1997 Annual Report - Four Seasons Hotels and Resorts

More documents

Recommendations

Info

ANNUAL INFORMATION FORM(continued)M ANAGEMENT’ S D ISCUSSION AND A NALYSISMinority Hotel Ownership Interests (continued)Statements of Operations(In thousands of dollars) 1997 1996Hotel revenues $ 9,739 $ 6,946Direct hotel expenses (7,729) (4,896)Operating earnings 2,010 2,050Rent to third parties (2,083) (1,745)Earnings (loss) before other operating items (73) 305Depreciation (816) (149)Interest on third party debt (420) (183)Net loss (1) $ (1,309) $ (27)Balance Sheets(In thousands of dollars) 1997 1996Current assets $ 2,057 $ 1,443Long-term assets 16,338 2,163Total assets $ 18,395 $ 3,606Current liabilities $ 2,109 $ 3,458Long-term liabilities 9,601 2,361Equity (deficit) 6,685 (2,213)Total liabilities and equity (deficit) $ 18,395 $ 3,606(1) No provision has been made for income taxes as the liability for such taxes is that of the partners rather than the partnerships.Vacation Ownership InterestThe book value of Four Seasons’ minority ownership interest in vacation ownership was $4.9 million as at December 31, 1997($4.6 million at December 31, 1996). This amount represented the Corporation’s 7.3% interest in the vacation ownershipproject located at Aviara in Carlsbad, California.Sales of vacation ownership units at the vacation ownership project in Aviara began in August 1997. Construction ofunits at the Punta Mita, Mexico, project is scheduled to begin in 1998, with sales expected to begin in December 1998.In connection with development of the resort and vacation ownership project in Scottsdale, the Corporation is consideringan investment of approximately US$25 million in 1998.R E S U L T S O F O P E R A T I O N SYear ended December 31, 1997 compared to year ended December 31, 1996Hotel Management OperationsFee RevenuesFee revenues increased $11.3 million or 11.9% to $106.0 million in 1997, compared to $94.7 million in 1996. Theincrease is attributable to increased incentive fees of $5.7 million, an increase in fees from hotels recently opened and fromnew management contracts of $4.8 million, fees from vacation ownership of $2.0 million, an increase in fees from hotelsunder development of $1.3 million, and an increase in other fees of $1.9 million. The growth in fee revenues was offset34Four Seasons Hotels Inc.
primarily by the termination during 1996 of management contracts for Regent hotels in Melbourne, Auckland, and Fiji,and the Inn on the Park in Toronto (which together accounted for a reduction of $4.4 million of fee revenues). Incentivefees contributed 23.2% of the total fee revenues in 1997, compared to 20.2% in 1996.Total revenues of all managed hotels increased to $2.1 billion in 1997, compared to $1.9 billion in 1996. Growth in revenuewas driven by continued strong performance in both the North American and European markets, offset by a weak performancein the Asian market in the last half of 1997. The weakness in a number of the Asian markets caused a decline in REVPAR of 8.2%and a decline in gross operating profit of 9.4% in hotels under management in that region in 1997. Compared to 1996,this resulted in a reduction of approximately $1 million in fee revenues from the Asian hotels in 1997. The Corporation’sCore Hotels showed an average increase of approximately 5% in REVPAR in 1997, compared to 1996, primarily as a resultof increases in room rates. The REVPAR increase realized in 1997, combined with enhanced operating efficiencies, resultedin an increase of approximately 10% in the gross operating profit of Core Hotels in 1997, compared to 1996.The Corporation expects REVPAR in Core Hotels to increase approximately 7% in North America and Europe in1998, compared to 1997, primarily due to an increase in room rates, offset by an expected reduction of approximately15% to 20% in Asia. Overall, REVPAR is expected to increase marginally in 1998 by approximately 2%, compared to1997, in Core Hotels. Gross operating profit of the same hotels is expected to increase by over 10% in North Americaand 5% in Europe, and decrease by approximately 20% in Asia, in 1998, compared to 1997.The Corporation expects that fee revenues should increase by approximately 15% in 1998 over 1997 primarily as a resultof (i) increased fees from the improved performance of hotels in North America and Europe, (ii) the fees to be earnedfrom the new or relaunched hotels in Bali at Sayan, Goa, India, Lisbon and the Maldives, (iii) a full year of fee revenuesfrom the resort and vacation ownership property in Aviara and the management contract in Atlanta, and (iv) theincremental fees to be earned from enhanced management contracts in London and Chicago. These increased revenueswill be offset by the expected reduction in fees from the Asian hotels.General and Administrative ExpensesGeneral and administrative expenses increased by $3.3 million or 8.4% in 1997, compared to 1996, due to increasing stafflevels, certain regional moves necessary to allow for the Corporation’s expansion into Europe, the Middle East and India,and as a result of the incentives earned by management in respect of the financial performance of the Corporation in 1997. In1998, the increase in general and administrative expenses is expected to be approximately 8% as the increase in staffing andregional moves are finalized.Hotel Management EarningsAs a result of the changes in fee revenues and expenses discussed above, the Corporation’s hotel management earningsincreased by $8.0 million or 14.3% to $63.7 million in 1997. Hotel management earnings represented 80.9% of theCorporation’s earnings before other operating items in 1997, compared with 86.5% in 1996. The decrease was due tothe consolidation of the Corporation’s 100% leasehold interests in The Pierre in New York and the Four Seasons HotelVancouver in 1997. It is estimated that this percentage will increase in 1998 to approximately 90%, due to an expectedincrease in hotel management earnings combined with an expected reduction in hotel ownership earnings due to theplanned disposition of the Corporation’s 25% interest in The Ritz-Carlton Hotel Chicago and the inclusion of the start-uplosses from the Four Seasons Hotel Berlin (see Hotel Ownership Operations on page 36). As a result of the above-mentionedfactors, hotel management fee revenues and hotel management earnings in 1998 are expected to exceed 1997 levels byapproximately 15%. In 1998, the hotel management profit margin is expected to exceed the 1997 margin of 60.1%.35Four Seasons Hotels Inc.
Page 1 and 2: FOUR SEASONS HOTELS AND RESORTS FOU
Page 3 and 4: FINANCIAL HIGHLIGHTS(In millions of
Page 5 and 6: Growth through selective diversific
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: Minority Hotel Ownership InterestsA
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

1997 Annual Report - Four Seasons Hotels and Resorts

Create successful ePaper yourself

Delete template?

Save as template?