HSH’S 2021 ANNUAL RESULTS
Hong Kong, 4 August 2021
The Hongkong and Shanghai Hotels, Limited today announced its interim results for 2021. Commenting on the results, HSH CEO Clement Kwok said:
“It has been over two years since the start of the Hong Kong protests, which significantly adversely impacted our group’s operating results, to be followed by the COVID-19 crisis starting in early 2020, resulting in a devastating impact on our global operations. Our previously healthy EBITDA of HK$1,680 million in 2018 was reduced to HK$1,390 million in 2019 and to an EBITDA loss of HK$61 million in 2020.
The first half of 2021 remained a most challenging time for our group, with many of our operations continuing to be severely impacted by the global COVID-19 pandemic. The bulk of our group’s earnings are usually derived from our home market of Hong Kong and, whilst infection rates remained low here, the stringent social distancing rules and ban on international travel imposed by the Government due to COVID-19 concerns continued to impact not only The Peninsula Hong Kong, but also the Peak Complex and our residential leasing business. Elsewhere, we have seen a strong recovery in our two Chinese mainland hotels in Beijing and Shanghai, and our US hotels have started to recover with the relaxing of social distancing restrictions. Business remains very weak at our hotels in Paris, Tokyo, Bangkok and Manila.
At a time when our operational cashflows have been significantly depleted from normal levels, we are seeking to complete the development and construction of our two major Peninsula hotel projects in London and Istanbul, as well as the Peak Tram upgrade project. These projects have also been affected by COVID-19 related impacts on the construction workforce and the supply chain, but we are working hard to deliver these projects whilst containing the timing and cost impacts of the delays as much as possible. We have committed financing in place to cover the entirety of these projects as well as provide a significant buffer against any future operating cash burn. Unfortunately, work has stopped on The Peninsula Yangon project, and we are keeping the situation under continuous review.
Our priority has been to implement significant cost savings while maintaining appropriate operational and service levels, as well as looking after the well-being of our staff. As a result of the actions that we have taken to minimise our operating cash outflows and bolster liquidity, our group’s net cash outflow from operating activities for the six months ended 30 June 2021 was significantly reduced to HK$12 million and we believe our financial resources are currently sufficient to meet the group’s funding requirements for at least the next three to four years.
The group recorded a 5% decline in consolidated revenue during the first half. This was principally a result of decreased revenue from our commercial properties division due to a decline in the demand in the luxury residential market impacting The Repulse Bay, as well as rental concessions and lack of visitor arrivals affecting the Peak Tower. Despite seeing some recovery, the hotels division continued to be impacted by the lack of international travel and various social distancing measures imposed on the food and beverage sector. These were somewhat offset by stronger performance of the clubs and services division.
Our financial results for the first six months of 2021 were in line with our expectations, recovering to a combined EBITDA of HK$35 million (as compared to a combined EBITDA loss of HK$114 million in the first half of 2020). The group’s cost saving efforts have resulted in our consolidated operating costs for the first six months of the year reducing from HK$2,181 million in 2019, to HK$1,429 million in 2020 and HK$1,258 million in 2021. Due to these cost saving efforts as well as improvements in operating performance in some markets, the group’s underlying loss reduced by 25% to HK$375 million. The group’s loss attributable to shareholders for the period amounted to HK$452 million compared to a loss of HK$1,197 million in the same period last year.
Although there is a high degree of uncertainty in the near term, our long-term philosophies and values remain steadfast. Our vision is: to develop, own and operate a small number of the highest quality hotels and luxury properties which we believe are considered to be amongst the finest in the world. By taking a long-term view and by maintaining and enhancing the quality of our assets and operations, we seek to create significant value for our shareholders from the long-term appreciation in the capital value of our properties, as well as from the increasing operating yield as each property grows its income over time.
BUSINESS PERFORMANCE
Our group comprises three key divisions – hotels, commercial properties and clubs and services. These divisions are described in more detail in the following review.
Hotels Division
|
Hotels Division
|
Revenue
|
Variance
|
|
|
HK$m
|
In HK$
|
In Local Currency
|
|
Consolidated hotels
|
|
|
|
|
The Peninsula Hong Kong
|
306 |
+8%
|
+8%
|
|
The Peninsula Beijing
|
111 |
+85%
|
+69%
|
|
The Peninsula New York
|
71 |
-49%
|
-49%
|
|
The Peninsula Chicago
|
142 |
+63%
|
+63%
|
|
The Peninsula Tokyo
|
141 |
-15%
|
-15%
|
|
The Peninsula Bangkok
|
12 |
-76%
|
-77%
|
|
The Peninsula Manila
|
13 |
-65%
|
-66%
|
|
|
|
|
|
|
Non-consolidated hotels
|
|
|
|
|
The Peninsula Shanghai |
215 |
+107%
|
+89%
|
|
The Peninsula Beverly Hills
|
189 |
+32%
|
+32%
|
|
The Peninsula Paris
|
49 |
-43%
|
-47%
|
|
|
|
|
|
|
|
The Peninsula Hong Kong
|
The Peninsula Hong Kong
|
|
Revenue
|
HK$306m
|
+8%
|
|
Occupancy
|
|
+16pp
|
|
Average Room Rate
|
|
-19%
|
|
RevPAR
|
|
+79%
|
The Hong Kong hospitality market continued to be negatively affected by stringent travel restrictions and border closures which have been implemented since March 2020. In the first half of the year, The Peninsula Hong Kong achieved improved revenue, occupancy and RevPAR compared to the same period last year. This was the result of a number of staycation offers and marketing promotions including “Journey the World: New Encounters” to attract the local market and offer unique experiences for local residents. To encourage guests to visit The Lobby, we organised spectacular displays in collaboration with various luxury brands including Aston Martin and Louis Vuitton.
Food and beverage revenue improved compared to last year but continues to be limited by the complex social distancing measures imposed by the Hong Kong Government, which led to restricted dining hours and the cancellation of many large functions and weddings. However, we believe there is strong pent-up demand and we are optimistic that food and beverage business will return as social distancing measures are relaxed and vaccination rates improve. As of 30 June 2021, our banqueting team achieved the category of “Zone D” which means that we are able to host large events for up to 180 people and we are optimistic that banqueting revenue will return.
We were pleased that Gaddi’s was awarded one Michelin star for the second consecutive year, while Spring Moon garnered one Michelin star for the fifth year in a row, which is a testament to the hard work and expertise of our talented culinary team.
The Peninsula Office Tower was 94% occupied in the first half of 2021, and the immediate outlook is stable. The Peninsula Arcade occupancy was 77% but we are optimistic for the second half with one of our luxury anchor tenants expanding their space and a number of new tenants signing contracts. The ongoing renovation of The Peninsula Arcade basement, which will create a high-end lifestyle retail area, is due to be completed in 2021. The new basement will include an eclectic mix of interesting lifestyle options including a sushi bar, a men’s grooming salon, high-end audio equipment store and a new and expanded The Peninsula Boutique & Café which opened in May 2021 and has received positive media coverage and strong demand.
We continued to support the local community and charities by partnering with Impact HK and offering a “one meal for one meal” programme to support the homeless and needy in Hong Kong.
The Peninsula Shanghai
|
The Peninsula Shanghai
|
|
Revenue
|
RMB179m
|
+89%
|
|
Occupancy
|
|
+32pp
|
|
Average Room Rate
|
|
+14%
|
|
RevPAR
|
|
+193%
|
The Peninsula Shanghai reported pleasing results for the first half of the year, following a rapid recovery from some local pandemic cases which were reported in January, and business levels returned to normal in the second quarter. The hotel remains the market leader in average room rates in the city and was number one in RevPAR for the second quarter. Occupancy and revenue improved significantly compared to the same period last year.
International tourist arrivals to the Chinese mainland are restricted and therefore the domestic market remained our largest revenue driver. Catering business was slow in the first quarter with many events being cancelled or postponed due to several COVID cases reported in the Huangpu area, but we are pleased to see robust demand returning in the second quarter for events and groups. We held several collaborations with luxury brands and enjoyed good market share for events despite intense competition in the city. Demand for suites was healthy although rates are still lower than their pre-pandemic levels. The Peninsula Shanghai remains the only hotel in the Chinese mainland to have two restaurants with Michelin stars.
The Peninsula Arcade was 93% occupied for the first half.
The group owns a 50% interest in The Peninsula Shanghai Complex which comprises a hotel, a shopping arcade and a residential tower of 39 apartments. As at 30 June 2021, a total of 31 units have been sold.
The Peninsula Beijing
|
The Peninsula Beijing
|
|
Revenue
|
RMB92m
|
+69%
|
|
Occupancy
|
|
+13pp
|
|
Average Room Rate
|
|
+8%
|
|
RevPAR
|
|
+83%
|
The Peninsula Beijing reported a creditable recovery in the first half, despite a slow start to the year when a second wave of COVID-19 affected the city. International tourist arrivals to the Chinese mainland remained restricted during the first half of 2021 and therefore the domestic market was our largest revenue driver, with some high-level diplomatic business contributing revenue. The hotel’s rooftop bar, Yun Summer Lounge, reopened in May 2021 which proved popular with guests seeking an outdoor dining experience.
The hotel implemented some innovative staycation packages and marketing campaigns to drive suite business. These included a collaboration with Sanrio Japan, the founder of the popular cartoon character “Hello Kitty”, which offered guests a wide variety of unique experiences as part of a campaign titled “Hello Kitty Journey Into Luxury”.
The Peninsula Arcade was 92% occupied and in addition to some anchor tenants expanding their retail space, we are pleased to have secured a new luxury lifestyle tenant that will be taking the entire lower level two of the hotel, which comprises a space of approximately 3,000 sqm. We expect that this lifestyle living space, which will open in late summer 2021, will further position The Peninsula Arcade as the best luxury shopping destination in Beijing.
The Peninsula Tokyo
|
The Peninsula Tokyo
|
|
Revenue
|
JPY1.97b
|
-15%
|
|
Occupancy
|
|
-10pp |
|
Average Room Rate
|
|
-44%
|
|
RevPAR
|
|
-58% |
|
The Peninsula Tokyo was negatively impacted by the ongoing “State of Emergency” restrictions for Tokyo which were in place for the majority of the first half, combined with government social distancing measures and a ban on international travellers. At the time of writing, the Japanese Government banned spectators from the pandemic-delayed Tokyo 2020 Olympics, which is disappointing for anticipated tourist arrivals in Japan.
All dining outlets at the hotel remained open but were affected by the government’s restrictions on dining hours, which barred residents from dining out after 8pm. We implemented a variety of local staycation packages in an intensely competitive market, offering dining credits as part of the hotel deals as per local market practice; however, this affected the average rate which declined significantly compared to the previous year. The group marketing campaign of “Peninsula Time” which allows flexible check in and check out times proved particularly popular with the local Tokyo market and helped further drive occupancy.
Despite the soft business environment, we were pleased to welcome several new tenants to The Peninsula Arcade in 2020 and this trend continued in 2021, with a new executive medical check-up centre and a wedding chapel expected to open in late summer 2021.
The Peninsula Bangkok
|
The Peninsula Bangkok
|
|
Revenue
|
THB48m
|
-77%
|
|
Occupancy
|
|
-29pp |
|
Average Room Rate
|
|
-74%
|
|
RevPAR
|
|
-91% |
|
The Peninsula Bangkok had a satisfactory start to the year in the first quarter due to relatively low COVID-19 rates in Bangkok and Thailand in general. The local staycation packages achieved positive uptake from the local market, although government restrictions meant that we could not host large functions or banquets. Unfortunately, in March 2021 the country experienced an increase in cases, particularly in the hospitality sector, and with safety of our employees and guests as a top priority, we decided to temporarily close the hotel from 18 April 2021 and this is reflected in the operating results for the first half of 2021. We plan to reopen the hotel in September 2021 and we are hopeful that almost 100% our staff will be fully vaccinated by this date. Thailand’s borders remain closed to international travellers with the exception of Phuket, and we are hopeful that the so-called “Phuket Sandbox”, which allows visitors to travel to Phuket without quarantine, will also lead to a resurgence in business for Bangkok in the second half.
The Peninsula Manila
|
The Peninsula Manila
|
|
Revenue
|
Php78m
|
-66%
|
|
Occupancy
|
|
-42pp |
|
Average Room Rate
|
|
-29%
|
|
RevPAR
|
|
-91% |
|
The Peninsula Manila experienced a very challenging start to the year due to stringent government restrictions which remained in effect until May 2021, and community quarantine guidelines for certain cities in the National Capital Region which remain in place at the time of writing. The hotel operated with minimal services and was unable to welcome guests to the Spa and the majority of F&B outlets due to restrictions. We reopened The Lobby and Spices in May 2021 and were able to welcome some local guests for staycations from May onwards. To drive revenue we also offered takeout delivery services and valet laundry services during the first half which was positively received by the local community.
Due to the unique structure of The Peninsula Manila with two separate towers, we have been granted permission by the Philippines Department of Tourism to allow high-end quarantine stays in Ayala Tower from 1 July 2021. We expect to attract high-end business travellers and diplomatic guests who are required to undergo 7-10 days of quarantine upon returning to The Philippines, depending on their original departure location. The Makati Tower will continue to be available for local staycation guests.
The Peninsula New York
|
The Peninsula New York
|
|
Revenue
|
US$9m
|
-49%
|
|
Occupancy
|
|
-20pp |
|
Average Room Rate
|
|
+1%
|
|
RevPAR
|
|
-35% |
|
The Peninsula New York reopened on 1 June 2021 after a prolonged temporary closure. The hotel received substantial positive media coverage about its reopening and achieved strong room rates in the month of June. Corporate and group business was robust and catering business was satisfactory. To coincide with the reopening, we launched a dynamic new multimedia art installation titled Life en Route and will host Dutch neo-expressionist painter Peter Riezebos in-house for the summer of 2021 as part of our Art in Resonance programme.
In June 2021, New York City’s official destination marketing organisation launched its largest ever, multi-phased global tourism and advertising campaign titled “It’s Time for New York City!” to remind visitors of the energy, excitement and resilience of the city. Several high-profile large events and New York Fashion Week are expected to return in the autumn. With high vaccination rates in New York and the lowering of quarantine restrictions for most international travellers, we are cautiously optimistic for a rebound of business in the second half.
The Peninsula Chicago
|
The Peninsula Chicago
|
|
Revenue
|
US$18m
|
-63%
|
|
Occupancy
|
|
-12pp |
|
Average Room Rate
|
|
+11%
|
|
RevPAR
|
|
-17% |
|
The Peninsula Chicago is celebrating its 20th anniversary in 2021 and we are pleased to report a positive first half in terms of increased revenue and average room rates, despite a challenging environment in the first quarter. At the time of writing, all social distancing restrictions and quarantine requirements have been lifted in Chicago and there is a positive energy in the city as it rebounds from the pandemic. The hotel’s restaurants and dining outlets have reopened with some limitations in dining hours, with the exception of Pierrot Gourmet which remains closed. The labour market remains challenging, with staff shortages in the hospitality sector, amid intense competition in the city.
To mark the 20th anniversary of the hotel, we introduced special anniversary packages with 20% discounts on rooms and suites, and special menus to celebrate culinary favourites from the past two decades, titles “Culinary Classics Revised”. For every meal purchased we donated one meal to The Greater Chicago Food Depository.
We were delighted to receive the accolade of “No 1 Hotel in Chicago and Illinois and No 3 Hotel in the US” by US News & World Report.
We are optimistic for the second half due to the high rate of vaccination in the US, the relaxation of social distancing measures and the return of some concerts, corporate groups, conventions and art exhibitions being held in Chicago, including the largest-ever exhibition by the artist Banksy and the world-renowned Immersive Van Gogh experience.
The Peninsula Beverly Hills
|
The Peninsula Beverly Hills
|
|
Revenue
|
US$24m
|
+32%
|
|
Occupancy
|
|
-1pp
|
|
Average Room Rate
|
|
+1%
|
|
RevPAR
|
|
-1%
|
The Peninsula Beverly Hills experienced a stable first half of 2021 with satisfactory average rates and occupancy remaining flat over the previous year, which is a creditable result in the light of the coronavirus Shelter-in-Place restrictions implemented by the California state government for several months of 2021.
The Hollywood awards season, which traditionally results in full occupancy for our hotel, was held virtually this year which negatively impacted our results. However, we have a high percentage of loyal guests from the entertainment sector and we look forward to welcoming them back as the pandemic situation returns to normal in Los Angeles.
From March 2021 onwards, business levels exceeded our expectations and continued to improve with the lifting of local restrictions and with an increase in the rate of vaccinations. We reported robust demand from the local drive-in market, particularly for leisure travel. There were almost no international visitors in the first half, although we were pleased to see some Middle East guests returning in June 2021. We launched a “Beverly Hills Dreaming” package to attract visitors and we are preparing for further celebrations for the hotel’s 30th anniversary later in the year.
The labour market remains challenging with staff shortages in the hospitality and restaurant sectors amid intense competition in the Beverly Hills area.
The Peninsula Paris
|
The Peninsula Paris
|
|
Revenue
|
EUR5m
|
-47%
|
|
Occupancy
|
|
-28pp |
|
Average Room Rate
|
|
+24%
|
|
RevPAR
|
|
-69% |
|
The Peninsula Paris reopened on 1 March 2021 for rooms business and has gradually expanded the services available to guests with the relaxing of government restrictions and curfews.
We are fortunate to have beautiful alfresco dining spaces at La Terrasse Kléber and our rooftop restaurant L’Oiseau Blanc, which was awarded one Michelin star in 2020. Alfresco dining venues have been particularly popular with Parisians keen to celebrate events which had been postponed during the pandemic. We implemented new dining experiences and Sunday brunch offers to attract local guests, although unseasonably bad weather in May temporarily affected this trend. The hotel’s indoor dining outlets reopened in June 2021, with the exception of Lili.
We are delighted to welcome a new Head Sommelier to our culinary team who has achieved the award of “Best Sommelier of France 2021” from the Union de Sommelierie de France.
International guests are slowly returning to Paris, mainly from the Middle East and the US, which helped drive suite business in June 2021.
We are cautiously optimistic for the second half, with large events and Paris Fashion Week returning as well as a large new luxury department store opening.
Commercial Properties Division
|
Commercial Properties
|
Revenue
|
Variance
|
|
|
HK$m
|
In HK$
|
In Local Currency
|
|
The Repulse Bay Complex
|
266
|
-15%
|
-15%
|
|
The Peak Tower
|
20
|
-41%
|
-41%
|
|
St. John’s Building
|
27
|
-4%
|
-4%
|
|
The Landmark
|
18
|
-5%
|
-6%
|
|
21 avenue Kléber
|
12
|
+13%
|
+3%
|
| The Peninsula Shanghai Apartments |
2
|
-41%
|
-46%
|
Our largest residential property, The Repulse Bay Complex, reported a weaker first half compared to the previous year. Residential revenue and occupancy declined compared to the same period last year due to the challenging environment in Hong Kong, especially the lack of new arrivals from overseas. The HKSAR Government social distancing measures continued to affect the performance of our food and beverage outlets, and catering revenue decreased due to the restrictions on large functions and events. The Repulse Bay is a popular venue for weddings and unfortunately many weddings have been cancelled or postponed due to the social distancing restrictions. The Repulse Bay Shopping Arcade reported stable occupancy and revenue in the first half.
The Peak Tower experienced a challenging first half. Revenue and occupancy declined and we had to offer rental concessions due to the continued border closures and lack of international visitors to Hong Kong, which has negatively impacted our tenants. Visitors to Sky Terrace 428 also declined compared to the previous year. We have implemented a number of sales and marketing strategies to continue to drive local business and to encourage local residents to visit the Peak Tower, which will remain open during the renovation and temporary suspension of The Peak Tram.
St John’s Building is located above the lower terminus of the Peak Tram and offers an excellent location for office space. Revenue dropped slightly but occupancy remained stable at 97% during the first half of 2021.
The Landmark, a 16-storey residential and office property, is located on a prime riverfront site in the central business district of Ho Chi Minh City, Vietnam. Revenue and occupancy for the offices remained stable year-on-year despite intense competition, but residential revenue and occupancy declined compared to the previous year. The COVID-19 situation in Vietnam has worsened significantly at the time of writing and we are concerned about the outlook for the second half.
21 avenue Kléber offers a prime location immediately adjacent to The Peninsula Paris on Avenue Kléber, just steps from the Arc de Triomphe. The property has achieved international BREEAM Excellent and HQE Outstanding environmental certifications which are the highest level of sustainable building assessments in Europe. We have successfully leased the entire office space, and one of the two retail spaces. Rental revenue was stable compared to the previous year.
Clubs and Services Division
|
|
Revenue
|
Variance
|
|
Clubs and Services
|
HK$m
|
In HK$
|
In Local Currency
|
|
The Peak Tram
|
13
|
+14%
|
+14%
|
|
Quail Lodge & Golf Club
|
45
|
+66%
|
+66%
|
|
Peninsula Clubs & Consultancy Services
|
2
|
+5%
|
+5%
|
|
Peninsula Merchandising
|
26
|
+100%
|
+100%
|
|
Tai Pan Laundry
|
15
|
+4%
|
+4%
|
The Peak Tram is one of Hong Kong’s most popular tourist attractions and has been in operation since 1888. The tram is undergoing a major upgrade project which will result in a significantly improved lower terminus, featuring covered queueing and waiting areas with entertainment features for up to 1,300 passengers. The new tramcars will carry up to 210 passengers instead of 120 at present and visitors’ waiting time will be significantly reduced. The full cost of the HK$700+ million upgrade project is being fully funded by HSH.
In the first half of 2021, the upgrade project has generally made good progress although it has been negatively impacted by unforeseen ground conditions and the global coronavirus pandemic, which affected the planning of the works and the manufacturing of our new tramcars and equipment. As a result, there was a delay in the second phase of service suspension, which commenced on 28 June 2021 with the retirement of the fifth generation Peak Tram.
The Peak Tram reported increased patronage and revenue during the last month of operation before temporary suspension, as a result of well received publicity campaigns, marketing promotions and deals for local residents. We expect to launch the sixth generation Peak Tram by the end of 2021.
Quail Lodge & Golf Club revenue increased by 66% year on year and reported a significant increase in average rates and RevPAR compared to pre-COVID 2019 levels, which was a pleasing result in the light of the shelter-in-place restrictions in California for several months in the first half of 2021. We unfortunately had to cancel The Quail Motorcycle Gathering in May, but we are planning to proceed with The Quail: A Motorsports Gathering in August 2021, which is considered one of the world’s leading concours events for classic motoring aficionados.
Peninsula Clubs & Consultancy Services (PCCS) manages prestigious clubs in Hong Kong including The Hong Kong Club, Hong Kong Bankers Club and The Refinery. PCCS reported a decline in revenue compared to the same period last year, impacted by the effects of the pandemic in Hong Kong and the loss of a management fee from Thai Country Club. The Hong Kong Bankers Club successfully reopened in January 2021 in a new location in Central and has received positive feedback from members.
Revenue at Peninsula Merchandising doubled over the same period last year, mainly due to stronger online sales and robust wholesale and travel retail business in the Chinese mainland and contribution from our Japan stores. In May 2021 we were excited to open a new Peninsula Boutique & Café in the basement of The Peninsula Arcade, and this opening received substantial positive media coverage and has been a popular attraction for Hong Kong residents. The Hong Kong International Airport boutique has been temporarily closed since March 2020 and sales in our Japanese boutiques have been affected by reduced operating hours during the “State of Emergency” in Tokyo. Despite the general economic uncertainty, early orders for the mooncake season have been satisfactory and we are cautiously optimistic for the outlook in the second half.
Tai Pan Laundry revenue increased by 4% compared to the same period last year, due to the reopening of some hotels, clubs and gyms which had been closed during the same period last year.
Projects under development
The Peninsula London
In 2013, our Group purchased a 50% interest in the lease of 1-5 Grosvenor Place in Belgravia, central London, for a cash consideration of £132.5 million. In 2016 HSH assumed 100% ownership of the project by buying out our equity partner Grosvenor for an additional cash consideration of £107.5 million. Grosvenor remains the landlord under the 150-year lease.
The property is in a high-profile location at the gateway to Belgravia, overlooking Hyde Park Corner, the Wellington Arch, Green Park and the gardens of Buckingham Palace. We are developing a 190-room Peninsula hotel with 25 luxury Peninsula-branded residential apartments for sale also integrated into the development. The construction budget for the project is in the region of £800 million.
The Peninsula London project suffered delays due to the COVID-19 impact on the construction workforce and supply chain, as well as other project challenges. Despite these challenges, significant progress has been made on the superstructures, guestrooms and the residences, although there were delays in the basement due to technical issues. We are addressing the delays and associated cost implications as a priority by deploying a significant team of HSH project executives to bolster the London project teams and seeking to contain the timing and cost implications as much as possible. We are hoping to open The Peninsula London during 2022.
The Peninsula Istanbul
In July 2015, together with our partners Doğuş Holding and BLG, we entered into a shareholders’ agreement to form a joint venture partnership, of which HSH has a 50% share, for a proposed hotel development in Istanbul, Turkey. The partners agreed to jointly develop the property with an investment commitment of approximately €300 million, of which HSH is responsible for 50% or approximately €150 million.
There will be approximately 180 rooms, a ballroom with sweeping views of the Bosphorus, indoor and outdoor swimming pools, Spa and verdant garden area on the waterfront. The Peninsula Istanbul will form part of the wider Galataport project being developed by our partners, which incorporates a promenade, museums, art galleries, restaurants, boutiques, retail units, parks and public spaces for the local community as well as a cruise passenger terminal.
The COVID-19 situation also impacted The Peninsula Istanbul project, although some curfews have been lifted. Despite these constraints, progress has been satisfactory with handover of Buildings 1 and 3 completed and Buildings 2 and 4 very close to being handed over. Construction completion of the project is currently targeted to be in 2022 and the costs of COVID-19 related delays are not significant.
The Peninsula Yangon
The Company entered into a shareholders’ agreement with Yoma Strategic Investments Ltd. And First Myanmar Investment Public Company Limited in January 2014 to acquire a 70% majority interest for a proposed hotel development on the site of the former headquarters of the Myanmar Railway Company in central Yangon, Myanmar.
Due to the unfortunate situation in Myanmar, we have agreed with our partners to stop all work on the project and we are keeping the situation under continuous review.
Human Resources
The first half of 2021 continued to bring pandemic-related challenges for our Human Resources team who have made an enormous effort to preserve as many jobs and livelihoods as possible, and to ensure our staff remain engaged despite working from home and furlough continuing in various countries.
We have undertaken major initiatives across the group to encourage our staff to get vaccinated, including an incentive programme in Hong Kong offering cash, paid leave and pre-vaccination medical checkups. At the time of writing, 82% of staff in our global operations and 92% of staff in Hong Kong have been vaccinated with their first or second dose.
Building a team of exceptional people is the key to executing our strategies. The culture of our company has cultivated a loyal and committed team spirit which has resulted in a stable and cohesive management team. This team spirit starts at the top of the organisation with our majority owners the Kadoorie family and we adhere to a core set of values and integrity that permeates through all levels of the company. We continue to safeguard this culture as the pandemic continues and as we add more than a thousand new team members to our group, with two hotels coming on board in the next 18 months.
I am pleased to report that in the first half of 2021 we rolled out a new Peninsula Services Principles framework for all employees in our hotel operations, which focuses on creating stronger emotional connections with guests while offering the highly personalised service that our guests have come to expect from The Peninsula. To further support this important programme, we have launched our HSH Core Principles across the Group to encourage all our colleagues to support these service principles.
Our internal WorkPlace 2025 initiative, which is focused on our people, culture and empowerment, aims to create effective transformation for our teams and modernise our workplace. Despite the challenging business situation, we remain committed to innovation and empowerment and we will be launching “Work Improvement Teams” globally and implementing a competition amongst the properties on best practice ideas. We continue to focus on developing strong leaders, implementing mental and physical well-being programmes, and to improve our engagement strategies.
Earlier this year we launched an “eHR Suite” which is an integrated HR Talent solution to attract, develop, retain the right talent and manage the employee lifecycle, and this solution has received positive feedback from our employees as we continue to automate our HR processes and to go paperless.
As of 30 June 2021, we have 5,595 full time staff.
Sustainable Luxury
In the first half of 2021, our Corporate Responsibility and Sustainability Team launched our Sustainable Luxury Vision 2030 (Vision 2030) Strategy to take the group beyond the previous strategy, Sustainable Luxury Vision 2020. The ten-year period demonstrates that some of these commitments will require significant change and will take time to implement.
We continue to believe that our attention to detail and quest to provide the highest quality service will make sustainability part of the appeal of our luxury offering. Sustainable luxury is an integral part of our long-term mindset. We aim to properly manage risk as well as invest in the right opportunities while enabling a sense of belonging by offering services that are sustainable, thoughtful and purposeful to the needs of our guests and customers.
In 2021, we focused our efforts on several challenging issues that were further complicated by the global pandemic due to more stringent hygiene standards, disruption of supply chains and temporary closures of our operations. Examples of these issues include water usage, single-use plastic transition, waste diversion and responsible sourcing. Social inequalities became more prominent with the impact of COVID-19, and we continued to have charitable and outreach programmes to assist the socially disadvantaged communities in cities where we operate. We recognise the role of green financing in driving a more sustainable future and low carbon economy, and in June 2021, we converted an existing €60 million loan to a green loan. We are in discussions with other financial institutions to identify sustainability-linked loan opportunities in the second half of this year.
Going forward, we will continue to deliver sustainable luxury through the groundwork laid by our previous strategy and seek to enhance our sustainability initiatives by leveraging internal resources, igniting employee’s enthusiasm and collaborating with like-minded stakeholders.
The key strategic objectives and topics of Vision 2030 are:
• diminishing natural resources such as energy, food and water;
• climate change; and,
• growing social and political instabilities and inequalities.
We will seek to address these interlinking issues and pursue Vision 2030 by focusing on our three stakeholder pillars of (i) enhancing our guest experience, (ii) empowering our people and (iii) enriching our communities, underpinned by 10 key commitments as set out in our vision. More details can be read on our website and in our group Corporate Responsibility and Sustainability Report.
Outlook
With the COVID-19 situation continuing, it is difficult to predict when international travel can resume to normal levels and the outlook for a business recovery remains uncertain. We can derive some optimism from the regions which have seen a significant rebound in business levels, principally the Chinese mainland and the United States, although rising cases of the Delta variant is concerning. We are hopeful that the cases in our home market of Hong Kong will remain low and that the Hong Kong vaccination rates will increase substantially so that our borders can reopen as soon as possible to both domestic Chinese and international travellers. In the meantime, we are seeing significant challenges in sourcing labour for the hospitality market due to other sectors offering more attractive economics. We are optimistic for our retail arcades with positive leasing renewals and beautiful new lifestyle options opening in The Peninsula Arcades in Hong Kong and Beijing.
In terms of business strategy, we are a company that focuses on the very long term, and we must be prepared to weather the downturns that are inevitable when one looks at a period of one hundred and fifty years. We remain focused on doing what we can to help our operations and our people recover from the devastation of the global pandemic. Our unique company culture is one of our greatest assets and I am personally involved in driving our internal transformation project, WorkPlace 2025, mentioned above.
Despite the current downturn, we are committed to ensuring that with the rapid development of technology we are keeping pace with the needs and opportunities of our business. Enhanced health and hygiene in our operations will continue to be a priority and we are looking at the latest technologies and innovation to assist with these high standards.
We expect that from 2022 onwards, the new hotels in London and Istanbul will further enhance our brand presence. We are very focused on managing the cost and programme implications of COVID-19 as well as other project challenges that we have faced, in order to minimise the budget and time impact of the unavoidable delays. We are very sad about having to stop work on the project in Myanmar and will keep the situation under continuous review.
The Peak Tram is undergoing its second phase of temporary suspension and we expect the project will be completed in December 2021. After completion, we believe it will significantly improve the visitor experience and enhance Hong Kong’s tourism image as well as generate significant revenues once the Hong Kong tourism market recovers.
Overall, our company has maintained a strong balance sheet and has closely managed our operating costs and maintained its liquidity position during this crisis. We are fortunate to have a highly motivated and dedicated team of management and staff who are committed to our long-term vision.
I would like to thank each member of my team for their loyalty and dedication during one of the most challenging periods our group has faced.”
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About The Hongkong and Shanghai Hotels, Limited (HSH)
Incorporated in 1866 and listed on the Hong Kong Stock Exchange (00045), The Hongkong and Shanghai Hotels, Limited is the holding company of a Group which is engaged in the ownership, development, and management of prestigious hotels and commercial and residential properties in key locations in Asia, the United States and Europe, as well as the provision of tourism and leisure, club management and other services. The Peninsula Hotels portfolio comprises The Peninsula Hong Kong, The Peninsula Shanghai, The Peninsula Beijing, The Peninsula Tokyo, The Peninsula New York, The Peninsula Chicago, The Peninsula Beverly Hills, The Peninsula Paris, The Peninsula Bangkok and The Peninsula Manila. Projects under development include The Peninsula London and The Peninsula Istanbul. The property portfolio of the Group includes The Repulse Bay Complex, The Peak Tower and St. John’s Building in Hong Kong; The Landmark in Ho Chi Minh City, Vietnam and 21 avenue Kléber in Paris, France. The clubs and services portfolio of the Group includes The Peak Tram in Hong Kong; Quail Lodge & Golf Club in Carmel, California; Peninsula Clubs and Consultancy Services, Peninsula Merchandising, and Tai Pan Laundry in Hong Kong.
For further information on this release, please contact:
Websites: www.hshgroup.com www.peninsula.com