Tour Operation and Leisure Business
HK & Macau Tour, the three Shenzhen theme parks, namely Window of the World, Splendid China and China Folk Culture Villages as well as Shenzhen Tycoon Golf Club are part of the Group's core businesses and major earning sources.
1998 was a challenging year for tourism in Hong Kong. According to the Hong Kong Tourist Association, the number of visitors to Hong Kong in 1998 was 9.6 million, 8% less than the figure in 1997. The relaxation of mainland tourists' quota to Hong Kong by
30% in July 1998 stimulated the performance of Hong Kong & Macau Tour despite misty tourist sentiment. The profit of the Shenzhen theme parks increased through the implementation of various management measures even though the number of visitors
has decreased as compared with that of 1997. The Group's Tour Operation and Leisure Business contributed a profit of HK$168.9 million to the Group's earnings this year which accounted for 51% of the total operating profit, representing a 28% increase as compared with that of 1997.
Statistics from the Hong Kong Tourist Association have shown signs of improvement in local tourism for 1999. In addition, the Government of the HKSAR has dedicated its efforts in promoting tourism for Hong Kong. The Group anticipated that the number of Hong Kong tourists will rebound in 1999, paving the way towards a more prosperous aspect for its Tour Operation and Leisure Businesses.
(1) Tour Operation
The total number of visitors from Mainland China in 1998 increased by 13.1% as compared with that of 1997. The number of visitors served by HK & Macau Tour increased by 13.2%. The HK & Macau Tour has maintained its market share successfully, with its major customers being visitors from Huadong and the Northern Provinces. The HK & Macau Tour achieved its best record with its profit increasing by 17% as compared with that of 1997. HK & Macau Tour implemented certain measures such as cost-control, effective promotional and marketing efforts, which helped to obtain these notable results. Visitors from the mainland China will continue to be the major source of tourists in Hong Kong and are believed to have a positive impact on HK & Macau Tour.
(2) Theme Parks
Despite a decrease in the total number of visitors, the profit from the Shenzhen theme parks in 1998 increased by 34% as compared with that of 1997. The profit for this year accounted for 25% of total operating profit of the Group.
Shenzhen The Splendid China Development Co., Ltd. ("Splendid China") obtained an ISO9002 Certificate which denotes that the management and internal control systems of Splendid China have complied with international standards and requirements.
The performance of the Shenzhen The World Miniature Co., Ltd. ("Window of the World") improved greatly due to the re-engineering and streamlining of its organizational structure, and implementation of cost containment measures.
The Shenzhen theme parks will continue to enrich their parks, improve and renovate their existing facilities in order to strengthen their cost competitiveness, attract visitors and explore potential markets.
(3) Golf Club
The Golf Course in Shenzhen was officially named as Shenzhen Tycoon Golf Club ("Tycoon Club") and commenced operations in March 1999. Tycoon Club is a 27-hole golf course with a plan to open an additional 9-hole night golf course. The Tycoon Club is facilitated with a fabulous clubhouse, excellent management and services besides its outstanding golf course. Tycoon Club commenced sale of its membership in late 1998 and has already had an average of 3,000 golfers utilizing its facilities each month.
Hotel
Tourism is still experiencing its hard times due to the continued sluggish economic conditions in the Asian region. The average occupancy rate for all Hong Kong hotels last year was 76%, similar to that of 1997. The average occupancy rate of the Group's hotels in 1998 increased from 78% to 80%. However, severe competition among hotels reduced the average room rate of the Group's hotels from HK$659 in 1997 to HK$342. The profit from our hotel business (excluding the revaluation loss) has decreased by 100% as compared with that of 1997. The revaluation of our 3 hotels is the main factor contributing to their loss of HK$451 million. Nevertheless, our 3 hotels implemented stringent cost-control and streamlined the staff structure in 1998 and managed to reduce their operating costs significantly.
The Group expects tourism to revive gradually in the coming year while the hotel industry still faces bitter competition. As a number of new hotels will be opened in 1999, the Group expects its hotel business to continue strive for its market share. The hotels of the Group will continue to capture new customers, improve the services and explore potential markets.
(1) Hotel Metropole
Hotel Metropole had diversified its clientele from Europe and Japan to the P.R.C., England and North America due to the attractive market conditions in these countries. The hotel recorded an operating loss (excluding the revaluation loss) in 1998 with its average occupancy rate of 71%.
(2) Hotel Concourse
The major clientele of Hotel Concourse was from the PRC, Malaysia and Singapore in 1998. The operating profit (excluding the revaluation loss) has decreased by 84% as compared with 1997. The average occupancy rate was 90%.
(3) Hotel New Harbour
Hotel New Harbour will continue to attract other customers groups besides its existing customers from HK & Macau Tour. The operating profit (excluding the revaluation loss) decreased by 99% as compared with 1997. The average occupancy rate was 83%.
(4) Hotel on Tung Lo Wan Road
The new hotel at 148-160 Tung Lo Wan Road has completed its foundation works. The Group expects it to commence operation in the early 2001. The hotel will provide 325 guestrooms with business travelers being the target for its primary clientele.
Transportation
The Group's transportation business recorded a profit of HK$34.4 million, representing a 10% of total operating profit of the Group.
(1) Freight Forwarding
The Group's profit from freight forwarding declined by 43% in 1998 as compared with that of 1997. The business of China Travel Services (Cargo) Hong Kong Limited ("CTS Cargo") was adversely affected as its freight volume reduced significantly due to Hong Kong diminishing re-export trade volume, especially in the railway transportation business. CTS Cargo strove to enlarge its customer base and strengthen the development of new businesses among which its express delivery business did notably well and achieved satisfactory growth. CTS Cargo will continue to develop express delivery service, enlarge its market share by expanding its overseas networks, strengthen its internal management and constantly adjust its business strategies to suit the needs of the market.
(2) Passenger Transportation
China Travel Tours Transportation Services Hong Kong Limited ("CT Tours") recorded a loss in 1998 as both scheduled and on-hire cross-border passenger transportation business declined. The company implemented measures such as cost reduction, efficiency management and diversification to sustain its profits. The Group does not expect a notable improvement in the passenger transport business in view of the fierce market competition. CT Tours will continue to strive for economies of scales, improvement in internal control operations, and exploitation of potential new bus routes to recover its grounds.
(3) Citybus Group Limited
The Group disposed of its entire equity interest of 23.12% in Citybus to Stagecoach Asia Limited at a consideration of HK$1.95 per share in 1999.
(4) Passenger Ferry Operation
The Group pursued a strategic move to develop its passenger ferry services through the acquisition of CTS-Parkview and the formation of a new joint venture with Shun Tak. The acquisition is expected to be completed in the first half of this year. The Group is confident that the new joint venture company will expand its passenger transportation services.
Investment Holdings
Property
Apart from its core businesses, the Group is also a major shareholder of Hing Kong Holdings Limited ("Hing Kong").
During the past year the Hong Kong property market experienced a turbulent and adjustment period. Due to various factors including the Asian economic turmoil, a rise in supply and negative market sentiment, the prices of real estates have fallen drastically. Hing Kong made consequential exceptional losses on its partial disposal of property developments and provision for diminution in value of its property projects as well as significant provisions against its long term listed investments. In 1998 Hing Kong contributed a loss to the Group's profits of HK$169 million.
For the coming year, the Group believes in a rebound in the regional economies as well as Hong Kong's stead as the regional financial centre as illustrated by the recovering signs of its local property market. The Group will ensure-that Hing Kong continues to adopt a progressive and prudent investment strategies.
Infrastructure
The Group's agreement with its parent company, CTS Holdings, in September 1997, under which the Group sold its 51% stake in Tangshan Guofeng Steel Co. in exchange for an additional 5% interest in Weihe Power Plant, was approved by the China Securities Regulatory Commission in September 1998.
After the Group's further acquisition of the remaining of CTS Holdings' indirect interest in Weihe Power Plant in December this year for a total consideration of HK$1.36 billion, the Group currently holds a total of 51% interest in Weihe Power Plant. Furthermore, the Group has invested in a number of toll roads and bridges in the PRC through its joint venture company, CTS- Coastal Infrastructure Investment Company Limited ("CTS-Coastal").
(1) The Power Plant
Due to a relatively high level of rainfall in the Northwest region contributing to an adequate supply of waterpower within the region, the demand for electricity generated by Weihe Power Plant fell in 1998. The total volume of electricity generated by Weihe Power Plant was 5.77 billion kWh. The management of Weihe Power Plant continued to explore new opportunities and strove to increase its efficiency in 1998. The profit before taxation of Weihe Power Plant for 1998 have fallen by 48% as compared with its performance in 1997. Notwithstanding the fall in the profit of Weihe Power Plant, the interest income derived from shareholders' loan maintained the Group's return on investment in Weihe Power Plant. After the completion of the acquisition and the increase in the Group's investment holding of Weihe Power Plant to 51%, the profit contributed by Weihe Power Plant to the Group has risen by 354% as compared with that of 1997.
(2) Roads and Bridges
The Group has participated in the construction of the Tianjin North Section of the Beijing-Shanghai Expressway, a road project in Fuzhou and a three-bridge project in Wuhan. The investments for the three projects amount to a total of RMB 1.36 billion, 1.2 billion and 0.39 billion respectively.
The outer section in the western expressway of the Tianjin project became fully operational in October 1997 with a monthly traffic flow of about 300,000 vehicles. The road project in Fuzhou which amounts to an expressway has also become fully operational with a monthly traffic flow of about 680,000 vehicles. The three-bridge project in Wuhan is under construction and expected to be fully operational by mid-2000. CTS- Coastal has contributed a net profit of HK$9.9 million to the Group. The Group expects that CTS-Coastal will continue to provide a steady return on investment for the Group.
Year 2000 Compliance
Year 2000 problem arises from computer systems and software programs storing date information based on two-digit year and are unable to process four-digit year dates for the year 2000 and beyond which causes disruptions in the operational systems. The Group commenced rectification work on year 2000 problem since the interim of 1998 to ensure that business operations of the Group will not be disrupted in the year 2000 and beyond.
The Group's year 2000 problem mainly stems from the application software of its subsidiaries. If the year 2000 problem cannot be resolved by then, it may lead to a loss of customer information, improper processing of accounting activities, disruption in transportation logistics and halting of hotel cashier system. The Group has initiated a comprehensive program and requested the Group's subsidiaries to identify its operations which are likely to be year 2000 non-compliant and to take appropriate measures to tackle the problems, including demanding all application software vendors to upgrade their respective computer hardware, rectifying and replacing existing application software. China Travel Hi-Tech Computer Hong Kong Limited has been appointed to monitor and to resolve part of the process. Moreover, all vendors were asked to certify that all vendor-supplied software is Y2000 compliant. The rectification work progressed satisfactorily and over 85% of the work has been completed up to the date of this report. The Group aims to complete the year 2000 compliance program by October 1999.
The total costs for the project are estimated to be approximately HK$3.30 million and HK$1.39 million, representing 42.43% of the total costs, were incurred up to 31 December, 1998 mainly to renew the hardware and software. Such expenses were capitalized when incurred and do not require approval from the Board of Directors. As at 31 December, 1998, there is no commitment authorized by the Directors and contracted or not contracted for in respect of year 2000 compliance.
| © Copyright 1996-2024 irasia.com Ltd. All rights reserved. |
|
DISCLAIMER: irasia.com Ltd makes no guarantee as to the accuracy or completeness of any
information provided on this website. Under no circumstances shall irasia.com Ltd be liable
for damages resulting from the use of the information provided on this website.
TRADEMARK & COPYRIGHT: All intellectual property rights subsisting in the contents of this website belong to irasia.com Ltd or have been lawfully licensed to irasia.com Ltd for use on this website. All rights under applicable laws are hereby reserved. Reproduction of this website in whole or in part without the express written permission of irasia.com Ltd is strictly prohibited. TERMS OF USE: Please read the Terms of Use governing the use of our website. |