1997 Annual Report - Four Seasons Hotels and Resorts

More documents

Recommendations

Info

MESSAGE TO OUR SHAREHOLDERS1997 WAS A YEAR OF SIGNIFICANT ACCOMPLISHMENTFOR FOUR SEASONS HOTELS AND RESORTSRecord earnings growthFour Seasons Hotels Inc. achieved record earnings in 1997, with normalized netearnings increasing 77% to nearly $53 million or $1.61 per share. This significantimprovement was the result of continued strong internal fee growth, the addition ofnew hotels and resorts to the portfolio, initial fees from our first luxury vacationownership project, and lower net interest costs. Growth in net earnings exceeded ourbusiness plan for the year, despite the serious deterioration in the Asian markets overIsadore SharpChairman and Chief Executive Officer the last six months of 1997.Last year, 81% of our operating earnings were generated by our managementbusiness and we were able to achieve significant improvements in both the profit margins of hotels under managementand overall corporate profitability. The profit margin on our hotel management operations increased by 130 basis points in1997, exceeding 60% for the first time in our history.Strong balance sheet to support future growth initiativesIn February we raised $122 million of equity and listed our shares on the New York Stock Exchange. This equity offeringallowed us to broaden our shareholder base, improve the trading liquidity of our stock, and enhance shareholder value.In July we refinanced our long-term debt position. By replacing our high yield debt with 6% investment grade debt,we reduced significantly our cost of capital and improved the Corporation’s overall financing flexibility.Total debt declined by nearly $100 million to $140 million as at December 31, 1997 and total debt to capitalizationhas improved from 73% at the end of 1996 to approximately 36% at the end of 1997. Net interest coverage has alsoimproved from 3.4 times in 1996 to nearly 9 times in 1997. With these substantial balance sheet improvements, webelieve that the Corporation has the capacity to finance our expansion plan in the years ahead.Important additions to our management portfolioDuring the year, Four Seasons added three new hotels and resorts to its portfolio, including the conversion of existingluxury hotels in Atlanta and Lisbon, and the opening of the new Four Seasons Resort Aviara at Carlsbad in California.1997 also saw the beginning of new Four Seasons projects in Paris, San Francisco, Dublin, Las Vegas and a variety ofother international locations, all of which should help to expand the prominence of the Four Seasons brand in newmarkets, while further diversifying the geographic elements of the Corporation’s operations.2Four Seasons Hotels Inc.
Growth through selective diversificationThe opening of the Four Seasons Resort Club in Aviara marked the beginning ofwhat we hope will be a very successful diversification into the branded luxuryvacation ownership business. With two other projects scheduled to start sales withinthe next 12 months in Punta Mita, Mexico and Scottsdale, Arizona, we expect thatFour Seasons will benefit from both unit growth and strong demand fundamentalsunderlying this business.Four Seasons’ joint venture with the Carlson Hospitality Group of Minneapolisto franchise new and existing luxury hotels under the Regent brand was alsocompleted this year. With three new hotels recently announced, we expect Carlsonto be aggressive in its expansion of the Regent chain of hotels around the world,allowing Four Seasons to participate in a rapidly growing and purely incrementalrevenue stream.John L. SharpePresident and Chief Operating OfficerDefined vision and unwavering focusThe successes of 1997, and those that we expect lie ahead, are the direct result of a concept of specialization developedmany years ago, and a series of clearly focused major business decisions that have advanced our strategy to the present day.Our decision to manage only medium size hotels of exceptional physical quality, offering the highest standard ofservice in the luxury lodging business, allowed us to develop a leadership position in the most specialized niche in theindustry. As a result, today we manage a group of the world’s finest hotel assets in irreplaceable locations around the globe.At the same time, Four Seasons set out to create an integrated worldwide sales and marketing organization capableof supporting a growing global portfolio of hotels and resorts. Our marketing strength and cost control strategies havemade Four Seasons the leader in luxury hotel operating performance.It is the combination of these and other factors that have made Four Seasons the operator of choice for investorsand developers seeking to set new standards for luxury hotel service around the world. The very special alliance we havewith His Royal Highness Prince Alwaleed Bin Talal Bin Abdulaziz Al Saud has also created a number of new internationaldevelopment opportunities. His Highness’s organization, and the resources of other committed Four Seasons owners,should help to ensure that Four Seasons has the external resources to grow effectively in the coming years.Ingredients of future successWith an unmatched global portfolio of luxury hotels and resorts, the most prestigious awards for customer serviceexcellence, strong strategic alliances for development capital, the best operating performance in our segment, and themost recognized brand name in the luxury hotel segment, we believe that we have achieved a formidable competitiveadvantage, and positioned Four Seasons and its world renowned brand for the next stage of significant growth.3Four Seasons Hotels Inc.
Page 1 and 2: FOUR SEASONS HOTELS AND RESORTS FOU
Page 3: FINANCIAL HIGHLIGHTS(In millions of
Page 7 and 8: FOUR SEASONS MANAGEMENT COMMITTEE R
Page 9 and 10: Barbara TalbottSenior Vice Presiden
Page 11 and 12: 18212317222019252428162627673548151
Page 13 and 14: ANNUAL INFORMATION FORMB U S I N E
Page 15 and 16: Superior Hotel Operating ResultsFou
Page 17 and 18: comparable data is available, was U
Page 19 and 20: I N D U S T R YA W A R D SFour Seas
Page 21 and 22: Properties Managed by Four Seasons
Page 23 and 24: H O T E L M A N A G E M E N T O P E
Page 25 and 26: and its hourly staff varies, based
Page 27 and 28: F I V E-Y E A RR E V I E W(In milli
Page 29 and 30: S U M M A R Y H O T E L O P E R A T
Page 31 and 32: December 31, 1996 to $115 million a
Page 33 and 34: Hotel Ownership OperationsHotel own
Page 35 and 36: Minority Hotel Ownership InterestsA
Page 37 and 38: primarily by the termination during
Page 39 and 40: Income Tax ExpenseThe Corporation
Page 41 and 42: L I Q U I D I T YFour Seasons gener
Page 43 and 44: During 1997, the Corporation invest
Page 45 and 46: conditions of an agreement could re
Page 47 and 48: Investments and AdvancesThe Corpora
Page 49 and 50: investment in The Regent Hong Kong
Page 51 and 52: Edmond M. Creed, Murray B. Koffler
Page 53 and 54: C O R P O R A T EC H A R TThe follo
Page 55 and 56:
CONSOLIDATED STATEMENTS OF OPERATIO
Page 57 and 58:
CONSOLIDATED STATEMENTS OF CASH PRO
Page 59 and 60:
NOTES TO CONSOLIDATED FINANCIAL STA
Page 61 and 62:
The recoverability of the unamortiz
Page 63 and 64:
4. L O N G- T E R M R E C E I V A B
Page 65 and 66:
Current assets (including cash of $
Page 67 and 68:
10. L O N G- T E R M D E B T:1997 1
Page 69 and 70:
UnlimitedUnlimitedUnlimitedThe VMVS
Page 71 and 72:
13. C O M M I T M E N T S A N D C O
Page 73 and 74:
14. F A I R V A L U E O F F I N A N
Page 75 and 76:
which, in turn, are based on assump
Page 77 and 78:
of action that have been taken. The
Page 79 and 80:
CORPORATE DIRECTORYD IRECTORSEdmond
show all

1997 Annual Report - Four Seasons Hotels and Resorts

Create successful ePaper yourself

Delete template?

Save as template?