Profit returns to Shangri-La as Asia booms - Brief Article

Business Asia, May 5, 2000

Hotel group Shangri-La Asia Ltd says it has rediscovered the earthly paradise of growing profits, thanks to Asia's economic recovery and rebounding consumer demand.

Net earnings in 1999 jumped 30 per cent to US$67.27 million from 1998's US$51.91 million, shooting just past the top end of analysts' forecasts of between US$59.7 million and US$66.9 million, the group reported.

It marked a return to growth after two punishing years. Profits fell to US$51.4 million in 1998 from US$95.3 million in 1997, after hitting a record US$139.7 million in 1996 since listing in 1993.

Chief financial officer Madhu Rao said the return to profit growth was mainly due to Asia's recovery and the return of tourists and business travellers, which helped lift occupancy rates.

Average occupany rates reached 66 per cent in 1999, up from 63 per cent in 1998, and in the months ahead the group was looking to increase room charges, which have either been slashed or frozen in the past two years, Rao said.

The company, which owns eight Shangri-Las in Hong Kong, the Philippines, Indonesia and Fiji, began making inroads into China in 1984 and owns 20 hotels and properties there.

Another four Shangri-La hotels are under construction in China. Together with 16 other hotels it manages but does not own in Singapore, Malaysia, Thailand, Indonesia, Canada, Myanmar, Taiwan and the Philippines, Shangri-La boasts 22,000 hotel rooms in all.

Looking ahead, Rao said the group was anxiously waiting for China's imminent entry into the World Trade Organisation, which would further boost business travel.

"Once the WTO issue is settled, we'll see a return of investment into China, we will see improvement in demand for (office) space, hotel rooms," Rao said.

While the slower pace of recovery in rents on mainland China was "a drag on earnings", Rao said: "The rate of decline in the yields have slowed."