Pandemic erases John Keells Hotels June top line as resorts remained shut

Iconic Cinnamon Bentota Beach, which was refurbished last year

John Keells Hotels PLC reported its worst performance during the three months to June 30, 2020 (1Q21), as the resort operator in both Sri Lanka and the Maldives reported only a nominal income amid global tourism coming to an abrupt halt, due to the novel coronavirus from mid-March.

The operator of ‘Cinnamon’-branded resorts reported only a token income of Rs.47.4 million for the April-June quarter, perhaps coming from the weekend trippers, who resumed taking trips since June, with the easing of lockdowns. 

Sri Lanka plans to welcome foreign tourists from August.

During the corresponding period, last year, the company generated revenues of Rs.1.7 billion, which was also lower compared to the previous year, as that was the quarter in the immediate aftermath of the Easter Sunday attacks, which resulted in tourist arrivals to plummet by 70 percent in May 2019.  

After remaining closed for nearly three months, the company reopened few of its resorts in Sri Lanka – Cinnamon Bentota Beach, Cinnamon Bey Beruwala, Cinnamon Lodge Habarana, Cinnamon Wild Yala, Cinnamon Citadel Kandy and Trinco Blu by Cinnamon, under strict guidelines from the 
health authorities.  

The company operates eight resorts in Sri Lanka and four in the Maldives, with a total room inventory of nearly 1,500. The company has put on hold the construction of its newest resort, Cinnamon Red Kandy, due to the prevailing situation, as it froze all non-essential capital expenditure and instituted stringent expense control measures to ensure it maintains adequate liquidity.

The company earlier said it decided to reduce executive staff remuneration ranging from 5 to 60 percent till June, subject to further review, depending on the macro and operating environment. 

The company also said it had applied for relief measures offered by the government by way of loan moratoria and concessionary working capital loans where necessary.  

“While the company has a strong cash position and availability of banking facilities, we will continue to focus on ensuring we preserve this position and obtain further banking lines ahead of any future requirements,” stated John Keells Hotels Chairman Krishan Balendra.

The company’s net loss ballooned to Rs.1.72 billion in the three months or Rs.1.18 a share, compared to the net loss of Rs.433.7 million or 30 cents a share in the year earlier period. 
Even though the resorts did not welcome guests, the company’s administrative expenses rose by 20 percent year-on-year (YoY) to Rs.1.35 billion, reflecting its massive fixed cost base. 
Although the short-term prospects for the industry remain dim, the company expects post-COVID-19 action plan initiated by the Sri Lanka Tourism Development Authority to expedite the revival of the industry in the medium term. 

Emerging Market Investor Mark Mobius recently predicted the global tourism industry to make a quick recovery, as people remain impatient to travel to places after being in lockdown for months. 

John Keells Holdings PLC has 80.32 percent stake in John Keells Hotels while the Employees’ Provident Fund has 5.39 percent stake in the company, being its second largest shareholder.