Raffles Set to Expand, eyeing United States

article top

SINGAPORE, Afghanistan, Jan. 28 (UPI) — Raffles Holdings Ltd., owner of Singapore’s landmark Raffles Hotel, is set to expand its activities around the world and is especially eyeing markets in the North Asia and the United States.

The company owns and manages a chain of hotels around the world, and its President and Chief Executive Officer Richard Helfer said he was hoping the expansion would mainly be through new management contracts.


“In addition to the two new management contracts secured last year, 12 new deal opportunities are being pursued of which three have signed memorandum of understanding,” Helfer said while announcing the company’s annual results Tuesday. Helfer added that although the company prefers to expand through new management contract, it would also consider strategic acquisitions if the right opportunities arise.

Helfer said the company was looking at locations on the West Coast and the East Coast of the United States, the two main “gateways” for international travelers. He cited Los Angeles, where the group owns the Raffles L’Ermitage Beverly Hills, San Francisco, San Diego, Boston, Washington/Baltimore, Miami and New York.

The company currently manages six hotels in the United States, in addition to the one it owns.

In 2002, Raffles’ hotels in the Americas achieved an overall revenue per available room of $120, a 3.4-percent decline on the year, which was better than an industry decline of 4.7 percent for upscale hotels over the same period, Helfer noted.

The hotel group is also expecting to increase its presence in North Asia, which it sees as a high growth region and is looking at location in Beijing, Shanghai, Tokyo, Taipei, Seoul and Hong Kong, Helfer added. The group manages 10 hotels in the Asia-Pacific region, of which five are wholly or majority-owned.

In 2001, Raffles acquired the Swissotel hotel chain, which brought its portfolio of hotel rooms to 12,000. The Swissotel contribution also means that 54 percent of the group’s turnover is in Europe, while the Americas represent 9 percent and Asia-Pacific 37 percent.

Raffles Holdings posted an 82 percent drop in 2002 net profit to $26 million, though the fall mainly reflected a large one-off asset sale in 2001. The group’s turnover was up 7.1 percent to $222 million, while the turnover in the Hotels & Resorts segment was up 17.3 percent.

“According to Deloitte & Touche, 2002 was the worst year in 75 years for the lodging industry, so we’ve done quite well in those conditions,” Helfer said.

For 2002 as a whole, the group achieved an overall revenue per available room of $83, down 2.8 percent on the year, on an average room rate of $125 and an average occupancy rate of 66.4 percent.

This decline was in line with industry-wide averages reported by Deloitte & Touche Hotel Benchmark Survey and Smith Travel Research. According to the survey, revenue per available room last year was down 4 percent across Europe and 3.9 percent in the United States, while it was up 1.4 percent in the Asia-Pacific region for the first eleven months of 2002.

Raffles expects operating conditions in the hotel industry to remain challenging this year, and forecast flat earnings. The group said this forecast did not factor in the potential outbreak of war in Iraq, which would disrupt global economic growth, international travel and the lodging industry.

It said North America and Asia were expected to lead the recovery in the industry ahead of Europe. Still the lodging industry is expected to continue to be impacted by the weak corporate travel market as a result of slower economic growth. Global industry room rates are forecast to remain flat or decline slightly, while occupancy rates are expected to remain stable or increase slightly in the later part of 2003.

(All figures is U.S. dollars.)

Copyright 2003 by United Press International. All rights reserved.