Kingdom Hotel posts first half profit drop

Kingdom Hotel Investments (KHI) has posted a 61 per cent fall in first-half net profit after weaker performances by its Four Seasons hotels, particularly in Paris and Cairo, property sales and impairment charges. Profits for the Dubai-based hotel and resort investment company declined to US$8 million (Dh29.3m) for the first six months of the yearm, compared with $20.6m in the same period last year. Revenues fell 11 per cent to $103.3m in the first half from $115.5m last year in a "challenging environment", as hotels worldwide were hit by a decline in demand for international travel. The Saudi billionaire Prince Alwaleed bin Talal founded the company and is the majority shareholder. Sarmad Zok, the chief executive of KHI, said: "Our determination to drive profitability across our wholly owned hotel operations has paid off and they remain cash generative. "Trading, however, is still tough across the wider portfolio but we don't expect the rate of deterioration to get any worse." Revenue per available room, the key industry measure, declined by 18.4 per cent in the first half of the year for KHI's hotels, compared with the same period last year. KHI said all of its hotels, except those in Kenya, Beirut and Lusaka in Zambia, suffered a fall in profitability driven by revenue declines. Dubai was particularly hard hit, with revenue per available room at its Movenpick Bur Dubai hotel down 42 per cent in the first half, said Gordon Drake, the chief financial officer for KHI. "The greatest challenge that Dubai has had is inexperience in managing through a crisis," said Mr Zok. "The market does not have the sophistication and the maturity to cope with a crisis." He said he added that he expected to see an improvement in its Dubai property's performance during the second half of the year, and that the market had good fundamentals and "long-term growth potential". Real estate sales would remain challenging "with a continuation in reduced sales volumes", the company said in a report. KHI's portfolio includes Fairmont, Raffles and Movenpick hotels, and the company's focus is in on emerging markets in the Middle East, Africa and Asia. In the first quarter of the year, KHI cancelled or put on hold four development and expansion projects: in Langkawi, Malaysia;, Da Nang, Vietnam; Phang NgaPhang Nga, Thailand; , and Uganda. KHI currently has five hotels under development, including properties in Marrakech and Manila. It said that its Four Seasons hotel in Beirut would open in the second half of this year. Mr Zok said KHI's development programme was "on schedule and fully funded". KHI is listed in London and Dubai. Deutsche Bank said it continued to rate the shares as a "buy" in a note to clients. "The group's balance sheet remains very strong, with significant cash resource left," said Simon Champion, a research analyst at Deutsche Bank.. "The 'nice problem' with this is how does the group intend to use this cash. - Tthe group does not foresee a pick up in acquisitions in the the second half of 2009." rbundhun@thenational.a