JKH city hotels extend poor show amid heightened competition

Asian Hotels & Properties PLC (AHPL), the owners and operators of the two Cinnamon-branded city hotels, is continuing with its dismal run, with the battle brewing among Colombo hotels getting intensified amid overall slowdown in business.

The company has been witnessing a decline in revenue and profits from the two city hotels— Cinnamon Grand and Cinnamon Lakeside— for several quarters.

The revenue from AHPL’S leisure activities fell by 14.6 percent year-on-year (YOY) to Rs.1.87 billion during the three months ended September 2018 (2Q18).

The firm’s bottom line performance was weaker as the net profit from the leisure business fell sharply to Rs.201.3 billion, from Rs.483.8 million YOY.

AHPL owns and operates the 501-room Cinnamon Grand and 346-room Cinnamon Lakeside.

The intensified competition from new entrants for dining and banqueting venues and the new and refurbished three and four-star hotels appear to have affected the performance of the two city hotels.

With the increase in room inventory in the Colombo city hotels sector, the pressure is building up on the minimum rates the city hotels are bound to adhere to.

AHPL also receives rental income from Crescat Boulevard—a shopping mall situated adjoining Cinnamon Grand.

Such income for the three months was Rs.102.8 million, unchanged from a year ago.

Meanwhile, the company reported 49 cents or Rs.214.8 million in total earnings for the quarter under review, down 48 percent YOY.

The total revenue was Rs.1.97 billion, down 14 percent YOY.

The company’s share was trading 10 cents or 0.23 percent weaker at Rs.42.50 in intra-day trading, yesterday.

Meanwhile, for the six months ended September 30, 2018, the company reported earnings of 63 cents a share or Rs.279.7 million, down as much as 60 percent YOY.

The revenue for the six months was Rs.3.62 billion, down 14 percent YOY.

The city hotel sector is one of many other sectors of the John Keells group which are going through a rough period.

Its key retail, processed food and beverage firm, Ceylon Cold Stores last week filed weaker than expected performance for the September due to poor consumer sentiments.

As at September 30, 2018, John Keells Holdings held a 78.56 percent stake in AHPL while the Employees’ Provident Fund held a 10.22 percent stake being the second largest shareholder.