The unaudited interim results released by The
Hongkong and Shanghai Hotels (HSH) this week reflect the difficult
business environment in which the group, and the industry in
general, has operated for the first six months of 2009.
The total turnover for the period amounted to
HK$1,962 million, down 18% over the same period in 2008. EBITDA
(earnings before interest, tax, depreciation and amortisation)
decreased by 41% to HK$411 million.
After taking into account depreciation and net
financing charges, profit before non-operating items and taxation
amounted to HK$182 million. Revaluation gains on investment
properties amounted to HK$413 million (2008: HK$1,267 million).
Profit attributable to shareholders in the six
months amounted to HK$462 million. The total tax charge was HK$116
million (2008: HK$112 million), including the impact of deferred
Earnings per share were HK$0.32 (2008: HK$1.12).
Excluding non-operating items and the related tax and minority
interests, earnings per share decreased by 78% to HK$0.08 (2008:
Shareholders’ funds increased to HK$21.3 billion
or HK$14.49 per share. Net borrowings increased to HK$2.1 billion
and the group’s gearing ratio increased to 9% mainly due to the
investment of HK$1,044 million made in respect of the
Peninsula Paris project.
HSH also provided a calculation of the
adjusted net assets attributable to shareholders, which after
taking into account the fair market valuations of hotel properties
and golf courses and a write-back of deferred taxation on property
revaluation surpluses arising in Hong Kong, amounted to HK$26.3
billion or HK$17.96 per share.
The Directors have resolved to pay an interim
dividend of 3 HK cents per share (2008: 6.5 HK cents per share).
Commenting on the group’s interim results,
Managing Director and Chief Executive Officer Mr. Clement K.M.
Kwok said, “The Hotels Division suffered a significant drop in
revenue as compared to the first six months of last year, as
occupancies and room rates continued to be adversely affected by
the global economic crisis, while our hotel properties in Asia
have suffered during the latter part of the first half-year from
travel being deterred or curtailed due to the human H1N1 virus
precautionary measures imposed by various governments. In the
Commercial Properties Division, where our principal assets are
located in Hong Kong, rental rates and occupancies have held up
relatively well. The Clubs and Services Division has maintained a
reasonable performance in this economic environment, with
consistent revenue being achieved by the Peak Tram.”
Revenue for the Hotels Division in the first six
months of 2009 was 22% below the same period last year. Revenue
per available room (RevPAR) fell 31% in the US and 32% in Asia.
Continuing strong revenue from the commercial arcades in The
Peninsula Hong Kong and The Peninsula Beijing was helpful in
supporting the profitability of those hotels.
In Asia, turnover
for The Peninsula Hong Kong decreased by 16% compared to the same
period in 2008. Demand has so far held up
in the hotel’s office and retail arcade spaces, which posted
higher revenues than last year.
Although there has been a drop in overall tourist
arrivals to Hong Kong, revenue from the Peak Tram (another HSH
division) was consistent
with the same period in 2008, with 2.3 million passengers in each
At The Peninsula Tokyo, the
revenue shortfall was 8% against 2008. An increase in the number
of luxury hotels in Tokyo has led to intense pricing competition
to offset the weak demand from domestic and international
At The Peninsula Bangkok, the hotel’s turnover was 46%
below the same period in 2008. Following the political unrest in
November 2008 (forced airport closures by protestors), there was a dramatic slowdown in arrivals from both
domestic and long haul markets and this was further exacerbated by
the civil unrest experienced in April 2009.
At The Peninsula
Beijing, there was a 32% revenue shortfall compared to the same
period in 2008. The commercial operations of the hotel remained
strong, with the retail arcade achieving the same level of revenue
as it did in the same period last year.
The Peninsula Manila
recorded a 22% shortfall in revenue compared to the same period in
2008, impacted by the prevailing weak economic conditions.
the US, revenue at The Peninsula New York was 15% below the same
period in 2008. Although RevPAR decreased by 25%, the hotel has
improved its position relative to its main competitors.
Peninsula Chicago’s revenue decreased by 31% compared to the same
period in 2008. The hotel’s RevPAR was 37% lower, with the
greatest impact on occupancy levels being in the group and
negotiated corporate segments.
At The Peninsula Beverly Hills, the
hotel’s revenue reduced by 28% as compared to the same period in
2008. Corporate business travellers reduced their length of stay
leading to suite sales being down by 15%.
At Quail Lodge Resort,
room occupancy was 14 percentage points lower than the same period
last year and average room rate fell by 15%, driving all other
Significant progress has been made in The Peninsula
Shanghai project in the first six months of the year. The
construction and fit-out of the hotel tower is close to completion
and on schedule to begin operation with a soft opening in the last
quarter of 2009.
Guestroom floors were handed over in phases and
the operations management team moved into the hotel in mid May to
begin pre-opening preparations. By the end of June, the number of
staff had grown to 171.
Marketing for the hotel also commenced
with the hotel starting to accept reservations in early June,
while senior executives travelled to Europe, the United States, as
well as key cities in Asia and mainland China to promote the
In the hotel apartment tower, final designs and fit-out for
the 39 apartments are underway. It is expected that the grand
opening of the entire complex will take place in spring 2010,
prior to the commencement of the World Expo in Shanghai.
January 2009, HSH entered into definitive agreements with Qatari
Diar Real Estate Investment Company (Qatari Diar) for the
development of a
Peninsula hotel in Paris, France in an historic
building located on Avenue Kleber, close to the Arc de Triomphe.
HSH has invested a total amount of Euro 102 million (HK$1.04
billion) into a subsidiary of Qatari Diar, called Al Maha Majestic
S.à r.l., in which HSH has a 20% shareholding interest and which
owns the building to be developed into The Peninsula Paris hotel.
The total renovation cost of the project is expected to be in the
region of Euro 250 million (HK$2.7 billion), in relation to which
HSH’s expected commitment is Euro 50 million (HK$0.6 billion).
is expected that the renovation cost will be substantially
financed by borrowings at the project level. The hotel will be
constructed in accordance with Peninsula standards and will be
managed by Peninsula for a period of 50 years.
construction of this hotel is underway with the appointment of an
architect, interior designer and project manager. The hotel is
expected to open in 2012 and will be Peninsula’s first hotel in
Looking ahead, Mr. Kwok said, “Economic
conditions in the countries and regions where we operate remain
uncertain, posing continuous pressure for our hotels business.
While there have been occasional improvements in markets and
consumer sentiment, economic data remains volatile while the
demand for regional and international travel continues to be
“The immediate outlook is that business will remain
soft across our main markets. Beijing continues to be impacted by
an over-supply in high-end lodgings following the 2008 Summer
Olympics and Bangkok continues to be depressed within an uncertain
political climate, while Tokyo battles the severe economic
downturn in Japan. Hong Kong, which had been hit by a decline in
long-haul arrivals while regional visitors interrupted their
travel plans due to the human H1N1 virus, has seen some initial
signs of a moderate pick-up.
“With the hotels business under
pressure, we are fortunate to have a diversified base of earnings
with our non-hotel businesses – most notably The Repulse Bay, the
Peak Complex including the Peak Tram, the Landmark in Vietnam and
clubs and consultancies – holding up reasonably well. We expect
these businesses to remain steady in the second half of the year.”
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