due to the Covid-19 outbreak, Millennium & Copthorne Hotels New Zealand confirmed with its insurers on Tuesday.

If current trading patterns continue into the next half of the year, the full-year result for 2020 hotel operations is anticipated to run at a loss, CDL disclosed in a regulatory update on Wednesday.

For reference, Millennium & Copthorne Hotels New Zealand recorded NZ$110.6 million in revenue, according to its unaudited financial statements for the six months ended June 30, 2019. 

The subsidiary - which is listed on the New Zealand Exchange - has suspended any profit guidance for 2020 indefinitely with immediate effect.

No hotel closures have been planned at present, according to Millennium & Copthorne Hotels New Zealand managing director BK Chiu. However, unused floors, building wings and other facilities may be closed.

Hotel restaurants and bars will either close or operate under reduced hours in the near future, which will also have a hard impact on hotel revenue, Mr Chiu said.

"Our intention is to keep our hotels open where possible and retain a level of staff and resources required to operate to the level of business that they have," he added.

There will also be "significant impact" on Millennium & Copthorne Hotels New Zealand's employees across all hotels and corporate offices.

Mr Chiu said the company will engage with employees and look towards viable options to retain as many jobs as possible. A range of options are being explored, he added.

"We will need to make some very difficult decisions about all of our operations and employees in the very near future, certainly over the coming weeks. There will be reduced hours, there will be job losses," Mr Chiu noted.

Millennium & Copthorne Hotels New Zealand had implemented cost-cutting and cost-management measures earlier in the year in response to anticipated market demand.

These measures will now be expanded across all business units, including the deferring of capital projects which are not business-critical.

The company is also looking in more detail into the New Zealand government's Covid-19 economic response package in the next few days. It noted that the reintroduction of depreciation deductions may be helpful.

CDL shares were trading at S$7.53 as at 2.13pm on Wednesday, down S$0.12 or 1.6 per cent.