International Hotel Investments diversifies its income streams

International Hotel Investments p.l.c. has successfully continued to reduce its income dependency on any specific subsidiary business in all the countries where it owns hotel and property assets.

IHI said it had successfully migrated towards a balanced geographic spread across its hotels and properties from 2009 to 2014. 

While in 2009, 66% of the contribution to profit was generated just by the Corinthia Hotel Tripoli and its adjoining commercial centre, by 2014 IHI had migrated to a model where not one of its businesses contributed more than 17% of its EBITDA.

The company’s 50% share in the Corinthia Hotel London registered the largest contribution to profits, a remarkable achievement which underlines the Company’s resolve to balance its income streams by adding stable investment jurisdictions to its portfolio.

IHI chairman Mr Alfred Pisani said the geographic diversity of income and future expectations were not casual.

“They are the consequence of a deliberate spread of our capital between stable and emerging economies, and more so, the result of investment and effort in our hotel operating capabilities in CHI Limited, our 100% owned hotel management subsidiary.

“CHI is a business in its own right, and its function is to use industry-standard fees it levies on our own hotels to drive incremental revenue and bookings into our hotel, and to ensure that our service matches five star expectations through extensive training and the adoption of operating standards and procedures that reflect our Corinthia Brand ethos,” Pisani said.

IHI registered an improvement in its consolidated forecast EBITDA for 2014 when compared to 2009 - €33.8m in 2014 versus €33.3m in 2009 – and this notwithstanding the revenue slide registered in the Tripoli hotel and the further negative impact of the Ruble devaluation on the Company’s Euro results in St Petersburg.

Challenges faced throughout 2014 in specific jurisdictions, notably Libya and Russia, have been mitigated by record results in other Corinthia hotels in Malta, Budapest, Lisbon and London and markedly improving profits in the Prague hotel.

IHI continued to derive value from its proprietary booking infrastructure, such that up to October, 20% of all room revenue in all IHI hotels excluding Tripoli, was driven through the Company’s own website and GDS codes. No commissions are levied on this business as it is driven entirely on the strength of Corinthia’s brand and online presence.

A further 16% of revenue was driven via third-party travel agencies linking into the company’s booking engines and the rest was booked directly into the hotels – a marked change to the booking patterns prevailing in 2009 and earlier when very little revenue was booked into IHI hotels without some form of reliance on third-party tour operators and travel management companies. 

Outlook for 2015

IHI is expecting its hotels in Malta, London, Lisbon, Prague and Budapest to register further improvements in 2015.

In Libya, the company will continue to be vigilant on its business in Tripoli with the aim of breaking even in the hotel operation and to maintain the steady flow of annual income from renting its adjoining commercial centre to oil and gas blue chip tenants.

In St Petersburg, IHI has put a new management team in place to execute a strategic refocus of its business. The company aims to generate as much business as possible from within Russia itself and to operate the hotel with a wide range of room rates targeting upscale corporate to luxury travellers. A level of success in this strategic refocus has already been registered this year, with 35% of the St Petersburg Hotel revenue generated from within Russia as compared to 25% in 2013.