It certainly hasn't been a great day for shareholders of Mantra Group Ltd (ASX: MTR). The share price of the leading Australian accommodation and hotel operator has plummeted by over 8% in morning trade today.
As there has been no news out of the company to drive its share price lower, today's decline is likely to be attributable to a research note released by global investment bank Deutsche Bank. The note reveals that Deutsche has downgraded Mantra to a sell with a $3 price target.
It really has been a rollercoaster ride for shareholders in the last month. Its share price was driven as high as $3.75 following a number of broker upgrades, with the most recent being from Moelis & Company which slapped a $4 price target on its shares on July 7.
I'm sure the question on the lips of shareholders now is which broker is right?
I like Mantra as a long-term investment and think this recent drop in its share price could make for a great entry point. But I am not without concerns over its future.
The rise of accommodation marketplaces Airbnb and Expedia's HomeAway are seen by many as major threats to Mantra. According to reports in the Australian Financial Review in April, analysts at Citi believe Mantra's Breakfree brand is most vulnerable.
They fear it could see a reduction in management letting rights if leisure property owners decide to list properties on Airbnb instead of letting out to Mantra. As well as this there are concerns that Mantra could lose pricing power in periods of peak demand due to increasing availability of alternative accommodation.
But Mantra's management has refuted these concerns, arguing that the locations of its properties are key. Mantra's CEO Bob East stated that: "People who come to places like the Gold Coast for a holiday will want to stay at Surfers Paradise where they are close to the beach and the amusement parks, not somewhere in the suburbs."
I feel it would be wise to keep a close eye on the growth of Airbnb and HomeAway, but for now I feel confident that Mantra is positioned for growth on the back of the tourism boom. Much like Crown Resorts Ltd (ASX: CWN), SKYCITY Entertainment Group Limited-Ord (ASX: SKC), and Star Entertainment Group Ltd (ASX: SGR), the next two to three years could be very rewarding for shareholders.
