Banyan Tree braces for a bumpy 2011

A weak European economy and the continuing political instability in Thailand pose challenges for the leisure property developer.

The company already had a taste of what would be in store for it for 2011 last year, with a low performance being recorded in Thailand.

The lowdown was attributed to the cessation of hotel revenue from Dusit following the completion of its sale in October 2010 and from Banyan Tree Bangkok which was still affected by the knock-on effects of the political riots that took place in 2Q10.

Banyan Tree Bangkok’s occupancy of 45% in 4Q10 remained below last year by 3% points because of the periodic anti- government rallies which necessitated the imposition of state of emergency in Thailand until late December 2010.

Banyan Tree’s operation in Maldives also suffered due to translation loss as a result of weaker US dollar against Singaporean dollar.

Resorts registered lower revenue by S$0.8 million in 4Q10 although in US$ terms, revenue was in line with 4Q09.
Overall occupancy decreased by 6% points from 64% in 4Q09 to 58% in 4Q10 but was cushioned by higher ARR by 13% from US$396 in 4Q09 to US$448 in 4Q10.

The company’s lackluster performance is reflected in its financial statement for 4Q10,which saw revenue decreasing by 13% to S$82 mln.

“Given the continuing unstable Thai political situation coupled with the weaker European economy where a significant portion of our guest markets were from, 2011 will be a challenging year,” a statement from the company said.

“However, we are tapping into new growth markets for our guest mix like China to compensate for the weaker European market. We will also look at ways to re-balance our asset portfolio to unlock values and re-deploy funds to other growing business opportunities,” it added.

Banyan Tree expects property sales in Thailand to remain slow given the negative sentiments towards the country as a result of the current political situation.

Improvements, however, are being felt in the company’s hotel operations. On-the-book (“OTB”) rooms revenue (i.e., forward booking reservation) for hotels in and out of Thailand on same store basis for 1Q 2011 are 12% and 15% above the same period last year respectively.