Shangri-La Returned to Profit in 2023 as Revenue Jumped 47% on Travel Recovery

Shangri-La Group reported attributable net profit of $184.1 million for 2023, reversing three consecutive years of losses as the luxury hotel owner and operator benefited from the lifting of pandemic travel restrictions in mainland China and Hong Kong, its two largest markets by revenue.

The HKEX and SGX-listed hospitality group controlled by Malaysian tycoon Robert Kuok saw revenue jump 46.5 percent from the previous year to $2.1 billion, while EBITDA tripled to $522.2 million over the same period, according to Shangri-La Group’s annual results announced on Friday.

“2023 saw the return of global travel as all markets fully reopened. Our bottom-line returned to pre-pandemic levels while margins surpassed pre-pandemic levels despite challenging macro conditions including inflation and rising interest rates due in part to cost and efficiencies improvements during the pandemic,” said Shangri-La Group in the announcement.

Shangri-La’s portfolio, which includes equity interests in 80 hotels, three hotels under lease, and 20 managed hospitality properties, saw its weighted average occupancy increase to 64 percent as of December from 42 percent a year prior, while weighted average revPAR grew 69 percent to $108 over the same period.

Mainland Chinese Tourists Return

Shangri-La’s effective EBITDA margin reached 31.5 percent last year, the highest in a decade, with Hong Kong and mainland China leading the company’s recovery, particularly in the second half of the year. Other markets including Japan, Singapore, The Philippines and Malaysia also saw strong travel demand, bolstered by the return of mainland Chinese tourists.

“With global international travel and China domestic travel returning to normalised levels, we are cautiously optimistic on the return of Chinese outbound travel as the next growth catalyst as more markets continue to roll out favourable policies and promotions, including the introduction of visa-free travel for Chinese tourists, as done by the governments of Singapore, Malaysia, and Thailand,” said Shangri-La.

Mainland China, the company’s largest market by revenue, saw revenue climb 63.6 percent to $702.6 million in 2023 after the lifting of travel restrictions, with occupancy and revPAR across the country increasing to 63 percent and $76 respectively as of December, up from 38 percent and $37 a year prior. While all cities in the mainland portfolio posted improving occupancy and revPAR, tier one cities saw the largest gains in those metrics.

In Hong Kong, business and leisure travel demand from mainland China visitors helped the company’s revenue grow 94.2 percent year-on-year to $304.3 million. Occupancy and revPAR stood at 70 percent and $199 respectively as of December, up for 38 percent and $75 a year prior.

Singapore, Philippines, and Malaysia, which round out the company’s five largest markets, all notched revenue, occupancy and revPAR growth, with average room rates in Singapore exceeding 2019 levels on the back of “surging” demand, while revenue at its Philippines properties climbed 69.5 percent from the previous year.

Free Cash Flow Positive

Shangri-La’s investment properties segment, which develops, owns and operates office properties, commercial properties, and serviced apartments, grew its revenue 8.6 percent to $108.3 million last year, while the company’s property development for sale business fell 89.3 percent to $1.6 million.

The company achieved positive free cash flow of $145 million in 2023 following three years of negative cash flow. Shangri-La aims to continue cash flow maximisation through cost vigilance and “more focused and disciplined” capex.

“As we push forward, we will also stay vigilant on costs to continue ensuring topline growth translates to stronger bottom line, and more importantly, cash generation. Meanwhile, we remain selective and strategic in our project undertakings, ensuring we allocate resources to opportunities with the most significant potential for sustainable growth whilst balancing our reserves to provide returns for our shareholders,” said Shangri-La.

Shangri-La’s hotel development pipeline includes properties in the mainland Chinese cities of Kunming and Zhengzhou, as well as the Shangri-La in Kyoto, Japan.