Love Hotel Operator Posts Impressive Results despite earthquake and recession

Alchemy Japan’s Japanese Leisure Hotels’ 2011 revenues grew to JPY2,074 million, a 2% improvement on 2010. EBITDA was on par with previous year, at JPY623 million, despite Japan’s biggest recorded earthquake and tsunami and its disruption on economic growth and consumer confidence.

2011 revenue growth was led by an increase in customer numbers of 6% reaching annual high water mark average occupancy rate of 272%.

In Q1 2011, Japanese GDP contracted by 3.7% (annualized) while Alchemy’s hotels posted 13% EBIDTA growth in Q1 driven by 6% revenue growth. Q2 was heavily impacted by nationwide supply chain problems caused by the 3/11 EQ and tsunami and after-effects which disrupted production and impacted consumer confidence. This also had an adverse direct impact on operations in Kanto area hotels. Q2 revenue slowed but exceeded Q1 by 2.3% and was 3% above previous year, while Q2 EBITDA was 6.8% ahead of Q1 and +3% on PY.

H2 2011 saw Alchemy’s hotels post resilient results, maintaining revenues with year on year growth in customer numbers. Bottom line results were impacted by cost inflation, particularly energy costs.

“Our hotels produced strong counter-cyclical performance achieving market share growth, sales growth and resilient earnings in 2011 despite recessionary and deflationary pressures and substantial external shocks. ” says Alchemy Japan CEO Miro Mijatovic. “While our hotels’ rate of revenue and earnings growth slowed post 3/11, bottoming out in the summer; our strong finish to 2011, with the winter holiday period posting record growth and revenue high water marks at a number of our hotels, established positive forward momentum into 2012 and provides us confidence that we can continue to produce growth in 2012.

“The improved liquidity and contracting caprates in the general Japanese property sector has started to trickle down to operational assets like Leisure Hotels. A number of deals were completed in 2011 with the return of financing to the sector subsequent to the closing of the Japan Leisure Hotels Ltd transaction in June 2011 at historically high caprates, setting a low point for valuations. On the supply side, attractive single turnaround opportunities are available from numerous operators who have not coped well with 2011’s regulatory changes and also portfolio deals where some institutional investors are looking to recycle capital on their long term holdings. We see the current trend for contraction of caprates to continue into 2012.” says Mijatovic.

http://www.propertyfundsworld.com/2012/02/08/161853/alchemy-japan-kk-japanese-leisure-hotels-continues-revenue-growth-2011