Corinthia Hotels owned and operated by International Hotel Investmentsp.l.c. (IHI) registered a record performance in 2014, excluding Tripoli and St Petersburg, where force majeure situations prevailed during the year under review.
In a company Announcement released on the Malta Stock Exchange today, IHI reported a 34% increase in Gross Operating Profit (GOP) at its wholly owned hotels for 2014, excluding the Tripoli and St Petersburg hotels.
Operating profits on a year-on-year basis in the properties wholly owned by IHI increased as follows:
Corinthia Hotel Budapest: +17%
Corinthia Hotel Lisbon: +31%
Corinthia Hotel Prague: +43%
Corinthia Hotel St George’s Bay: +90%
Corinthia Hotel Marina: +36%
Equally, the operating performance at the Corinthia in London - where IHI owns 50% - continues to progress and the hotel continues to establish itself at the forefront of London’s luxury hotel market.
The positive performance at all of these hotels has gone a long way towards mitigating a downturn in business at the Tripoli and St Petersburg hotels, although these hotels’ respective commercial centres continued to generate substantial rental income from retail and office commercial tenants.
For the year under review, IHI is anticipating a consolidated GOP from hotel operations of €36.2 million and income from rent at the Tripoli and St Petersburg commercial centres amounting to €9.4 million. The unaudited EBITDA for 2014 is expected to reach circa €34.0 million and this includes IHI’s 50% share of the London Hotel.
The Company reiterated that the reduced dependence on any one jurisdiction to achieve a balanced geographic spread of business and revenue is providing financial resilience, despite force majeure in one or another of its hotel investment jurisdictions. A chart released with the Company Announcement shows the Company’s successful migration towards a balanced, geographic spread of EBITDA from 2009 to 2014.
In 2009, 66% of the contribution to profit was generated by the Corinthia Hotel in Tripoli and its adjoining commercial centre. By 2014, IHI had shifted its profit mix to a model where not one of its businesses contributed more than 17% of its EBITDA.
The Company’s 50% share in the Corinthia Hotel London registered the largest contribution to profits, a remarkable achievement which underlines the Company’s successful strategy to balance its income streams by adding stable investment jurisdictions to its portfolio.
Corinthia Hotel Tripoli
In reflecting on the recent events at its hotel in Tripoli, the Company described the loss of life as “tragic”. The Company said that it has been inspired by the acts of courage shown by Corinthia’s personnel who lived through the unfolding events with a bold sense of calmness that saved many lives. No members of IHI’s staff were injured or killed.
IHI said that it is now focused on repairing the limited damage at the hotel. The adjoining commercial centre continues to remain tenanted and generating rental income.
Corinthia Hotel St Petersburg
IHI reported that in 2014, the St Petersburg operation registered a downturn in profits due to various factors beyond the Company’s control, including the collapse in the price of oil and the devaluation of the Rouble. The Rouble to Euro rate has devalued from a rate in the 40s at the start of 2014 to one in the high 70s by year-end. The volume of business at the hotel remains the same as at pre-crisis levels - in terms of occupancies and room rates as quoted in Roubles - but the Euro equivalent of these rates has now been hit hard by the devaluation. The Company explained that Russian travellers have always constituted the foremost market for the Corinthia hotel in St Petersburg and now more so with Russians taking more vacations internally. The hotel has established an online presence in the Russian language, opened a sales office in Moscow and consolidated the senior management team to continue building the business in Russia.
Strategic decisions yielding results
In its commentary to the market, IHI explained that the record positive results registered in 2014, excluding properties where force majeure situations prevailed, happened as a consequence of an overhaul of its operating company, CHI. A two-year restructuring programme in CHI started in 2012 and is now bearing fruit. The strategy was based on four pillars:
1. The development of an extensive training programme and effective HR structures to nurture the right spirit for quality service centred on Corinthia brand values;
2. More aggressive and effective marketing to distribute directly to the market with less reliance on intermediaries, by driving revenue through new segments and providing online booking and social media platforms;
3. The establishment of a culture of rewards across the company’s management tied to financial and measured service targets; and
4. The allocation of a percentage of revenues for the upkeep of the hotel properties to ensure that these are continuously kept in a pristine condition.
Outstanding results achieved in the face of adversity
IHI Chairman Mr Alfred Pisani described the Group’s performance in 2014 as “outstanding even if achieved in the face of adversity presented by force majeure situations”. He added that “IHI is facing 2015 with confidence. Our business as a developer and operator of hotels and real estate has moved on, and our dependence on any single hotel operation is now marginal. The outlook for profits for 2015 at all our hotels, except those operating in force majeure situations, remains positive. The Company remains focused on reaching its targets for 2015 including the repayment of all its funding commitments, which remain well within industry parameters for debt-service cover ratios”.
NOTE:
Acquisition of Island Hotels Group Holdings p.l.c.
As announced in an earlier statement, the Company is about to commence a due diligence exercise on Island Hotels Group Holdings p.l.c. (IHGH). IHI intends to acquire IHGH in the coming months and will retain IHGH as a corporate entity in its own right.