Geographical spread gives Corinthia hotels resilience

Corinthia Hotels, owned and operated by International Hotel Investments p.l.c. (IHI), registered a record performance in 2014, excluding its Tripoli and St Petersburg operations where force majeure situations prevailed during the year.

IHI reported a 34% increase in gross operating profit (GOP) at its wholly owned hotels for 2014, excluding the Tripoli and St Petersburg hotels.

Equally, the operating performance at the Corinthia in London – where IHI owns 50% - continued to progress with the hotel establishing itself at the forefront of London’s luxury hotel market.

The positive performance of these hotels went a long way towards mitigating a downturn in business at the Tripoli and St Petersburg hotels, although these hotels’ respective commercial centres continued to generate substantial rental income from retail and office commercial tenants.

For the year under review, IHI is anticipating a consolidated GOP from hotel operations of €36.2 million and income from rent at the Tripoli and St Petersburg commercial centres amounting to €9.4 million. The unaudited EBITDA for 2014 is expected to reach some €34 million and this includes IHI’s 50% share of the London Hotel.

“Reduced dependence on any one jurisdiction to achieve a balanced geographic spread of business and revenue is providing financial resilience, despite force majeure in one or another of its hotel investment jurisdictions,” IHI said.

IHI chairman Alfred Pisani described the group’s performance in 2014 as “outstanding even if achieved in the face of adversity presented by force majeure situations”.

“IHI is facing 2015 with confidence. Our business as a developer and operator of hotels and real estate has moved on, and our dependence on any single hotel operation is now marginal. The outlook for profits for 2015 at all our hotels, except those operating in force majeure situations, remains positive. The company remains focused on reaching its targets for 2015 including the repayment of all its funding commitments, which remain well within industry parameters for debt-service cover ratios.”

In 2009, 66% of the contribution to profit was generated by the Corinthia Hotel in Tripoli and its adjoining commercial centre. By 2014, IHI had shifted its profit mix 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 successful strategy to balance its income streams by adding stable investment jurisdictions to its portfolio.

The company said the tragic loss of life at its hotel in Tripoli, which was attacked by suicide bombers affiliated with the Islamic State, was countered by the acts of courage of Corinthia’s personnel who lived through the unfolding events with a bold sense of calmness that saved many lives.

IHI said that it is now focused on repairing the limited damage at the hotel. The adjoining commercial centre continues to remain tenanted and generating rental income.

In 2014, the St Petersburg operation registered a downturn in profits due to various factors beyond the company’s control, including the collapse in the price of oil and the devaluation of the Rouble. The Rouble to Euro rate has devalued from a rate in the 40s at the start of 2014 to one in the high 70s by year-end.

The volume of business at the hotel remains the same as at pre-crisis levels – in terms of occupancies and room rates as quoted in Roubles – but the Euro equivalent of these rates has now been hit hard by the devaluation.

“Russian travellers have always constituted the foremost market for the Corinthia hotel in St Petersburg and now more so with Russians taking more vacations internally. The hotel has established an online presence in the Russian language, opened a sales office in Moscow and consolidated the senior management team to continue building the business in Russia,” IHI said.

IHI is also about to commence a due diligence exercise on Island Hotels Group Holdings p.l.c. (IHGH).