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they recognised the potential for the longer term future of the Australian economy. The
present shareholding structure was 85 per cent institutional and 25 per cent foreign. The
current management held less than 5 per cent of the equity. No shareholder owned more
than 10 per cent of the equity, though the Marito group, a Japanese construction company
had built up a 8.5 per cent stake and was continuing to add to it. Under Australian law, the
company was required to capitalise 50 per cent of lease commitments.
Table 12C. Ratios to total Sales of Australasian, Asian hotels compared with the
Freemantle group averages
Australasia
Asia
Freemantle
Average occupancy
69%
66%
75%
Average room rate $
54
72
75
Revenues - % contribution
Rooms
52
50
70
Food
23
28
10
Beverage
11
9
9
Telephone
3
5
5
Rentals/other
4
7
10
Total
100
100
100
Cost centres - %
Administrative
8
9
12
Marketing
6
5
8
Energy costs
2
8
4
Maintenance
4
5
3
Management fees
3
4
-
Fixed charges
11
10
13
Rooms
17
9
15
Food
24
20
9
Beverage
12
6
8
Telephone
3
4
4
Total costs
90
80
64
Gross margin
10
20
27
Australian interest rates were at present 9 per cent and the long government bond was
yielding 7 per cent. Hotel investments had been traditionally a fairly solid investment in the
Australian market and the risk premium was estimated to the around 1.2-1.5.
The industry
The market was continuing to grow, though demand was patchy varying from country to
country and sector to sector. Overall global occupancy rates remained around 67 per cent,
with declines in North America and increases in Latin America, and throughout the Asian
region where occupancy rates remained above 78 per cent over the past 5 years.
Economic growth and expansion in capacity had meant that regions had become very
varied in levels of profitability and return. As demand increased, the prices that the hotels
could charge would automatically improve, with a substantial growth in profitability. Hotels
in the United Arab Emirates for example have no requirement to discount their hotel
rooms; they have been able to achieve very high occupancy levels at premium prices. By
contrast, hotels in the centres of many European cities can only achieve reasonable levels
of occupancy by offering substantial discounts to important customers. Thus, a hotel in the
centre of London might have a full room rate - or rack rate - of £130 a night. Tour
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