A major player in the tourism industry has said that significant foreign investment has been made in the country’s tourism industry with local hotels and companies now facing intensified competition with regional challengers offering "more for less."
Mr. Kapila Jayawardene, Chairman of Eden Hotels Lanka PLC, an LOLC company, has said that foreign investment has flown into the hospitality sector here in the context of projected significant growth in the mid to long term.
"Sri Lanka is also facing competition from the region which offers more at a lesser price which causes immense challenges to the local industry," he said in the Eden annual report.
This has resulted in the local industry facing the challenging of reduced margins as well as price pressure coming from markets which were attractive in the past but are currently not performing as a result of the global economic crisis, he noted.
The result was Eden incurring a substantial group loss of Rs. 273.2 million in the year ended March 31, 2015, down from a profit of Rs. 58.9 million the previous year. At company level, there was a loss of Rs. 212.3 million against a profit of Rs. 14.8 million a year earlier.
Jayawardene attributed the lower performance mainly to falling occupancy, reduced room rates and increased operational expenses. Average occupancy for the year in review was down to 58% from 62% the previous year, he said.
However, during the winter season, there was a significant increase in the numbers they hosted and resulting revenue. The average occupancy in the final quarter starting in January was 76% which resulted in revenue of Rs. 252 million in that quarter.
He was optimistic that despite reduced performance against the previous year, the company which had a strong asset base of Rs.4.8 billion as at March 31, 2015 was well positioned for the future.
They had completed a major refurbishment covering the rooms and had also acquired Dickwella Resorts (Pvt) Ltd in the previous financial year in order to strengthen their overall value proposition.
"With the development of the tourism industry in future years, the company is expected to reap the benefits of these investments which will have a positive impact on the company’s profitability and overall value proposition," he said.
He further noted that they had the advantage of LOLC Group resources to strengthen occupancy, increase margins and manage costs.
Dickwella Resorts has ocean frontage on three sides of the property providing sea views for all of its 76 rooms. The sea-water swimming pool and diving centreare also popular, the Director’s report said.
The report said that the directors had reviewed an investment opportunity in Maldives and identified it as one with potential for high returns.
Palm Garden Hotels PLC (46.21%), Confifi Management Services (Pvt) Ltd (10.7%) and the ETF (9.98%) are the top shareholders of Eden. The ETF too owns 3%. Palm Garden and Confifi Management are LOLC companies.
Eden has stated capital of Rs. 525 million, reserves of Rs.1.6 billion and retained earning of Rs.180.8 million in its books. Total assets ran at Rs. 5.03 billion and liabilities at Rs.2.7 bullion.
The Directors of Eden are Mr. W.D.K. Jayawardene, Mrs. K.U. Amarasinghe, Prof. M.T.A Furkhan, S. Furkhan, D.S.K. Amarasekera and Dr. J.M. Swaminadan.
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