Hotel sector shares slated to rise
East West Properties PLC's letter of intent to sell a stake in subsidiary, Weligama Hotel Properties Ltd and with a slew of city hotels in the market, the share market has seen a keen interest in hotel sector stocks, analysts say.
East West Properties is the property owner of recently opened Weligama Bay Marriot Resort & Spa and the company earlier this month announced its intent to sell 72 per cent of the shares of Weligama Hotel Properties Ltd to Singapore's HPL Hotels & Resorts Pte Ltd.
Many are keen on buying shares of firms that own city hotels, some analysts told the Business Times. So far Hilton and Hyatt Colombo hotels' state owned stakes, Bank of Ceylon's (BOC) intent to divest the Grand Oriental Hotel
(GOH) and two prime 5-star Colombo hotels owned by different conglomerates are for sale.
Businessman Nahil Wijesuriya and his children own about 85 per cent of East West Properties. "The announcement to sell Weligama Hotel Properties sort of triggered the intense buying from early this month," an analyst noted.
Another analyst added the Ministry of Public Enterprise Development saying recently that Requests for Proposals (RFP) from 15 local and foreign companies to act as the transaction advisor (TA) in the scheduled divestment process for the Hilton and Hyatt Colombo hotels also triggered interest in hotel sector shares. This intensified with a news report that Weligama Hotel's intended buyer, HPL Hotels & Resorts has also made an offer to invest in and upgrade the heritage hotel, GOH. Later it was found that the Underperforming Enterprises Or Underutilised Assets Act 43 of 2011 where Hilton and Hyatt come under doesn't provide for any legal provision to sell these hotels.
Almost all analysts said that city hotels aren't performing well another reason they are in the market. On a going concern, they are far below their net asset value. The hotel sector witnessed a decline in occupancies in many conglomerates last quarter primarily as a result of the increase in room inventory within Colombo. "The competition is catching up with additional rooms by international chains coming in which is the main reason many want to exit the hotels and possibly sell them to foreigners," the analyst said.