Shangri La Hotel Essay Example

Shangri La Hotel Essay Shangri-Las Net Profit Rises 54% Kate OKeeffe. Wall Street Journal (Online). New York, N. Y. : Mar 17, 2010. Abstract (Summary) HONG KONGLuxury hotel operator Shangri-La Asia Ltd. said Wednesday its 2009 net profit rose 54%, lifted by higher property prices, though its core hotels business suffered from a sharp drop in demand due to the global financial crisis.  »   Jump to indexing (document details) Full Text  (515   words)| (c) 2010 Dow Jones Company, Inc. Reproduced with permission of copyright owner. Further reproduction or distribution is prohibited without permission. HONG KONGLuxury hotel operator Shangri-La Asia Ltd. said Wednesday its 2009 net profit rose 54%, lifted by higher property prices, though its core hotels business suffered from a sharp drop in demand due to the global financial crisis. The economic crisis hit the hospitality sector as businesses restricted employee travel and tourist numbers declined. The industry has lagged other sectors in its recovery outlook, even as demand has been making a comeback since the end of 2008. The Hong Kong-listed company, which is controlled by Malaysian businessman Robert Kuok Hock-nien, said though it expects improvements in its business this year and next, it doesnt expect to return to pre-crisis levels until 2012. Weve been fairly encouraged by the last 10 to 12 weeks, said Shangri-La Chief Financial Officer Madhu Rao at a news conference, adding there has been a return in business travellers. He also said he expects the second half of this year to be better than the first. Shangri-La, which owned stakes in 49 hotels at the end of last year, said its net profit for 2009 totaled US$255. million, up from US$165. 9 million a year earlier. Revenue fell 9% to US$1. 23 billion from US$1. 35 billion. The strength in Shangri-Las earnings was mainly due to a US$327. 1 million non-cash property revaluation gain, up from US$13 million in 2008, reflecting higher property rates. The company has stakes in a number of investment properties such as shopping malls and offices, mainly in the Asia-Pacific region. Stripping out the accounting gain, Shangri-Las operating profit for the year fell 69% to US$51. 3 million from US$163. 2 million, dragged by the poor performance of its core hotel operations. We will write a custom essay sample on Shangri La Hotel specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Shangri La Hotel specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Shangri La Hotel specifically for you FOR ONLY $16.38 $13.9/page Hire Writer Total revenue for room rentals fell 15% for the year to US$570. 2 million from US$674. 2 million, with average revenue per available rooma key metric of the hoteliers performancefalling 24% for the year. RevPAR for its hotels in mainland China, Shangri-Las biggest single market, fell 27% to US$66 from US$91, while RevPAR for its hotels in Hong Kong fell 24% to US$157 from US$206. Shangri-La said it saw more opportunities in China as the nations economy continues to expand and that outside of projects it has already committed to do in Beijing and Shanghai, most of the companys development focus will be in provincial cities. Credit Suisse said last week Shangri-La Asias well-established footprint in tier-two and tier-three cities in China should help it generate superior returns over the next three to five years, noting hotel room oversupply concerns persist in tier-one cities such as Beijing and Shanghai. The brokerage firm said Shangri-La Asia would likely have stronger earnings growth momentum compared with regional peers Hong Kong Shanghai Hotels Ltd. and Mandarin Oriental International Ltd. due to expectations its hotel portfolio will increase 26% over the next three years in terms of rooms. Shangri-Las disappointing core earnings performance comes after rival Hong Kong ; Shanghai Hotels last week reported a 61% drop in underlying profit to HK$315 million from HK$807 million in 2008 as hotel revenue was hit hard by the financial crisis from January to August. Credit: By Kate OKeeffe | Translate document from:   | Other available formats: Abstract Find more documents like this: Subjects: Hotels motels Bond issues Stock offerings Capital formation More options v | | Shangri-La raises $375m in rare market foray for Kuok; Euroweek. London: Feb 13, 2004. pg. 1 Abstract (Summary) Shangri-La Asia, the Asia Pacific hotels group controlled by Malaysian businessman Robert Kuok, on Monday raised $375m in a dual $200m convertible bond and HK$1. 354bn issue of new shares. The dual deal, led by JP Morgan, was the first such joint exercise from Hong Kong, emulating the larger deals from Singapore earlier this year. In Hong Kong, only Star Cruises has achieved similarly attractive 5 year funding in recent memory. The last time Shangri-La Asia issued a convertible was in the racy markets of 1993.   Jump to indexing (document details) Full Text  (626   words)| Copyright Euromoney Institutional Investor PLC Feb 13, 2004 Shangri-La Asia, the Asia Pacific hotels group controlled by Malaysian businessman Robert Kuok, on Monday raised $375m in a dual $200m convertible bond and HK$1. 354bn issue of new shares. The dual deal, led by JP Morgan, was the first such joint exercise from Hong Kong, emulating the larger deals from S ingapore earlier this year. The challenge was to raise $375m for a company whose stock is illiquid, with less than $1. m trading a day on average. The total fundraising represented 325 days average trading volume. Moreover, there is little or no stock borrow available, making it almost impossible for buyers to set up the usual delta hedge strategies. Shangri-La also wanted to defer dilution because in hotel development, returns lag investment by several years. The company was also wary of stretching its balance sheet, which has previously been geared at 35% or less. The compelling terms available in the CB market made a convertible an obvious choice. However, the stocks illiquidity and the lack of stock borrow meant a maximum size of about $200m. These conditions also meant it appealed more to outright buyers than arbitrage funds. With the CB, Shangri-La secured five year funding at a zero coupon. Issued at par with redemption at 114. 633 and no put, the deal yields 2. 75%. In Hong Kong, only Star Cruises has achieved similarly attractive five year funding in recent memory. The tightly priced jumbo convertible from Henderson Land recently had a one year put structure. The conversion premium of 25% was at the low end of the range, but JP Morgan extracted implied volatility of just over 32%, compared with about 35% historical volatility, which is an excellent result for a non-technology stock. There is still huge interest in any stock that offers a play on the Chinese market. Kuok, with his high level connections in China, is considered more likely than others to succeed. There was price sensitivity in the book, as the buyers were mainly the European CB funds and other more equity focused players in the US and Asia, said a CB specialist in Hong Kong. Solid buyers who tend not to flip issues in the immediate after-market are always more cautious on pricing. The bond floor is also notable, pricing at just under 90%. For an issuer of this type to secure five year funds at modest cost, the investor base demands a floor of about 90% as a minimum, said the same specialist. The last time Shangri-La Asia issued a convertible was in the racy markets of 1993 , when the Kuala Lumpur stock market was often trading more shares daily than the NYSE. Although originally Malaysian, Kuok has lived in Hong Kong for many years, from where he has steadily built his plantations-to-shipping-to-hotels group of listed companies. Recently Kuok has focused much of his attention on mainland China. Shangri-La Asia, for example, owns Beijings largest hotel, the Kerry Centre Hotel. The new funds are slated for further expansion in China. The 183m shares were sold at HK$7. 40, a 7. 5% discount to the stocks HK$8 close on Monday. That was the wide end of the 5%-7. 5% discount range. Shangri-La has not traditionally enjoyed a strong following among funds outside Asia, largely because of its modest trading volumes and also because Kuok has for decades tended to steer clear of the capital markets. For this reason most of the shares were sold in Asia. With trading volumes at a little over HK$24m daily, the new share issue represented 56 days trading and will dilute shareholders (other than Kuoks Kerry Group) by roughly 8. 5%. Kerry owns slightly over 50% of the company and in keeping with Kuoks practice of retaining control of group companies, it took up $85m, or 48. 5%, of the shares on offer. ction: International News BEIJINGTheres much more than hotels in Shangri-La Hotels and Resorts expansion plans for the Peoples Republic of China. To staff both its present seven and at least 10 new properties set to open by 1998, Shangri-La is opening two new training facilities. A management-training center will open in Beijing in February, and an Institute of Management wil l open in Shenzhen at the end of 1996. Current Chinese employees total 7,000, a number which will increase to approximately 17,000 with the proposed expansion, said Phil Stephenson, group director of human resources. Our management projections indicate that we will need to train and develop 5,000 managers and supervisors during the next five years to meet the needs of the expansion and replacements. Experienced managers and supervisors are simply not readily available in China, Stephenson said. We are therefore taking a pro-active stance by developing our own hotel educational institutes. The Beijing project is expected to have start-up costs of $280,000, with operating costs of $645,000 annually. The facility is expected to graduate more than 1,000 students each year. The Institute of Management will be a much bigger project, involving construction of a campus-style school including classrooms and dormitories, Stephenson said. It will graduate 450 students a year in a 48-week prog ram. To launch the Beijing project, Shangri-La and the Beijing Second Foreign Languages Institute have formed a partnership to operate the non-profit hotel-management training center. It will be located within the,institutes existing campus setting and will include classrooms, dormitories and recreational facilities. Open only to hotel employees selected for their potential for company advancementand whose salaries will continue to be paid by their properties during their eight-week training sessionsinstructional areas will cover supervisory and management positions such as housekeeping, food and beverage, communications and marketing. Targeted training In Beijing, we are not grooming an elite executive corps, a Shangri-La spokesperson said. We are training to meet our area of greatest need, which is at the middle-management and supervisory levels. There are no accredited hotel management schools either in China or in the region, and there is a real need to teach basic concepts of management and delegation of responsibility, something that is not part of current Chinese society. Des Pugson, group director of training and development, said the schools also will help meet the rising demand for more local people to be employed. Training must also produce sufficient numbers not just for present needs, but to replace employees other foreign joint-venture companies lure away. Our people are bright, personable and speak English well, Pugson said. Those are skills that are in very high demand these days in China. No wonder Shangri-La is a company other people are happy to poach from. According to company guidelines, the Beijing school is designed for potential supervisors and junior managers who will receive standardized training and educational programs. Graduates are expected to perform above average upon return to their work unit, and will command respect from subordinates, peers and managers, the guidelines said. They also are expected to be less likely to leave the company. Building leadership The Shenzhen management course will target future Peoples Republic of China managers and educate potential leaders for specific career moves. The program will develop multidisciplined hotel managers with practical understanding of the divisions of the hotel, and their relationship with the wider business market, the program guidelines said. Therefore, this will allow them to be allocated to different departments, divisions and hotel locations. Pugson stressed the program will have standards comparable to overseas hotel education institutes such as Cornell. Shangri-La now operates 27 hotels, all in Asia except for a property in Vancouver, British Columbia. Pacific Rim locales include China, Fiji, Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, Taiwan and Thailand. Most of its hotels are in Chinain Beijing, Hang-zhou, Shanghai, Shenzhen and Xianand in Malaysia, where it has six properties. Secondary-city strategy Expansion in China will focus on the countrys secondary citiesthose with populations between 3 million and 5 million, Pugson said. Properties with announced openings include Beihai next spring, Shenyang and Changchun in 1996, and Dalian in 1997. Pugson expects that in this new group of hotels, perhaps 60 percent to 70 percent of the patrons will be Peoples Republic of China citizens. There are more and more local people who can afford quality accommodations, a trend we have noticed in Malaysia where, as the market matured during the past three to four years, the percentage of clients who are nationals has steadily grown, Pugson said. PHOTO: The Shangri-La Hotel Shenzhen will benefit from the training facilities. ~~~~~~~~ By Robert Selwitz HMM New York Bureau