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Having completed yet another successful financial year, Renuka City Hotel’s Chief has devoted a considerable part of the Chairman’s Review on the current status and future of the industry. Some of his suggestions, which have been made in his previous reviews, have become more pertinent in the current context.
Following are some of the excerpts of Ravi Thambiayah’s review in FY14 Annual Report:
The Government’s timely initiative to improve the country’s infrastructure, by completing the Colombo-Katunayake Expressway and extending the Southern Highway are highly commendable and have certainly facilitated the growth in tourism.
However, coupled with these Government initiatives, it is vital for hotels to maintain appropriate minimum standards and to promote the continued use of the minimum rates already in operation in the city of Colombo, in order to avoid unnecessary price competition and allow hotels to compete on their service and facilities.
There is an exponential rise in the number of hotels being built in the country. Approximately 52 new hotels are expected to come up this year alone, adding to the 1465 Hotels currently registered in the island. The highest number of new hotels amounting to 16 out of the 52 is expected to come up in Colombo adding 2,080 more rooms to the existing room capacity, by the end of the year.
This growth and competition would be welcome provided that there is a steady increase in tourist arrivals. If there is no corresponding increase in demand, the industry will suffer due to a lack of regulation leading to price wars as a result of the oversupply of hotel rooms. All stakeholders including the Government, owners, management and staff alike will suffer, as a result. Maintaining the equilibrium between demand and supply is crucial to maintain profitability in a market with an increasing supply of hotel rooms.
Furthermore, the tourism industry needs to be focused not only on increasing the number of rooms but this should be coupled with developing activities such as shopping malls, theme parks, integrated parks, entertainment complexes, casinos, and international events that would provide an authentic tourist experience to attract visitors to our country.
Simultaneously we must have suitably trained staff with the correct mind set, skills and linguistic abilities to communicate and service these visitors in order to provide a unique experience to the international traveller. Promoting our country as a safe travel destination is also equally important to sustain the current growth and attract potential travellers.
I believe that the Government deserves to be applauded on a job well done thus far by hosting a successful CHOGM, uplifting the world image of the country and undertaking the development of our infrastructure such as roads, technology, etc., and including the outstanding job they are doing beautifying Colombo and some of the other major cities.
A conscious effort in implementing modern attractions along with proper regulations and planned development, in my opinion is the need of the hour and shall take the industry to unparalleled heights.
Renuka City Hotels shines with Rs. 300 m profit in FY14Renuka City Hotels Plc has performed commendably in the FY2013/14 by posting a Rs. 300 million net profit thanks to an above market occupancy of 82%.
The 2013/14 bottom line of Rs. 299.6 million reflects a healthy 21.5% growth over the previous year and it is the best to date in Renuka City’s recent history baring the extraordinary profit figure of Rs. 508.7 million posted in FY12 due to heavy windfall in other income. However that year Renuka City enjoyed a record occupancy of 93% as well though turnover was Rs. 188 million.
In 2013/14 turnover amounted to Rs. 284 million, up from Rs. 221.3 million in FY13. Gross profit was Rs. 246 million, up by 30% from last year. Renuka City’s other operating inco me amounted to Rs. 163.2 million, marginally down from Rs. 177.2 million in FY12. Other income comprised of Rs. 67 million in interest income and Rs. 59 million in dividend income.
There was no sale of shares in FY13 despite Renuka having a sizeable investment portfolio. Exchange gain was Rs. 29 million, up from Rs. 1 million in the previous year. As at 31 March 2014, investments in quoted companies amounted to Rs. 803 million (at cost) and Rs. 1.68 billion (at market value).
The Board of Directors has proposed a final dividend of Rs. 4 per share for FY14 (involving an outlay of Rs. 28 million ), same as last year. Earnings per share rose to Rs. 42.80 from Rs. 35.22. With Rs. 3.55 billion in assets (up from Rs. 3.2 billion a year earlier) net asset per share was Rs. 498.35, up from Rs. 446.23. Renuka City Hotels continues to be long-term debt free whilst its total equity was Rs. 3.48 billion.
“I take pride in highlighting the achievement of an above market occupancy of 82% which is above the average room occupancy rate for Sri Lankan hotels for the year 2013, which  resulted in an impressive post tax profit of Rs. 299.6 million,” Renuka City Hotels Plc Chairman Ravi Thambiayah said in his review in the 2013/14 Annual Report.
“The management and staff have been able to sustain this impressive profit due to their commitment to service, optimisation of resources and the continuance of the minim rates in the city of Colombo,” he added.
The improved bottom line at Renuka City is also despite increase in expenditure especially marketing (Rs. 13 million, up three fold from Rs.  4 million in FY12), salaries and related expenses (Rs. 51.6 million up from Rs. 35 million in FY12). Operationally electricity cost had risen by 67% to Rs. 15 million.
“Our staff is committed to the continued and consistent improvement of our services and that commitment will reap benefits not only to us, but to our valued customers and guests as well,” the Chairman said adding that many customers and guests whose loyal and valued patronage has sustained the company over the year.
In February 2013, Renuka City Hotel added a new wing featuring 18 deluxe guest rooms, a state of the art gymnasium, infinity swimming pool and staff facilities. This move involving Rs. 200 million investment has improved the yield.
Focusing on the industry, Thambiayah said the peaceful environment in the country together with International events such as the CHOGM promoted by the Government of Sri Lanka has paved way to witness another successful year for tourism in Sri Lanka enabling a record number of arrivals to reach 1.27 million surpassing the targeted 1.2 million mark for 2013.
The Board of Directors Renuka City Hotels Plc comprises R. B. Thambiayah (Executive Chairman), F.H. Puvimanasinghe (Independent Non Executive Director), N.A. Thambiayah (Executive Deputy Chairman), M.A. Jayawardena (Executive Director), S.R. Thambiayah (Executive Jt. Managing Director), R.. Tissanayagam (Independent Non Executive Director), C.S. Wijeyeratna (Independent Non Executive Director), A.L. Thambiayah (Executive Jt. Managing Director) and N.R. Thambiayah (Non Executive Director).
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