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The audited results for the year ended 31 December 2010 of The Hongkong and Shanghai Hotels, Limited (HSH) show that the Group’s business performance improved strongly from the year before, with some recovery in the global hospitality markets following the significant downturn caused by the economic crisis which started in August 2008.
The highlight of 2010 was undoubtedly the Grand Opening of The Peninsula Shanghai hotel, which took place on 18 March. Situated in a magnificent location on the famous Bund in Shanghai with commanding views over the Bund and across the river to Pudong, this magnificent hotel represents for our Company a fitting return to one of its founding cities after an absence of over 50 years.
In line with our Company’s philosophy of focusing on a small, select number of hotel projects which we hope can rank amongst the world’s best, no efforts were spared in the design, construction and service standards of The Peninsula Shanghai and this property has already gained widespread recognition both within China and internationally, with the receipt of many prestigious awards.
HSH Chief Executive Officer, Mr. Clement K.M. Kwok,said: “2010 was a year in which we saw some recovery in the global hospitality markets following the significant downturn caused by the economic crisis which started in August 2008. However, whilst hotel revenues recovered partially towards the 2008 pre-crisis levels, inflationary pressures have remained on operating and other costs, especially labour costs, and margins continue to be under pressure. The performance of our hotels have varied quite significantly between different geographical locations, with strength in Greater China but recovery lagging in some parts of the US and Japan.
“It continues to be a strength of our Group that our hotels business is balanced by a strong mix of commercial properties, including several successful high-end shopping arcades inside our hotels, as well as our well-established commercial, residential and office properties.”
The Group’s total turnover in 2010 amounted to HK$4,707 million, up 12% as compared to last year. Earnings before interest, taxation, depreciation and amortisation (EBITDA) increased by 24% to HK$1,143 million, while operating profit rose 35% to HK$794 million. We have continued to focus on controlling costs while providing the staff and resources to service the increased business levels and this has resulted in an improvement in EBITDA margin from 22% in 2009 to 24% in 2010.
Inclusive of non-operating items, being principally the year-end investment property revaluation surpluses, the net profit attributable to shareholders was HK$3,008 million, as compared to HK$2,660 million in 2009. The underlying profit attributable to shareholders, which the Group has calculated by excluding the post-tax effects of the property revaluation surpluses and other non-operating items, amounted to HK$408 million, as compared to HK$323 million in 2009, representing an increase of 26%.
HSH’s financial position remains strong. The revalued net assets attributable to shareholders increased by 11% to HK$29,103 million, representing HK$19.66 per share and the gearing remained at a very conservative level of 5% at the year-end. Our net cash surplus for the year, after deducting capital expenditure, interest and dividends, amounted to HK$568 million.
The Directors have recommended a final dividend of 8 HK cents per share (2009: 6 HK cents per share), making a total dividend for the year at 12 HK cents per share. Shareholders will also be given the option to receive their dividend in the form of scrip rather than cash.
On the situation in Tokyo,Mr. Kwok said: “We are of course deeply saddened by the massive earthquake that shook Japan on 11 March 2011 and the suffering and devastation it has caused to the people of Japan. The full extent of the devastation is still to be assessed. However, all of the guests and staff at The Peninsula Tokyo were safe and unharmed and the hotel premises did not suffer any physical damage of significance. On the night of the earthquake, The Peninsula Tokyo opened its doors to the general public, providing hot food and beverages and refreshment facilities to those seeking refuge, while special guestrooms were set aside for pregnant women, mothers with small children, and the elderly who needed a place to rest. The hotel has remained fully operational throughout and will continue to play a role in supporting the community where needed as it faces the challenges that lie ahead as Japan recovers from the earthquake. We have already launched a number of fundraising initiatives in our hotels to assist the relief efforts.
“The impact on our businesses, both in Japan and elsewhere, in the aftermath of this earthquake cannot be fully assessed at this stage. We will, of course, use our best endeavours to manage the financial and other consequences of this disaster and play our part in restoring a healthy operating environment at The Peninsula Tokyo as quickly as possible.”
Outlook
The strength of our Group continues to emanate from our genuine commitment to the long term, which provides the vision and willingness to invest in assets for their long term value creation and the staying power to ride through shorter term cycles in the economy without compromising the quality of our products and services. In the volatile economic circumstances that we regularly encounter in today’s environment, this long term commitment has enabled us to make investment and capital expenditure decisions with a long term outlook and to maintain our service quality and the continuity of our people. With this philosophy in mind, we remain optimistic that we are continuing to chart a course which will maximise the quality and value of our assets and deliver long term returns to our shareholders.
In the more immediate future, we are optimistic that the recovery in some markets that became apparent in the latter part of 2010 will continue into 2011. Generally, the economic development of and outlook for Hong Kong and China, where the bulk of our assets are based, continues to be positive and we expect this to be reflected both in the trading results of our hotel operations and the performance of our non-hotel commercial properties. However, for our operations generally, there is no doubt that in the labour intensive hotel industry, management of margins in the light of an ever increasing cost base continues to be a difficult challenge and the economics between revenue and costs continue to be imbalanced in several of the markets in which we operate.
Sustainable development continues to be high on our agenda. Much of our efforts here are focused on the development and well being of our staff, where during the year we rolled out a completely revamped human resources manual. Significant efforts have also been made and continue to be made in the areas of energy efficiency, water consumption, indoor air quality, waste management, responsible sourcing and community involvement. Our energy intensity and water usage intensity figures have continued to improve and a new set of sustainable design standards for hotels has been adopted for our future developments.
Our corporate development and investment strategy continues to focus on the enhancement of our existing assets, seeking opportunities to increase their value through new concepts or improved space utilisation, and the development of a small number of the highest quality Peninsula hotels in the most prime locations with the objective of being a long term owner-operator. This is the approach which we believe has enabled us to establish and sustain a brand which is now recognised as possibly the leading luxury hotel brand in the world, thereby creating long term value in each Peninsula hotel through both asset value appreciation and operational earnings growth.
Vicky is the co-founder of TravelDailyNews Media Network where she is the Editor-in Chief. She is also responsible for the daily operation and the financial policy. She holds a Bachelor's degree in Tourism Business Administration from the Technical University of Athens and a Master in Business Administration (MBA) from the University of Wales. She has many years of both academic and industrial experience within the travel industry. She has written/edited numerous articles in various tourism magazines.
