Langham Hotels owner sees tough times ahead for Hong Kong hotels

The chairman of Great Eagle Holdings, the Hong Kong-based owner of Langham Hotels, is not very bullish on the operating environment in Hong Kong, at least for the next two years. However, market turmoil could create buying opportunities, he told the South Morning China Post.

According to chairman Lo Ka-shui, there is slowing demand for rooms "and the weakening purchasing power of China's tourists could dent the company's profit."

"Weakening yen and euro will continue lure tourists away from Hong Kong," he said. "Exchange losses also hurt overseas earnings. Our hotel in Australia sank into the red after the profits were converted into Hong Kong dollars."

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Great Eagle owns 10 hotels overseas.

Lo said the company has a goal of building a portfolio of 500 hotels worldwide over the next decade. "If I cannot achieve this goal, I hope my next generation or the generation after that can do it."

Meanwhile, as SCMP points out, investors do not have Lo's patience. Last week, Great Eagle's shares dropped to HK$23.95, close to this year's low of HK$23.

Alvin Cheung Chi-wai, an associate director at Prudential Brokerage, told SCMP that the company's weakening hotel business had dragged down its share performance.

Still, Great Eagle is cash rich, with nearly HK$10 billion in cash and undrawn loan facilities, according to SCMP. "Cash is king. We are in a strong position for further acquisitions, particularly in Europe," Lo said.

The sharp fall in regional currencies, in fact, provides buying opportunities for the firm.

"Yes, we lost business in our hotels. But we bought prime sites in Tokyo for less than in Tuen Mun," said Lo. Great Eagle plans to build a 270-room luxury Langham Place hotel on the site with a total investment of 50 billion yen.

The firm also bought two hotel-residential sites in San Francisco for a total of US$64.6 million in April last year. The sites—designated for a 150-room Eaton hotel and 220-room Langham hotel—will reportedly require a total investment of US$435 million.

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