While John Keells Holdings (JKH) will play its part in helping the tourism industry and the country achieve a speedy recovery, the group together with the relevant chambers of commerce, is engaging the authorities to urge them to take immediate steps to prevent a recurrence “of such (April 21) heinous acts and ensure regular and [...]

Business Times

Cinnamon brand to initiate own marketing efforts after travel advisories are relaxed

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While John Keells Holdings (JKH) will play its part in helping the tourism industry and the country achieve a speedy recovery, the group together with the relevant chambers of commerce, is engaging the authorities to urge them to take immediate steps to prevent a recurrence “of such (April 21) heinous acts and ensure regular and consistent dissemination of information only from designated spokespersons of the Government and military.”

This was stated by JKH Chairman Krishan Balendra in the group’s 2018/19 year-end financial review, his first as chairman after taking over the reins in January 2019.

The group, which suffered losses when its Cinnamon Grand Colombo property was one of three hotels blasted by pro-IS militants, says it will initiate its own marketing and outreach efforts once the travel advisories are revised which is expected in the next few months. Several countries have issued travel warnings with China being the first last week to relax the warning to ‘be cautious’ from “don’t travel to Sri Lanka”.

“It is pertinent to note that studies of other travel destinations that were impacted by similar terrorism incidents indicate that destinations require 12 to 18 months to revert to pre-incident levels. Popular destinations which were affected by acts of terrorism such as Bali, Mumbai, Paris and Brussels have seen a recovery in arrivals in less than 18 months,” Mr. Balendra.

City hotels sector witnessed a lacklustre year of operations, despite the improvement of overall room nights in the city by 4 per cent. This was predominantly due to the increase in room inventory within Colombo and the aforementioned political developments within the country which impacted MICE and corporate travel during the reporting period.

As far as the group’s financial health is concerned, group revenue for the year ending March 2019 increased by 12 per cent to Rs.135.46 billion while recurring group earnings before interest expense, tax, depreciation and amortisation (EBITDA) decreased by 11 per cent to Rs.25.67 billion. “The decline in recurring EBITDA was on account of the performance of the Leisure, Financial Services, Property and Retail industry groups, where we witnessed some one-off impacts in addition to the downturn in the performance of the city hotels sector due to a significant increase in the room supply within a short period of time,” the chairman’s statement said.

Recurring Group profit before tax (PBT) decreased by 24 per cent to Rs.18.40 billion for the financial year ended 31 March 2019.

Mr. Balendra said it was a challenging year for the group, where economic growth was muted amidst pressures emanating from the external environment, in addition to domestic macro-economic pressures, which were exacerbated by political uncertainty.

During the financial year, both the Port of Colombo (POC) and SAGT recorded a year on year volume growth of 11 per cent. The calendar year 2018 marked a significant milestone for both the POC and SAGT, with throughput recording an all-time high of over 7 million TEUs and 2 million TEUs, respectively.

The Supermarket business recorded a growth of 4.5 per cent in customer footfall which contributed towards a modest growth of 2.3 per cent in same store sales, despite the subdued macro conditions which resulted in a contraction in average basket values.

“The penetration of modern fast moving consumer goods (FMCG) retail in the country remains low, compared to more developed regional countries, and continues to present a significant opportunity for growth. The business will continue to strategically expand its outlet network and distribution capabilities in gaining market share,” the statement said.

Meanwhile the construction of the “Cinnamon Life” project is progressing with encouraging momentum, where the structural work of all buildings is now complete, and the installation of the mechanical and electrical services and the external facades are currently underway. The completion dates of the residential and office towers will be March 2020, whilst the operations of the hotel and retail mall are expected to commence in March 2021.

The project cost, as estimated in 2013, was approximately US$805 million, excluding interest during construction and applicable taxes and customs duties. Based on the finalised design concepts and increases in cost since 2013, the project cost is now estimated to be approximately 10 per cent higher.

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