Earnings per share decreased to 25 cents, the difference being attributable to the prevailing market conditions in the tourism sector, partly offset by foreign exchange gains in the Thai joint ventures. An interim dividend of 5 cents per share has been declared (15 cents in 1997). 

Shareholders' funds at 30th June, 1998 stood at HK$18,290 million or HK$15.81 per share and net borrowings increased to HK$6,059 million. 

Reviewing the figures for the half year, Pierre Boppe, Chief Executive Officer, said, "Whilst there are positive influences in parts of our business, there is no doubt that the economic woes affecting the region have inflicted pain on our Hong Kong operations. 

"The most apparent effect is the drop in occupancy levels at The Peninsula and average room rates at both The Peninsula and The Kowloon Hotel for the first half of the year. These are significantly lower than previous years and we do not anticipate any upward variation for the second half of 1998. 

"However, it must also be remembered that the 18 months leading up to the Handover was an extraordinary time for Hong Kong and it had an exaggerated effect on the local economy." 

In contrast, Mr Boppe pointed to the healthy picture in the United States where a booming economy and growing disposable income have contributed to the ability of The Peninsula Beverly Hills to increase its yield over that of 1997. 

The major upgrade of The Peninsula New York is progressing on schedule for its 1st November, 1998 opening. The hotel is expected to re-enter the top tier of a competitive market in an advantageous position that will enable it to retain its loyal clientele and to increase market share. Room rates are expected to be commensurate with that positioning. 

Work is progressing on the completion of The Peninsula Bangkok in time for its soft opening in November, 1998. Notwithstanding the current tourism challenges in a difficult competitive situation, Bangkok as a destination has begun to regain its popularity. 

On the property side, occupancy levels at The Repulse Bay residential complex in Hong Kong were maintained at 94 per cent, with rental yields up three per cent over the first half of 1997. The renovation programme for the older apartments is almost complete with only 37 units still to be upgraded. Repainting of the façade of the main building is already underway. 

With regard to its Hong Kong retail tenants, the Company has adopted a policy of rental rebates and flexibility in lease renewals in line with prevailing market fundamentals, in order to maintain valued long-term relationships. 

Overseas properties have performed well with The Sutton in New York, The Landmark in Ho Chi Minh City and 208 Wireless Road in Bangkok turning in creditable performances. Construction of the apartments at Bennelong Point in Sydney is well advanced and active marketing will commence in August 1998. 

"In such a downturn, there is always a temptation not only to consolidate but perhaps to stand still," said Mr Boppe. "However, we are committed to maintaining our quality and image. Customers demand this whether in good times or bad, because level of service is what they are paying for and they expect and deserve value." 

"The Company's path is one of forward momentum," he continued, "of identifying opportunities, targetting and capturing new markets, developing attractive offers to our existing customer base to increase business, and expanding our portfolio. And we are actively looking into every area. 

"We know that in the short term, the circumstances in the Asian region will be difficult, but we are well prepared to meet those challenges," he concluded. 

Incorporated in 1866, The Hongkong and Shanghai Hotels, Limited, formerly The Hongkong Hotel Company, Limited, was one of the first stocks to be listed on the Hong Kong stock exchange. Its principal business comprises the ownership and management of prestigious hotel, commercial and residential properties in key destinations in Asia, Australia and the USA; its hotel management arm is The Peninsula Group.