Success ingredient. Photography by Joan Boivin. Stuart Dickie, CFO, Mandarin Oriental Hotel Group

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1 Success ingredient Stuart Dickie, CFO, Mandarin Oriental Hotel Group T Photography by Joan Boivin he Year of the Snake is a big one for the Mandarin Oriental Hotel Group. The company s first hotel, the Mandarin Oriental Hong Kong, opened in 1963 and thus turns 50 this year. Coincidentally, so does Stuart Dickie, the group s chief financial officer. Dickie, a Hong Kong Institute of CPAs fellow, joined the group in 2000 as director of corporate finance from the company s auditors then as now, PricewaterhouseCoopers where he was a senior manager from 1994 to He became CFO and a director of the hotel group on 1 April 2010, but is clearly no April fool in his financial decision-making. He heads a team of 28 people, not counting the individual finance teams at each hotel. Supporting Edouard Ettedgui, the group chief executive officer, Dickie is involved in many aspects of the overall running of the business, including corporate governance. The CEO and I are the only two day-to-day directors on the public company 28 February 2013 board, and we spend a lot of time preparing for quarterly board meetings and the audit committee, held twice a year. We also present our results at the halfyear and year-end to the stock market in a formal presentation, followed by questions and answers with the analysts and press. This event is held at the Mandarin Oriental Hong Kong hotel and is extremely well attended due to the genuine interest in town in us as a Hong Kong-grown global brand, he says. The Mandarin Oriental name has been an iconic presence on the Hong Kong skyline despite many buildings since exceeding its height and grandeur for half a century. Although Mandarin Oriental built much of its

2 The iconic Mandarin Oriental Hong Kong turns 50 this year. Robin Lynam looks at the hospitality group s recipe for success with its CFO February

3 Success ingredient reputation on looking after business travellers, Dickie says that its focus is shifting to providing leisure experiences. Today it s probably 40 percent to 45 percent leisure business across the group. Ten years ago it would have been 30 percent to 35 percent, which might not sound like a big difference, but in our industry it represents a sea change. We focus a lot on spas and food and beverage. We have more Michelin stars than any other hotel group in the world. It s a very deliberate policy, he says. Since taking over as CEO in 1998, Ettedgui has pushed the group s image as a luxury brand hard through initiatives like the celebrity Fan advertising campaign, and Dickie, as CFO, says that it is not always easy to walk a line between maintaining the group s elevated standards and reining in costs. Not all costs act in a linear fashion when compared to changes in revenue, he notes. Hotel employees still deserve a salary increment annually even if the outlook in a particular market in any one year is for a reduction in revenue year on year. It is a matter of balance on the one hand, not permitting costs to escalate out of control, and on the other hand being fair, and also providing sufficient funds to be re-invested in maintaining the asset. Similarly at the corporate level, we have to balance the needs of individual departments who want to provide sufficient support to the hotels, against the risk of cost creep for the group overall, he observes. Although its hotels have been regarded as standard setters in Asia since the mid-1960s, the Mandarin Oriental brand has gone genuinely global during his time with the group. A major programme of expansion began while Dickie was at PwC with the appointment of Ettedgui. At that time we had about a dozen hotels within Asia with a very good reputation, but were not particularly well known around the globe, says Dickie. We have 25 hotels today, and in 14 of those we have an ownership stake; in some cases 100 percent, in others only 25 percent. Eleven are owned by other people. With our growth pipeline we re going up to 45 hotels over the next five years, and all of those hotels at the moment are pure management contracts. Last month, the group opened a new hotel in Guangzhou, to be followed by openings in Shanghai s Pudong in the second quarter of 2013, Beijing by mid-2014 and One thing I very much enjoyed, even before joining the group, was the great welcome, the service, and the smiles of the staff, which in my view is what it s all about in the hospitality industry. Chengdu in Capturing the growing Mainland China market is an important part of our growth strategy, says Dickie. Mainland China is the group s second largest customer base, representing over 13 percent of the room nights sold globally. To cater to the growing demand from the China market, we have introduced a Mandarin-language version of our new website and we are partnering with Chinese celebrity fans in our 30 February 2013

4 A PLUS global advertising campaigns. One of Dickie s earliest exposures to the distinctive hospitality style of Asian hotels was a stay at the Mandarin Oriental in Singapore when he was at PwC. One thing I very much enjoyed, even before joining the group, was the great welcome, the service, and the smiles of the staff, which in my view is what it s all about in the hospitality industry, he observes. It was probably a welcome change from his experiences of British hotel service standards (the Mandarin Oriental Hyde Park did not open until six years after he moved to Hong Kong). British born, Dickie earned a bachelor of arts honours degree in business studies from Sheffield Hallam University in northern England, graduating in In 1988 he became an associate member of the Institute of Chartered Accountants in England and Wales, and a fellow of the Hong Kong Institute of CPAs in He worked as an audit manager for a medium-sized accounting firm in the City of London, which, he says, gave him broadbased experience of many aspects of his clients businesses. I worked on auditing and tax advisory for a number of different businesses including stock jobbers prior to the Big Bang, stockbrokers, lawyers, insurance companies and banks, as well as sole traders including a butcher, a baker but not a candlestick maker and other retailers. I audited a racetrack Epsom, where they have the Derby every year a nightclub and various pubs, and also worked on music publishers, and companies in the light manufacturing and agricultural sectors. Oh, and not forgetting, an oil company. It was a wonderful foundation for being able to assimilate a wide array of information quickly later on in my career, he recalls. Wanting to see more of the world, Dickie applied for a position at what was then Coopers & Lybrand in Hong Kong, where he acted as audit manager for a range of companies, including AT&T, Philip Morris and, after the merger with Price Waterhouse, a number of members of the Jardine Group, including Hongkong Land, Colliers Jardine, Gammon Construction and Mandarin Oriental. Dickie reached a career turning point when he worked on the due diligence aspects of Mandarin Oriental s acquisition of the Monte Carlo-based Rafael Group in I got to know the management team well and I also really liked the culture of the company. It was an exciting time for Mandarin Oriental. They were embarking on a focused strategy of growth, leveraging the strength of their brand, which although well known within Asia was not well known in other parts of the world at the time. He learned the hotel business fast, working on asset disposals as well as acquisitions, re-financings, investor relations, tax strategy and group treasury activities. We made some record disposals, Dickie recalls. For example, our disposal of a part share of Mandarin Oriental, New York, in February 2007 to Dubai World was sold at a record price of US$1.4 million per key, the highest price per room for a hotel in the United States at the time. I believe this record still stands today given that the U.S. is not yet fully recovered from the global financial crisis. In 2007 he was also responsible for negotiating a US$450 million seven-year loan from a syndicate of over 20 banks, secured on the group s two wholly owned Hong Kong hotels the Mandarin Oriental and The Excelsior. The loan has, as it is still in February

5 Success ingredient place, record low pricing of 0.28 percent from the borrower s perspective. Given that loans have [been] re-priced upwards since the onset of the global financial crisis, I am not sure what pricing we would achieve today, says Dickie. That crisis has also affected the group s expansion plans. Before that we were looking at greenfield sites and at building resorts in various places. Now we ve got the same number of opportunities, but many of them are for existing hotels that have struggled since the financial crisis under another brand or operator, he explains. Dickie says that at any one time he is looking at the financial aspects of 30 to 40 possible properties or locations for Mandarin Ori- 30 January 2013

6 A PLUS claims not to get preferential treatment when making bookings. If the Mandarin Grill is full he has to reschedule his lunch. I am treated very well when I travel, and the hotels, of course, know that I am coming, but I can see how well other people are treated as well. Before I worked for the group I always had a very good experience with the hotels, so there is that consistency. ental hotels, but that from those only about erwise for business entertaining. He also stays in Mandarin Oriental hotwo or three are likely to come to fruition. The job sounds glamorous, but Dickie tels on holiday, and says his wife and three His extensive travel schedule means he points out that while leisure travellers can children are fans but he gets a bill when does get to experience some of that Man- relax and enjoy their surroundings, often he he checks out, just like everybody else. You darin Oriental luxury. When travelling on is checking into a room for just a couple of might call it a busman s holiday, but it s very business he likes to use the spas to recover hours either side of a business appointment nice. We pay, but we get fantastic service, from jet lag, and he uses the group s food and before catching a plane to another city. and if a Mandarin is there, why would I give beverage outlets Michelin-starred or othhe is content with his lot, however. Dickie the money to anyone else? At any one time he is looking at to 40 possible properties or locations for Mandarin Oriental hotels, but that from those only about two or three are likely to come to fruition. February