Earnings at The Hong Kong and Shanghai Hotels (HSH), owner of the Peninsula chain of luxury hotels, could suffer a setback next year when nearly half of the guest rooms at its most profitable Hong Kong unit are due to be renovated.
The group, which saw a 26 per cent jump in underlying profit to HK$408 million last year, enjoyed persistent growth during the first quarter of this year as revenue per available room in Hong Kong, Asia and the United States rose between 12 and 19 per cent from a year ago.
However, Japan's March 11 earthquake is casting a pall over the second quarter, with the occupancy rate plunging from an average of 65 per cent last year to its current level of between 30 and 40 per cent. The group has launched promotional packages to lift the rate back to between 45 and 50 per cent.
The group's director and chief operating officer, Peter Borer, said staff at The Peninsula Tokyo had been told to take annual leave and unpaid leave, and some had been transferred to other hotel operations for up to eight months to save wages.
'We are also looking at energy saving ... we try to streamline operating hours, closing floors,' Borer said.
One analyst said the quake was not a major problem, because The Peninsula Tokyo had not contributed much profit anyway since its opening in 2007, but the partial closure of its flagship, The Peninsula Hong Kong, in 2012 was of far greater concern.
'We believe the renovation plan could cut the group's year-on-year net profit by some 15 to 20 per cent in 2012,' the analyst said, speaking on condition of anonymity. 'But we project a 40 per cent surge in its bottom line this year, due to increased room rates and a strong performance in Hong Kong and mainland hotels.'