Hong Kong to be headquarters of China’s biggest travel business player
China National Travel Service (HK) Group and China International Travel Service Group will set up their headquarters in Hong Kong after their proposed merger that will create the country’s biggest player in the sector.
The plan was unveiled on Thursday when China Travel International Investment Hong Kong, the
Hong Kong-listed subsidiary of China National Travel Service, reported a 22 per cent drop in net profit for last year as a result of dwindling Chinese tourist numbers in Hong Kong.
The management said it believes overnight visitor arrivals in the city are likely to stay depressed in the short term.
China Travel, which mainly operates hotels, theme parks and leisure resorts, said its net profit for last year fell to HK$1.35 billion. Revenue slipped 2 per cent to HK$4.4 billion.
China Travel chairman Xu Muhan declined to elaborate on the proposed merger between its parent and China International Travel.
“What I can only disclose is that Hong Kong will still be the head office of the new group,” said Xu. “The restructuring will provide a potential synergy between the two groups.”
Credit Suisse expects the merger to be completed in one to three months. The plan was announced on February 23.
On the company’s performance, Xu blamed the profit plunge on the weak performance of its hotels as mainland Chinese tourist flows to Hong Kong ebbed. Net profit of the company’s hotel operations in 2015 came to HK$112 million, a steep year-on-year drop of 48 per cent while revenue came to HK$760 million, an 18 per cent decrease.
“Revenue and net profit of five hotels in Hong Kong and Macau decreased considerably due to factors including hotel renovations in Mong Kok and Macau Metropark Hotels,” said Xu.
“A strong Hong Kong dollar and looser visa restrictions are drawing Chinese tourists to other destinations such as Japan and South Korea. We may continue to face great pressure in hotel operations this year.”
The average occupancy rate of its five hotels in Hong Kong and Macau dropped to 80 per cent last year from 89 per cent in 2014. The average room rate fell to HK$811 from HK$ 930.
Xu appealed to Hong Kong hotel operators not to cut average room rates further as that would not solve the problem of the city’s slower tourist flows but instead may raise unemployment and affect service in the hospitality industry.
Shares of China Travel closed 3 per cent down at HK$2.6.