China Travel on spending spree in new game plan
Tourism operator shifts focus to investments in hotels and property to spur long-term growth
China Travel International Investment Hong Kong says it will ramp up capital expenditure to HK$2.6 billion this year from HK$600 million as part of its new strategy to invest more in hotels and property.
The tourism operator already owned several hotels, buildings and warehouses in the city but was considering how to convert some of those to hotels, shopping malls and other tourist facilities to generate better returns, Xu said.
"In accordance with its strategic plan, the company … will increase investment in travel destination development and tourism real estate to promote long-term growth," China Travel said.
Construction of tourism-related facilities will begin in China Travel's Ocean Spring Resort in Zhuhai, Guangdong province, this year and in its Ocean Spring Resort in Xianyang, Shaanxi province, within two years.
The company aimed to sell residential property on these tourist resorts, general manager Heywood Ho said.
Xu said: "In the past two years, we were preparing a new strategy to address the dissatisfaction of the market and our poor share price performance. We came up with a new strategy based on two platforms: developing comprehensive tourist facilities around scenic spots and capital operations, including mergers and acquisitions as well as investments."
Shares in China Travel have fallen from HK$6.08 in November 2007 to hover mostly below HK$2 since. They dropped 1.9 per cent to HK$1.54 yesterday.
The firm's previous strategy of making big one-time investments had not paid off, Xu said, citing its 2 billion yuan (HK$2.5 billion) investment in the Ocean Spring Resort in Zhuhai as yielding slow returns.
China Travel would now invest in hotels and property at scenic tourist spots on the mainland, he said. It also hopes to invest in hotels in major cities.
At the end of last year, the firm had net cash of HK$2.24 billion, with a debt-capital ratio of 16 per cent.
Net profit rose 16 per cent to HK$804 million last year, while turnover grew 7 per cent to HK$4.67 billion. Travel agency revenue increased 6 per cent to HK$1.77 billion, while revenue from its mainland tourist spots rose 10 per cent to HK$1.47 billion and hotel revenue grew 6 per cent to HK$962 million.
