Shangri La Review

Topics: Board of directors, Non-executive director, Corporate governance Pages: 35 (10807 words) Published: July 31, 2013
OPERATIONS REVIEW ~ CITY HOTELS

CITY HOTELS
The financial performance of Shangri-La Hotel Kuala Lumpur declined over 2001 owing to the negative impact of the ongoing extensive renovation works at the hotel throughout 2002. Additionally, business conditions remained challenging with lower corporate demand as a result of a softening global economy. Specifically, the last quarter of 2002 saw the commencement of the final phase of the hotel’s renovation programme involving refurbishment works to its remaining guestrooms from levels 3 to 23. This work caused a material number of rooms to be unavailable for guests resulting in a significant reduction in room sales in the last three months of 2002. Revenue from the hotel’s food and beverage operations however was enhanced by the four renovated food and beverage outlets, which reopened for business at various points during the year, with the full impact of these new facilities expected in 2003. Total food and beverage revenue showed an improvement of 4% to RM39.284 million in 2002.

10 SHANGRI-LA HOTELS (MALAYSIA) BERHAD

OPERATIONS REVIEW ~ CITY HOTELS

The hotel’s room occupancy dropped from 59% in 2001 to 56% in 2002. Average room rate at the hotel however increased by 3% over last year due to the higher room yield achieved for the renovated Horizon guestrooms on the top five floors, which became available in the second half of 2002. Total revenues from the hotel’s operations amounted to RM78.797 million, 3% lower than 2001 largely attributable to a reduction in rooms revenue. This decline, combined with increased finance costs and promotional expenditure incurred in the year resulted in the hotel making a loss of RM2.343 million in 2002 versus a profit of RM4.172 million in 2001. The higher interest expense reflects an overall increase in bank borrowings in 2002 used to finance the hotel’s renovation programme. At the same time, the hotel undertook significant promotional activities and media advertising during the year to re-introduce its newly renovated rooms and facilities into the marketplace in order to raise awareness and stimulate market demand. The renovation programme at the hotel is nearing completion with the last guestroom floor to be fully refurbished by end April 2003. The newly renovated rooms and facilities have significantly raised the profile of the hotel in its marketplace. The rooms that have so far been renovated are already achieving a higher occupancy and average room rate, particularly on the Horizon Club floors. In addition, the renovated food and beverage outlets have been well received and continue to enjoy strong support from both hotel guests and the local community. The full benefit of this comprehensive renovation programme is expected to be reflected in the hotel’s results in 2003.

SHANGRI-LA HOTELS (MALAYSIA) BERHAD 11

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OPERATIONS REVIEW ~ CITY HOTELS

In the current year, the hotel’s Chinese restaurant, Shang Palace , the Gourmet Corner and

The Pub will be upgraded to complement the new image and luxury of the hotel. In spite of the operating difficulties caused by the ongoing renovations, the prestige of the hotel has been enhanced by the winning of several awards during the year. The hotel was named Best Hotel

in Kuala Lumpur by readers of Global Finance (USA) and was awarded the noteworthy Five Star Diamond Award from The American Academy of Hospitality Sciences. 2002 was a difficult and trying year for Shangri-La Hotel Penang. The hotel experienced sluggish demand throughout the year due to the continuing downturn in corporate arrivals as the economic climate deteriorated. Several of the hotel’s major corporate customers, particularly those in the electronics industry cutback significantly on business travel and discretionary spending, which reduced sales in the higher yield corporate segments. The hotel managed to counter some of the loss in these bookings by gaining more...
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