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Mantra looks to dominate domestic market

MANTRA Hotels has been fattening up its domestic portfolio in recent years, but the Australian hotel group has made its plans clear – more expansion is on the cards.

Outrigger Surfers Paradise Aerial_mrBy Louise Wallace

MANTRA Hotels has been fattening up its domestic portfolio in recent years, but the Australian hotel group has made its plans clear – more expansion is on the cards.

Mantra had a busy year in 2014, adding a whopping 12 hotels to its portfolio in Australia and New Zealand. The group also made its mark early in 2015, swallowing Outrigger’s entire Australia portfolio back in March in a $29.5 million deal that will see Mantra take on Outrigger’s four beachside properties in Queensland next month.

It’s not the first time Mantra and Outrigger have signed on the dotted line, with Outrigger selling off its Australian assets to Mantra’s predecessor Stella Hospitality for $91 million back in 2006. And much like last time, the deal was accompanied by an elaborate PR campaign to stress that Outrigger remains “committed” to the Australia market despite pulling the pin on its entire portfolio.

During a recent visit to Sydney in March, Outrigger vice president corporate communications Bitsy Kelley told travelBulletin that the move to cull its Australian properties was simply part of a “realignment” of its Australian portfolio to focus on “premier beachfront locations”.

“We want to become the ultimate beachfront brand of the world, and in order to do that we saw the need to realign our Australian portfolio with properties in iconic destinations,” she said. “Our portfolio no longer aligned with that strategy.”

But Kelley stressed that Australia was on Outrigger’s radar, insisting that the group would “very seriously” look at other opportunities on Australia’s east coast. She was unable to pin down a timeline for when Outrigger would step back into Australia, instead claiming that the group remained “optimistic” that opportunities would arise in the near future.

Mantra, meanwhile, wasted no time stepping in Outrigger’s place as it forges ahead with an aggressive expansion strategy to build its domestic portfolio. The deal, which brings Mantra’s portfolio to over 120 properties across Australia, New Zealand and Indonesia, was accompanied by a $50 million capital raising to fund the acquisition and forge ahead with new “pipeline opportunities”.

But as Mantra executive director marketing and distribution Kent Davidson told travelBulletin, the transition process to move the properties into the “Mantra machine” is not expected to have much of an effect on the balance sheet. Instead, he said, the capital raising is part of a broader strategy to add more hotels to its base inventory.

“The problem with our business at the moment is that we don’t have enough inventory and there is such strong demand. To continue to grow we need more properties and clearly that is what we’re doing,” he said.

With limited hotel supply posing challenges for the group’s expansion plans, Davidson said Mantra was keen to take up opportunities as and when they arise. He stopped short of singling out a target figure but said the hotel group was looking to acquire “as many domestic hotels as possible”. “We jumped at the opportunity to buy Outrigger’s portfolio and immediately put an offer in place,” he said.

With the four Outrigger properties expected to be fully operational under the Mantra brand by the end of the financial year, Davidson said the Outrigger portfolio was a “step in the right direction” as the hotel group looks to step up its domestic presence.

And with three other Mantra hotels opening in the same period including two in Hobart and a BreakFree hotel in Christchurch, the plan is starting to take shape. Davidson confirmed that the Mantra Group had a “series” of deals on the boil with many other acquisitions currently in the pipeline. He also stressed that major cities were central to the plan, with particular focus on CBD properties.

“Our CBD properties operate at very high occupancies and we want to continue to grow with more inventory if we can get our hands on it,” he said. “Australia is very important for us and while we would like to move overseas when the time comes, we are so frantically busy in Australia at the moment that we are going to focus on domestic growth for now.”

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