Waikato Regional Airport chief executive Mark Morgan tells the Ticker why the group has decided to buy a hotel out of receivership for $3m and how it fits into plans to boost the CCO’s non-aeronautical income.
It is generally well known that the aeronautical side of the businesses for regional airports in New Zealand can, at times, be marginal – it is heavily influenced by tourism and economic conditions.
We have seen very strong passenger growth at Hamilton Airport over the past two years – around 10% to 12% year-on-year – and that’s certainly been comforting.
However, we are very determined to grow our non-aeronautical income and the acquisition of the Hamilton Airport Hotel and Conference Centre from ASB and the Parker and van der Hulst families fits very nicely into that strategy. The Parker’s have owned and operated the hotel since the early 1990s.
Hamilton Airport does not fly internationally. It did have a trans-Tasman service up until 2012 but there is no direction from the board or shareholders to pursue international air services at this point. We operate as a CCO – owned by five local councils – under a statement of intent and one of those key principles is to operate a safe and profitable regional airport.
Because we are not an international airport, the hotel is not hugely reliant on the passenger activity that comes through. It receives some benefit from that, of course, but principally it’s been enjoying growth on the back of the region’s economic growth and some domestic tourism. There is a bit of international tourism as well because of the airport’s central location to Hobbiton and Waitomo.
Also, Waikato is home to many sporting champions so there are a lot of sports-focussed conferencing and events across the region and the hotel is well placed for that.
Importantly, the hotel is an asset on the airport’s grounds. That allows us to consider how we develop the hotel facility in line with how we are developing our aeronautical facilities. We are actively involved in property development on the grounds so the hotel fits nicely into our portfolio, which has seen increased land values strengthening our balance sheet.
Our wholly-owned subsidiary Titanium Park Ltd has developed a ten-year property strategy, which is to deliver an additional $1 million in earnings before tax annually to the group’s performance.
The investment we are making in our property development is being financed by a combination of land sales and debt funding. We have been selling commercial land for industrial development which is providing the funds to open roading and services infrastructure. We are opening up more land on a couple of our precincts with the ultimate intention of using some of the proceeds to develop, design and build out our own leased property portfolio.
We now have three businesses on our precincts. One completed its building pre-Christmas and is a new regional centre for Armourguard. Another building currently under construction is going to a caravan hire company. And we also have sold services sections and expect to see three or four buildings come out of the ground over the next 12 months.
On the other side of the aerodrome, on land that we no longer own, packaging company Visy Board has built one of the largest manufacturing plants in the region – 35,000 sq m – which went into operation at Christmas. We have also seen a number of sections sold by McConnell Property and Todd Property who are actively developing that land.
Overall, there’s been a general increase in activity south of the city because of the availability of freehold land still available for companies to purchase.
In addition, the Airport location is centered between Te Awamutu, Cambridge and Hamilton and has good transport links which will be further enhanced with the completion of the Waikato expressway in 2020 and the Southern Links roading initiative over the next 10 years.
We really have moved from having very little activity on our grounds over the past five years to a significant turnaround.