Sunday, May 22, 2011

Q1 2011 - Japan Leisure Hotel Operator Shows Impressive Revenue and EBITDA Growth Despite Earthquake

Tokyo, Japan May 19, 2011 – Alchemy Japan’s Japanese Leisure Hotels reported Q1 2011 results producing EBITDA of ¥146million, a 13% improvement on the previous year, from a Net Operating Income of ¥211million being a 7% growth on net income for Q1 2010.  Sales grew to ¥497 million, a 6% increase on Q1 2010. Revenue growth was led by a 12% increase in customer numbers as Q1 2011 average Occupancy Rate (OCR) reached 260%.

“Following revenue and EBITDA growth in 2010, we commenced 2011 with strong growth momentum; despite the March 11 earthquake and its aftereffects which impacted our hotels in the Kanto region, we are pleased that in the first quarter of 2011 we have achieved our best revenue and earnings growth since we entered the sector in 2004.” noted Mr. Mijatovic.

“While our Kanto area hotels, representing half of our hotels and 40% of our room inventory, escaped major structural damage in the earthquake and after shocks, they did suffer in the immediate aftermath with some damage to rooms and facilities, power outages and disruptions in supply chains, but were able to quickly recover by the last week of March.  Nonetheless, the March 11 earthquake and its aftereffects interrupted the sales growth of 9%, achieved prior to March 11, with sales growing only 1.2% in March 2011. Since March, we have again returned to strong positive growth in top and bottom line results"noted Mr. Mijatovic.

Our positive results can be attributed to a combination of factors said Mr. Mijatovic:

·         the success of our operating partner, Urban Resorts Japan’s Guaranteed Value® customer retention and acquisition strategy evidenced by OCR increasing by 12%,
·         Food & Beverage sales, growing 12% during the Q1 2011, to reach a high water mark of 6% of sales, doubling the industry average of 3%,
·         continuous improvement in operational efficiency,reaching a 42.4% NOI margin in the first quarter (+1% year-on-year), and most importantly a 12% growth of EBITDA.

“While it is difficult to fully assess the medium and long term impacts of the aftereffects of the March 11 earthquake on our operational business, early results show that we continue to be well placed to continue to deliver revenue and EBITDA growth in 2011 in excess of levels achieved in 2010.”

“In relation to valuations, we believe that the recently announced transaction, of London AIM-listed Japan Leisure Hotels Limited proposed disposal of its trading subsidiaries to Sanglier Pte, comprising Japanese and foreign based investors, represents a historic low in the leisure hotel mark for cap rates and could mark the bottom point of this market cycle in terms of valuation. With the clearance of that transaction, which was causing an overhang in the market, we foresee a contraction of cap rates in the future, while increased interest from overseas investors attracted by the Japan Leisure Hotels transaction may improve liquidity in the market” stated Mr. Mijatovic.

Headquartered in Tokyo, Alchemy Japan is an asset management, investment and advisory company that creates value by transforming and managing real estate, investments, and financial assets.
Alchemy Japan commenced management of Leisure Hotel assets in Japan in 2004 with an asset management mandate for one of the first foreign institutional investors into the sector. Its Leisure Hotel division now owns and manages a nationwide portfolio of 15 hotels.

Urban Resorts Japan is one of Japan’s leading and most dynamic leisure hotel operators and is ranked 10thnationally in terms of room inventory.

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