The head of the Mandarin Oriental luxury hotel group is pushing for his executive team to be temporarily based outside of Hong Kong, saying the isolated city has become a “very poor” base as a result of strict coronavirus restrictions.
The $2.7bn group is majority owned by Jardine Matheson, one of Hong Kong’s oldest business empires, and operates hotels and properties in more than 20 countries. But the recovery of its Hong Kong business from the pandemic has been constrained by the city’s decision to follow Beijing’s “zero Covid” strategy and severely limit international travel.
James Riley, Mandarin Oriental’s chief executive, who recently returned to Hong Kong after 10 months overseas, told the Financial Times that it had become infeasible for his team to remain in the city, where authorities have closed schools, gyms and restaurants after 6pm to combat a surge in cases.
“Increasingly, most of my key senior executives are now travelling or are outside Hong Kong. My chief operating officer, who’s based in Hong Kong, left 15 months ago. And I have no plan for him to come back because he can’t do anything here,” said Riley, who has lived in Hong Kong for 25 years.
Mandarin Oriental’s hotel in central Hong Kong was a destination for affluent travellers and contributed to the city’s reputation as a premier business hub. International business groups have warned that the Chinese city’s tough pandemic policies, which include weeks-long hotel quarantines for incoming passengers and flight bans on countries such as the UK and US, are undermining Hong Kong’s status as the region’s financial centre.
Global companies are struggling to run their regional operations without being able to travel and surveys show many are losing staff in part due to the restrictions.
“As a base from which to run a business it’s very, very poor today,” said Riley, adding that a recovery was possible when Hong Kong regained freedom of movement.
“When the borders are shut, this is a strange place from which to operate. Because you can’t go and visit a hotel or visit a customer or visit a potential owner. You can’t go anywhere,” he said.
In the first half of 2021, Mandarin Oriental eased its losses to $67mn from $102mn during the same period the year before. Its Singapore-listed shares have risen by 24 per cent over the past 12 months to close at $2.15 on Wednesday.
Riley said the group’s recovery had been strongest outside of Asia, since Japan was still closed to almost all travellers and parts of south-east Asia were only now starting to ease border controls.
Europe and the Americas “got back to operating quite strongly and through much of the fourth quarter. So the real focus is on the rest of the world”, he said, adding Mandarin Oriental’s oceanfront resort in Dubai had become the group’s most profitable property.
He said that unlike Hong Kong, the mainland Chinese market was offering reasonable returns because of the pick up in domestic travel and the group was planning to add five hotels in Hangzhou, Beijing, Nanjing and Shanghai.
The group plans to revive the sale of the historic former Excelsior hotel site it is redeveloping into a commercial property, built on the first plot of land sold after Hong Kong became a British colony in 1841.
Mandarin Oriental paused the sale of the hotel in late 2017 after bids for the property fell short of its expectations and said it would undertake a $650mn redevelopment of the site instead.
Riley said he expected the sale to go though over the next two to three years, adding that the group was pursuing more property sales. The company is in the process of selling its stake in the Mandarin Oriental hotel in New York to Mukesh Ambani’s Reliance Industries.
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