Cinnamon Grand, Lakeside feel the heat from new entrants as competition heightens

• Top and bottom lines of hotel owning company slow
• New entrants, refurbishment of 3 to 4-star hotels appear to be key reasons 

Asian Hotels & Properties PLC (AHPL), the owners and operators of the two city hotels under the Cinnamon brand, appears to have started to feel the intensity of the competition in the city hotel sector in Colombo, as the group’s top and bottom lines fared poorly in the most recent quarter. 

AHPL, a John Keells Group company, reported Rs. 2.2 billion revenue for the quarter ended March (4Q18), down 6.0 percent year-on-year (YoY).

The operating profit declined by 36 percent YoY to Rs. 454.8 million for the period while the earnings fell 17 percent YoY to Rs.689.1 million. The per share earnings was Rs.1.56 compared to Rs.1.87 a year ago. 

AHPL owns and operates the 501-room Cinnamon Grand, Colombo and the 346-room Cinnamon Lakeside, Colombo. The group also receives rental income from Crescat Boulevard – the shopping mall situated adjoining Cinnamon Grand. 

The intensified competition from new entrants for dining and banqueting venues and the new and refurbished three and four-star hotels appear to have affected the performance of the two city hotels. 

Among the competition, the opening of Shangri-La Colombo may have eaten into the business of both Cinnamon Grand and Cinnamon Lake. 

Since its opening, Shangri-La Colombo has been a busy venue for banquets, weddings and conferences. 

Even before Shangri-La, Cinnamon Grand has been seeing a slight drop in room occupancy levels. The hotel’s occupancy level hovered around 72 percent a year ago. 

The segmental results showed the two hotels recording lesser revenues and profits for the financial year ended March 2018. 

The total revenue for the year was Rs.8.2 billion compared to Rs.8.7 billion in the previous year. The operating profits for the year was Rs.1.9 billion against Rs.2.7 billion in the previous year. 

Meanwhile, the income from Crescat Boulevard remained unchanged at Rs. 411 million while the operating profit rose to Rs.285.5 million compared to Rs.252.3 million. 

The full year earnings by the group stood at Rs.3.81 a share or Rs.1.69 billion, down 26 percent from a year ago. 

As at March 31, 2018, John Keells Holdings held 78.56 percent stake in AHPL while the Employees’ Provident Fund held 10.22 percent stake being the second largest shareholder.