TAIPEI: FX Hotels Group Inc, which manages more than 50 directly operated and franchise hotels in Taiwan and China, is to report losses this year after closing unprofitable businesses and recognizing bad debts from operations in China, chairman Alvin Ho said yesterday.
The group incurred a loss of of NT$76.22 million (US$2.33 million) in the first three quarters of the year, or losses of NT$1.96 per share, and would remain in the red for the whole of this year, although it might recover most debt payments later, Ho told an investors conference in Taipei.
The results are to present a stark contrast with a record profit of NT$59.02 million, or earnings per share of NT$1.55, last year, Ho said.
Ho attributed the weak results to the closure of two hotels in Tianjin and Beijing, where poor location and business strategies made the continuation of operations impractical and undesirable.
An economic slowdown in China is also to blame, as some Chinese corporate customers are unable to honor account receivables, assistant vice president Mars Yang said.
FX Hotels Group is in talks with customers in the hope of recovering debts after a haircut of 10 percent to 20 percent, Yang said, adding that the group would remain in the black if delinquent debts were stripped.
The 13-year-old hotelier aims to grow into the top mid-range in Taiwan and China by adding one new hotel on both sides of the Taiwan Strait per year if it can succeed in finding partners that share its business strategy, Ho said.
“We aim to place more emphasis on direct operation as the model allows better control of brand quality in both software and hardware,” Ho said.
The group plans to limit its role to operating hotels and shy away from property development or rental payments, Ho said.
The group would pay less attention to franchising because it provides less control over quality, even though the model could generate a net profit of 4 percent to 5 percent, Ho said.
The group owns four brands — FX Hotels, Boyi Boutique Hotel, FX Inn and Boutix Resort Hotel— that have average room rates of NT$1,650 per night this year, an increase of 5 percent to 10 percent from last year, Ho said.
Occupancy rate stands at 70 percent this year, down from 75 percent last year, company data showed.
Direct operations generated 92 percent of total revenue and the remaining 8 percent was generated through financing.
Ho dismissed concerns about a bubble in the hospitality industry, saying that a growing number of tourists from China can guarantee profits for the coming decade.
The group is to open a new FX Inn in Tainan next month to take advantage of rising travel interest to the southern municipality, Ho said.
The group also seeks to enter the market in Los Angeles to cater to affluent tourists of Chinese background, he said.