Hotels pare outlook in bomb’s wake

Centel, Erawan Group see short-term setback

Last week’s deadly bombing at the Ratchaprasong intersection has prompted two SET-listed hotel companies to revise down their full-year revenue growth projections.

Central Plaza Hotel Plc (CENTEL) cut its target to a range of 7-10% from 10-15%, while Erawan Group Plc (ERW) revised down its outlook to 28% from 35%.

Under the revised targets, Centel expects revenue of 19.5 billion baht and Erawan 5.5 billion baht. Both figures would still improve on 2014 levels.

Centel chairman Suthikiati Chirathivat expects his company’s hotel business will suffer in the short term before bouncing back in the next three months.

One week after the bombing, the company said it lost 10 million baht from hotel room cancellations for August. Restaurants at CentralWorld and Siam Square saw a 20% sales drop, a value of 1 million baht.

Mr Suthikiati said the government should act swiftly to restore confidence among foreign tourists.

For example, it should extend visas on arrival to two or three months from just one month, waive visa fees and extend the personal income tax deduction of up to 15,000 baht on travel expenses for another year. The deduction is due to expire on Dec 31.

“Although our revenue growth is being affected, we’re confident our bottom line remains good thanks to effective cost control,” Mr Suthikiati said.

The margin of earnings before interest, tax, depreciation and amortisation for Centel’s food business rose to 13% in the first half of this year from 9% in the yearearlier period, while the margin for hotel business rose to 36% from 33%.

Ronnachit Mahattanapreut, Centel’s senior vice-president for finance and administration, said profit growth would come from the core hotel and food businesses, reflecting effective management and experience in dealing with past negative situations.

Moreover, the company has reduced risk by diversifying into upcountry and international markets.

In the hotel business, Centel plans to spend US$210 million to build two luxury hotels in the Maldives.

Their opening in 2018 will boost the revenue contribution from international hotels to 30% from 21%.

Revenue from Bangkok hotels will decrease to 17% from 26%, while the share from hotels upcountry will remain 53%.

Centel will also spend 1 billion baht on new restaurant brands until year-end.

Kanyarat Krisnathevin, executive vicepresident and chief financial officer at Erawan, said her company now expected 2015 foreign tourist arrivals would miss the Tourism Authority of Thailand’s goal of 28.8 million. She predicts 27.6 million visitors instead.

Ms Kanyarat acknowledged that the Grand Hyatt Erawan Hotel was dealt the worst economic blow by the bomb blast, which occurred at the nearby Erawan Shrine.

But Erawan remains confident its 2015 will be better than last year, which saw a loss of 111 million baht. First-half net profit reached 115 million baht, while revenue grew by 43% to 2.55 billion.

“We expect the situation will bounce back to normal in November,” Ms Kanyarat said.

An expansion plan to launch 15 Hop Inn hotels remains on track, with five set to open by year-end.

CENTEL shares closed yesterday on the SET at 32 baht, down two baht, in trade worth 249 million baht.

ERW shares closed at 3.62 baht, down four satang, in trade worth 20.7 million baht.