JKH leisure sector earnings driven by city hotels, resorts see less occupancy
View(s):Tourism is booming in Sri Lanka but not all resort hotels are making huge profits as John Keells Holdings’ (JKH) latest results show.
JKH in its third quarter earnings ending 31st December 2012 says leisure sector earnings were mainly driven by the group’s (Colombo) city hotels – Cinnamon Grand and Cinnamon Lakeside.
“Sri Lankan Resorts were impacted by lower than expected occupancies as a result of a drop in our traditional markets, combined with aggressive marketing by competing destinations,” the company said in its third quarter accounts released to shareholders and posted on the group website.
Most other hotel chains like Aitken Spence have also reported less-than-full occupancies while Sri Lankan authorities roar ahead to a target of 2.5 million arrivals in 2016. At least 20 per cent of the arrivals have been staying in cheaper accommodation and avoiding class-rated resort hotels. The industry has also complained of a lack of awareness of the Lankan tourism product, complaining that the regional competition is spending millions of dollars in promotion and awareness.
JKH said its leisure industry group PBT (profits bfore tax) was Rs. 1.34 billion, up 33 per cent over the third quarter of the previous year [2011/12 Q3: Rs. 1 billion].
“We continue to reiterate the importance and urgency of creating greater awareness of Sri Lanka as a travel destination, to ensure that the country fully realises the substantial multiplier effects to the economy from this important industry,” the report said.
It said the cumulative profit attributable to equity holders for the nine months ended 31 December 2012 was Rs. 6.97 billion, up 28 per cent from the corresponding period in the previous year, while the profit attributable to equity holders for the third quarter at Rs. 2.90 billion reflects an increase of 8 per cent over the same period last year.
Cumulative Group PBT for the nine months ended 31 December 2012 was Rs. 8.97 billion, up 27 per cent.
Cumulative revenue for the nine months ended 31 December 2012 was Rs. 62.2 billion, up 13 per cent over that recorded in the corresponding period last year. Group chairman Susantha Ratnayake said the Group’s quarterly results reflect the challenges that it continues to face in a volatile macro-economic environment.
He said a new domestic aviation associate of the Group, operating under the brand name ‘Cinnamon Air’, completed the purchase of two Cessna amphibian aircrafts. Operations of the airline are scheduled to commence during the fourth quarter of the financial year 2012/13.
JKH said the imposition of the value added tax (VAT) of 12 per cent with effect from 1st January 2013 on retail businesses with turnover exceeding Rs. 500 million per quarter is expected to have an impact on the margins of the retail sector. “Whilst we support the principle of broadening the tax base, the fact that no transitional provisions were made available to allow for the claim of input VAT on the closing stocks as at 31st December 2012 was disappointing. This will result in a significant ‘one-off’ impact on profitability in the next quarter,” the report added.
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