News for the Hospitality Executive
The Hongkong and Shanghai Hotels, Limited Annual Results
for the Year Ended December 31, 2007;
The Peninsula New York Achieves an $814 Average Room Rate at 75% Occupancy
|19 March, 2008
THE HONGKONG AND SHANGHAI HOTELS, LIMITED HSH ANNOUNCES STRONG RESULTS
Hong Kong, 19 March 2008 – Announcing its audited results for the year ended 31 December 2007, The Hongkong and Shanghai Hotels, Limited (HSH) said that the underlying strong performance of its businesses during the year was reflected in its 2007 financial results, with profit attributable to shareholders amounting to HK$3,437 million, including revaluation surpluses.
The total turnover of the Group for the year of HK$4,542 million was 22% above 2006. Earnings before interest, taxation, depreciation and amortisation (EBITDA) were HK$1,510 million, a rise of 18% over 2006. The increase was driven primarily by the strong performance in the hotel division, together with robust rental income from The Repulse Bay and the Peninsula Hotels’ shopping arcades.
Profit before non-operating items increased by 20% to HK$1,088 million. Shareholders’ funds stood at HK$20,726 million, or HK$14.37 per share as at 31 December 2007, an increase of 22% as compared to 2006. Our accounts are prepared on the basis of investment properties being stated at fair market value, whereas the hotel properties are stated at cost less depreciation and any impairment provision. In addition, deferred tax is provided on the revaluation surplus on Hong Kong investment properties which the Directors do not expect will materialise. In the light of the above, the Directors have provided for shareholders’ additional information a calculation of the Group’s adjusted net asset value which amounts to HK$27,032 million (HK$18.75 per share).
An interim dividend of 6 cents was paid during the year 2007 (2006: 5 cents). The Directors are recommending to shareholders that the final dividend be set at 12 cents per share (2006: 11 cents), representing a total dividend for 2007 of 18 cents per share. Shareholders will also be given the option to receive their dividend in the form of scrip rather than cash.
Mr. Clement K.M. Kwok, HSH’s Chief Executive Officer, commented, “2007 was a buoyant year for the economies and travel demand in our key markets. Operating from the strength of our brand and their well-established market positions, our hotels and other properties and businesses achieved pleasing results, with this year’s profit before non-operating items of HK$1,088 million representing an increase of 20% from last year.
Our Group was thus able to continue the sustained recovery which it has enjoyed since emerging from the Asian financial crisis which occurred in the late 1990s, with our EBITDA having improved consistently every year from its low of HK$698 million in 2001, to HK$1,510 million in 2007. Our balance sheet has continued to strengthen, with our net gearing decreasing to 7% in 2007 despite the significant spend on the Peninsula Tokyo project during its final stages of construction.”
The highlight of the year for our Company was undoubtedly the opening of the new Peninsula Tokyo hotel. Situated in a most prime location in the Marunouchi business district of Tokyo, within a short walk to the heart of Ginza and overlooking the Imperial Palace and gardens, this project was conceived, designed and constructed in partnership with Mitsubishi Estate Company. With meticulous attention to detail, no effort was spared in creating the 314 guestrooms and suites, the five different and strongly themed restaurants, the lobby, ballroom and other public areas, the dramatic swimming pool and spa and the artwork in the hotel. The philosophy of our Group is to focus on a small number of hotel projects at any one time and thus, this was our first new hotel opening since 2001. From the reaction of hotel guests and the market generally since its soft opening in September 2007, I believe that this focus and attention to detail has paid off, with a hotel that is already proving to be a strong addition to our brand, as well as gaining worldwide recognition in its own right.
Our seven existing Peninsula Hotels generally had a strong year, continuing in their positions as being either top or amongst the leaders in room rate and revenue per available room (RevPAR) in their respective cities. In particular, The Peninsula Hong Kong had a record year in terms of RevPAR, which at HK$2,892 (US$371) represented an increase of 12% from the previous year. This, our flagship hotel, is truly standing proud as it enters its 80th anniversary year.
Elsewhere in Asia, business conditions for the year were somewhat mixed. The Peninsula Beijing faced intense competition from the large number of new luxury hotel openings ahead of the Beijing Olympics and its RevPAR increased by 9% to HK$1,048 (US$134). The Peninsula Bangkok lived through a period of relative political uncertainty in Thailand from the ousting of the former Prime Minister in October 2006 until elections were held in December 2007. In the circumstances, the hotel did well to achieve a RevPAR of HK$1,201 (US$154), up 19% from last year.
The Peninsula Manila enjoyed its first full year following the extensive renovation of the Makati Tower, lobby and ballroom, with room rates in the newly renovated rooms achieving a premium of well over 60% above the similar unrenovated rooms. The RevPAR of the hotel ended at HK$752 (US$96) for the year, an increase of 55% as compared to the previous year when it was under renovation for part of the year. Unfortunately, the hotel gained world-wide media attention in November 2007 when it was seized by anti-government rebels and the ensuing attack by government troops significantly damaged the lobby and some other areas of the hotel. Through the outstanding hard work of our staff, the hotel was re-opened for business just four days after this event, although disruption to the business of the hotel continued for a period of time.
The performance of the three Peninsula Hotels in North America has been very strong during the year. The Peninsula New York had a record year, increasing its RevPAR by 17% to HK$4,771 (US$612). The Peninsula Chicago maintained its position as the top hotel in the city and, in a relatively weak year for conventions in the city, increased its RevPAR by 8% to HK$2,638 (US$338). The Peninsula Beverly Hills continued to achieve rate increases, resulting in a RevPAR of HK$4,242 (US$544), up 12% from the previous year. Quail Lodge, under Peninsula management since April 2006, continued to improve its service standards and offerings but still faces the challenge of filling in the off-peak periods during the year. Quail’s RevPAR was up 2% to HK$1,462 (US$187).
We continue to focus on seeking projects to enhance our brand and our services, as well as to improve the return on our hotel assets. The focus on the development of our own exclusive line of Peninsula Spas continued. Following the successful openings of the new Peninsula Spas in our hotels in Hong Kong, Bangkok and Chicago, we have now started the construction of new Peninsula Spas in The Peninsula Beijing, due to be completed in May 2008 prior to the Olympics, and in The Peninsula New York, due to be completed in September 2008. At the same time, the rooftop facilities at The Peninsula New York are being renovated with a new design theme for the popular rooftop bar.
Following the successful outcome of the phase one renovation of The Peninsula Manila, which included all the guestrooms in the Makati Tower, the lobby, the ballroom and some back of house areas, we have decided to proceed with phase two of the renovation in 2008, which will include a renovation of all of the guestrooms in the Ayala Tower.
With generally high levels of inflation in the key economies in which we operate, it continues to be a significant challenge to manage costs while maintaining and improving the level of service provided to guests. Through our efforts to control our operating costs, the EBITDA margin on our hotel businesses, excluding the pre-opening expenses of HK$83 million and the initial operating results of the new Peninsula Tokyo, has increased from 30% last year to 32% in 2007.
The retail arcades in The Peninsula Hong Kong and The Peninsula Beijing continue to be most sought after by top level brands, achieving amongst the highest rentals per square foot in their respective cities and enjoying effective full occupancy. We have been pleased to welcome brands like Harry Winston, Chopard, Goyard, Graff and de Grisogono to our arcades. For the year, The Peninsula Hong Kong arcade achieved 96% occupancy at an average rent of HK$314 per square foot per month and The Peninsula Beijing Arcade achieved 98% occupancy at an average rent of HK$95 per square foot per month. During the year Peninsula Merchandising opened four Peninsula Boutiques in China and Japan, bringing the total number of shops to 18 around the world. Overall, the hotel division’s revenue and EBITDA for the year were HK$3,550 million and HK$991 million, an increase of 22% and 15% respectively as compared to 2006.
December 31, 2007
** In 2006, on average, 133 rooms were closed for renovation at The Peninsula Manila.
Overall, the hotel division’s revenue and EBITDA for 2007 were HK$3,550 million and HK$991 million, an increase of 22% and 15% respectively as compared to 2006.
During 2007, the market remained buoyant in Hong Kong for both residential and office lettings and this was reflected in the performance of our properties. At The Repulse Bay, the rental per square foot of the unfurnished apartments increased to HK$36 per square foot per month (2006: HK$34). Both The Repulse Bay Arcade and The Peak Tower were fully let, at an average rental of HK$69 per square foot for The Repulse Bay and HK$56 per square foot for The Peak Tower. St. John’s Building maintained an occupancy of 99% at HK$25 per square foot per month.
Patronage on the popular Peak Tram grew by 11% to a record-breaking 4.9 million passengers, as Hong Kong enjoyed a boom in tourist arrivals. To enhance this tourist attraction, the Group created and opened The Peak Tram Historical Gallery at the lower Peak Tram terminus.
The Thai Country Club, The Landmark, our club management operations and Tai Pan Laundry all performed satisfactorily. Booming air travel in Hong Kong also meant that the Group handled a record number of 1.2 million passengers at the Cathay Pacific first and business class lounges, which are managed by HSH at the Hong Kong International Airport.
Overall, the revenue and EBITDA from non-hotel properties and operations for 2007 were HK$992 million and HK$519 million, and increase of 22% and 25% respectively as compared to 2006.
The Peninsula Shanghai, due to open in late 2009, made good progress during the year. It will be the only new building to be constructed with a frontage onto the Bund. The complex, which is being developed, will comprise a 15-storey, 235-room hotel, a 5,300 square metre high-end shopping arcade and 15,600 square metres of hotel apartments.
Construction of the complex started in October 2006 and the hotel tower reached structural topping out in mid January 2008. Topping out of the entire complex will be achieved by June 2008. Designs of the interior spaces are well progressed and the interior fitting-out works have begun.
The Group continued to focus on enhancing existing assets to improve returns. An example is the development of our own exclusive line of Peninsula Spas, and we are now underway in the construction of new Peninsula Spas in Beijing (completion in May 2008) and New York (completion in September 2008). The Peninsula New York is also renovating its popular rooftop bar. In Manila, The Peninsula will proceed with phase two of its renovation in 2008, which will include a renovation of all of the guestrooms in the Ayala Tower.
Commenting on the business outlook, Mr. Kwok said, “The biggest operating challenge currently facing us is that our operating costs continue to rise, with continuing inflation and particularly wage and energy cost increases in our main business locations over the past few years. Whilst present business momentum continues to be positive, the outlook for our revenues has been clouded by the current uncertainties in the world economies and financial markets following the sub-prime crisis in the US.
Amidst such uncertainties, it is worth remembering that our approach to handling any downturn that may result is for management to react quickly but always to look long-term and value the long-term relationship that we have with our staff.”
Mr. Kwok continued: “Looking at the immediate business prospects of our operations, it appears that the hotel business in the US, particularly from the corporate sector, is showing signs of being negatively affected by the uncertainties in the economy and the financial markets. Such a slow down would inevitably also affect our Asian businesses, although presently demand is still good in Hong Kong both for the hotel and for residential lettings where demand mainly comes from the multi-national corporate sector.”
The Hongkong and Shanghai Hotels
The Peninsula Hotels
Investor relations: firstname.lastname@example.org
|Also See:||The Hongkong and Shanghai Hotels Limited Finds Profits by Assuring its Peninsula Hotels Focus on Delivering the Highest Quality and Service Standards; The Peninsula New York Achieves 2006 Average Daily Room Rate of $698 at a 74% Occupancy / April 2007|