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Hotel Developers (Lanka) Plc Chairman Krishantha Cooray has said that this year marks the beginning of a new era at Hilton Colombo, one which would redefine luxury and see an improvement in the way the upside potential in tourism in Sri Lanka was harnessed.
This confidence from Cooray has been articulated in the Chairman’s Review of the Hotel Developers’ Annual Report for 2015/16, which was released last week, when the company’s Annual General Meeting was also held.
The company reported a strong operational performance despite facing disruptions from the ongoing refurbishment work at Hilton Colombo.
Hotel Developers has not carried out any major refurbishment of the hotel since its inception and a major refurbishment program was started in September 2014 which will see improvement made throughout the property, including with its rooms, food and beverage outlets and meeting spaces. The refurbishment program has been estimated to cost $ 35 million (excluding duties) and will be financed by a loan amounting to $ 27 million (undrawn as of FY16) and the balance from internally-generated funds.
Due to the ongoing refurbishment only 80% of the rooms were operational during FY16. During the nine months of operating in a state of partial closure, Hilton Colombo was able to achieve an average occupancy of 38% against the 43% occupancy for the comparative nine-month period of the previous financial year.
Total revenues for the nine-month period amounted to Rs. 1.57 billion against Rs 1.78 billion in the comparative period of the previous year. Although the company expected profits to be much lower than the previous year, it nevertheless managed to generate reasonable profits. As a result, the company and the hotel exceeded modest forecasts for FY16 with a gross profit of Rs. 1.3 billion against Rs. 1.45 billion in the previous year, while total profit before tax achieved was Rs. 92 million in comparison to Rs. 207 million for the comparative period in the previous year.
During the Chairman’s Review, Cooray announced that the Hilton Colombo would be reinstated to its “rightful position as the crowning glory of Sri Lankan hospitality.”
“The current year marks the beginning of a new era where luxury has been redefined under the aegis of the Hilton brand to satisfy the most discerning expectations of sophisticated international travellers,” he added.
“Following months of renovations and modernisation, the Hilton is now poised to regain its position as the leading international luxury leisure and hospitality services provider in Sri Lanka and is ideally positioned to support the national tourism development goals with premium products and services internationally associated with the Hilton Brand,” Cooray emphasised.
The following are excerpts of some of the other points presented during the Chairman’s Review.
The company has achieved a profit and contributed positively towards the national tourism industry and overall national economic growth, despite a challenging year where all operational activities were conducted within the backdrop of ongoing renovations and internal changes.
I take this opportunity to provide you with an overview of the industry during the period under review, our achievements amidst these challenges and our future strategy to sustain growth, whilst contributing to the development of the tourism industry and the economy of Sri Lanka.
Tourism remained one of the leading international revenue generators across the globe in 2015, with international tourist arrivals growing by 4.4% to reach a total of 1,184 million, according to the latest UNWTO statistics.
Asia and the Pacific recorded 13 million more international tourist arrivals while Oceania and South-East Asia accounted for the major share of growth. China, the US and the UK saw the strongest outbound travel growth in 2015 where China was the fastest-growing outbound destination. Tourism in the Russian Federation and Brazil declined significantly, reflecting the economic constraints in both countries. The sentiment remains largely positive for 2016, though at a slightly lower level as compared to the previous two years. Based on the current trend and this outlook, UNWTO projects international tourist arrivals to grow by 4% worldwide in 2016.
The global growth trend in tourism was reflected in Sri Lanka, where the tourism industry maintained an upward trajectory in the peaceful and stable context of the post-conflict era supported by conducive national policies that have earmarked the tourism sector as a key growth sector of the local economy.
Tourism is a major foreign exchange generator, while also opening up diverse employment opportunities across the country. It has almost unlimited potential for growth given the natural and cultural endowments Sri Lanka has been blessed with, and the country has commenced the process of realising this potential.
On track with industry growth objectives tourist arrivals exceeded the target of 1.5 million, reflecting an increase of 13% in 2015, which is exceptional. This growth can be attributed to an effective tourism policy and to the support rendered to the industry by the Government. The Hilton Colombo is proud to have been an active and significant contributor to this industry revival through a range of high-end, state-of-the-art leisure services that have set new industry benchmarks by reinventing the concept of luxury leisure.
Sri Lanka saw sustained growth in tourist arrivals from the non-traditional markets of South East Asia supported by the widespread 
tourism promotional campaigns conducted by the country as part of the national tourism development strategy. The higher inflows from South East Asia contributed towards offsetting the decline in arrivals from traditional European markets. The arrivals from China, India, East Europe, UK, Japan and Germany were the key contributors to the upsurge in tourist arrivals, with China being the biggest contributor.
However, over 60% of the arrivals have been recorded as leisure travel, while the business travel segment showed a slower rate of growth. In addition, the tourism sector is currently experiencing a boom. Therefore, it is vital that marketing and promotional campaigns to reposition Sri Lanka as an emerging tourism destination be sustained in the coming years.
The domestic tourism industry has been greatly uplifted by the post-conflict investment drive in tourism-related infrastructure development that has directly contributed towards capacity expansion of the leisure and tourism sector, while also enhancing product and service quality and expanding the tourism product portfolio of the country. This expansion will fuel future industry growth by establishing Sri Lanka among premier global tourism destinations in the region by catering to diverse customer segments from business travellers, to sun-and-sand tourists, to cultural tourists and other segments of leisure travellers.
I believe the business segment in particular presents a growth opportunity for Sri Lanka’s tourism sector as business travel, not only from outside the region, but also within the region, and continues to grow, fuelled by unstoppable globalisation forces. Sri Lanka is ideally positioned to capitalise on this movement of business travellers by providing secure, customised and luxury accommodation for business travellers from all parts of the globe.
The 2016 National Budget that targets growth in FDIs aims to establish a suitable business environment to attract foreign investments is a positive step in this direction.
Given the many opportunities for national growth and development offered through regulated and sustainable tourism growth the domestic tourism Industry has the potential to become a leading economic sector of the country. Therefore, the tourism policy of Sri Lanka must focus on harnessing the opportunities in the global tourism market to extend beyond traditional boundaries to make Sri Lanka an exciting destination for tourists. The Hilton Colombo is now ideally positioned to become a channel to cater to such specialised travel and tourism needs and is poised to support the country in its development drive.
Your company has taken the lead in reinventing the concept of luxury accommodation in Sri Lanka by incorporating opulent details into all aspects of the Hilton Colombo from its overall ambience, to design and art décor elements, to all products and services. We are incorporating superior value across the Hilton experience to enable the Hilton brand to sustain its position as the leading international 5-star hotel in Sri Lanka. This extensive capital investment will enhance the value of the property while also boosting brand equity and opening up new opportunities for growth across international markets.
In addition, our partnership with the internationally-renowned Hilton brand provides an unparalleled competitive advantage against the rising competition, where the Hilton brand has an unrivalled reputation for luxury and the highest International service standards coveted by elite travellers from across the globe. Therefore, I am confident the Hilton Colombo will stay ahead of the curve upon completion of refurbishment, despite the rising tide of competition in the City Hotels segment.
Our growth strategy will harness the advantages of our brand strength and improved facilities, to penetrate tourism markets across the globe. The Hilton brand loyalty, new and improved ambience, state-of-the-art facilities and sumptuous product range, will make it possible to position the Hilton Colombo on the global luxury tourism map. We are strengthening our marketing drive and support services in line with this objective and we are equipped with the correct mix of skills and experience to drive this process. Therefore, I am confident we will be able to generate a healthy return on investment for the refurbishment, over the short to medium term.
As we look towards the future, I am confident the Hilton Colombo is equipped to overcome all challenges that come our way by harnessing our expertise in the domestic and international tourism industry.
I would like to thank my fellow board members for their support and the senior management and the entire staff of the company and hotel for their tireless efforts in ensuring uninterrupted business operations while also accommodating ongoing refurbishments to the property.
I take this opportunity to thank the outgoing Board of Directors for their contributions made to the success of our performance in the past. I also wish to convey my sincere gratitude to our valued guests for patronising the Hilton Colombo and for their support in this difficult time, which reflects brand loyalty and the service level maintained by our staff
