Hongkong and Shanghai Hotels reported a “challenging” first half as a result of the trade war between the US and China, uncertainty over Brexit and the Gilet Jaunes protests in France.
The results came as Dusit Thani reported a fall in Ebitda, pulled down in part by the strong domestic currency, warning that full-year revenue growth was likely to be affected by “the overall economic slowdown”.
At Hongkong and Shanghai Hotels, the company reported a 16% fall in half-year Ebitda to HKD610m (Eur71m). CEO Clement Kwok said: “At the time of this report, political protests in Hong Kong that started in June are continuing and we are concerned about the impact of these on tourist arrivals as well as broader economic stability in Hong Kong.”
Revenue at the hotels division, which accounted for 77% of group revenue, fell by 3% to HKD2.1bn. The decrease in revenue of the hotels division was mainly due to new room supply in Hong Kong and the general softness of the market resulting from the US-China trade war. The group said that the depreciation of Renminbi and Japanese Yen had also contributed to the negative revenue growth of the hotels division.
The group has interests in 10 operating hotels in Asia, US and Europe and three hotels under development; in London, Istanbul and Yangon.
Kwok concluded: “During challenging times such as the present, we maintain a constant focus on building a long-term sustainable business. We retain a conservative capital structure to help insulate our business against volatility.”
At Dusit Thani, the company said that it planned to open six more hotels in the Philippines and China in the second half of the year, after opening five in the first half under the asset light and lease models.
The group said: “The hospital industry in Thailand may remain under pressure due to the strong Thai Baht that adversely impacts number of tourist arrivals especially from China, UK and Russia. The company is now reviewing 2019 core revenue growth which mainly impacted by the overall economic slowdown.”
For the first half of the year revenue from the hotel business was THB1.9bn, a decrease 14.5% year-on-year, attributed in the main to the closure of Dusit Thani Bangkok, while overseas hotels showed growth as well as additional revenue from Elite Havens which the company acquired during the half year. Ebitda for the period fell by 38.2% to THB289m.
The company’s USD15m acquisition of villa company Elite Havens was part of its diversification strategy, commenting that the deal would allow it to move deeper into the luxury segment, with plans to expand in Asia.
Elite Havens has a network of more than 200 fully staffed properties across Indonesia, Thailand, Sri Lanka, and the Maldives, providing marketing, reservations, concierge and management services.
Suphajee Suthumpun, group CEO, DTC, said: “Our investment in Elite Havens marks another important milestone in our strategic journey, particularly our two-pronged plan for expansion, which includes doubling our number of hotels in operation, and providing broadened experiences for our customers. Our current brand line up covers the midscale through to luxury hotel segments. Now, with the addition of Elite Havens, we are delighted to cover the luxury villa rental segment too.
“While the integrated luxury villa management business is new to us, Elite Havens has an impressive track record in this segment, successfully expanding from a small enterprise to the leading company of its kind in Asia. And we are confident that our 70 years of experience in operating upper-upscale and luxury hotels will only enhance these operations further, allowing the dynamic Elite Havens team to leverage our own capabilities to continue providing exceptional services for luxury consumers, while simultaneously expanding the brand’s reach in more dream destinations throughout Asia and other key regions.”
The company moved into the sharing economy last year with an investment in Favstay, a Thai hospitality startup offering condos and villas for rent in Thailand. In April last year it announced it would also enter the affordable lifestyle segment with the launch of ASAI Hotels.
HA Perspective [by Katherine Doggrell]: These are glorious times for political journalists around the world, but not much for anyone else. With ructions around the world – particularly in capital cities, where luxury hotel groups like to site their hotels – the protection afforded by geographical diversification is not what it was.
In the case of Hongkong and Shanghai Hotels, the message is that it will maintain its conservative outlook and not take any unwarranted risks and so far, so sticking to its knitting. The fear for growth in the sector is where those with a higher appetite for risk follow suit.
At Dusit Thani, the company had diversified with Elite Havens (the clue’s in the name) which takes it away from those hotspots and into the leisure destinations. Hotel companies may well be speculating as to how to move their lucrative corporate business into remote havens as well.