A disruption in Hilton’s hurricane-stricken South America is no concern for group

Frasers Hospitality has forecast a steady full-year profit increase despite the threat of hurricanes and anemic sales, uniGroup chief executive officer Robert Fung said.

Expected guidance is that EBITDA for the full year to December 31, 2017 will be higher than the $454 million earned in 2016, according to an investor conference call. Its book value per share is calculated at $2.48.

Frasers International Hotels Ltd., the sub-company which runs Embassy Suites by Hilton and Hilton Garden Inn chains, reports its quarterly performance for the three months ended September 30 on Monday, taking the shine off a company-wide triumph. Profits and revenues rose as the company found solutions to recover from a pandemic it characterized as catastrophic and perilous in the quarter.

“The pandemic was a bit unpredictable,” Fung said, adding that the company has paid through its first tranche of insurance claims. The board has put aside $6 million of internally generated funds to cover the medical expenses of CEO David Haigh.

Hilton Garden Inn came through the crisis virtually unscathed, though in South America, where it operates, there was “a little bit” of damage, Fung said. Embassy Suites, which has 80 hotels in the United States, has “more exposure in that region.”

While the company should be able to recover most of the earnings loss from the pandemic through its insurance payment, the expense is expected to hurt future bottom lines, executives said.

Excluding the pandemic, Fung said, its underlying performance was healthy. “We had revenue in line with the last quarter,” he said. “We managed to achieve EBITDA performance that was better than last quarter.”

While Haigh and Fung attributed most of Frasers’ earnings to sales of hotels and profitable timeshare sales, the business experienced some turbulence in the quarter due to the hurricane season, the CFO said.

“While the disaster effected RevPAR [revenue per available room] down, we were largely able to cover it internally and pass on about 3 percent” to 6 percent of that, he said. A final tally will be available on Monday, when the company releases its quarterly earnings.

For a company-wide improvement, Yishay Shetty, the president of food and beverage, noted healthy growth at its Aloft hotels in the United States. It is investing in different areas, including in its designer food culture, all of which Fung expects to continue driving growth.

More and more, there will be overlapping brands between Frasers’ four brands, from Embassy Suites to hotel-within-a-hotel chains, Fung said. In particular, there will be an Embassy Suites brand in China. “Over time, we will most likely close the Korean brand,” Fung said.

Coinciding with ongoing global growth, Frasers International will get a new brand when it opens the 18-storey Capitol Tower in Amsterdam in November. Given the uniGroup-controlled W hotel properties in Washington, D.C., Saudi Arabia, Australia and Europe, Fung said, the now ritzy Amsterdam hotel will have the softest spot in the portfolio.

As for corporate downsizing, Fung noted that Frasers has talked with a few large American national chains about combining some of their hotel ownership. It has expressed an interest in acquiring hotel assets currently on the market.

In the end, investors will have to wait for the September quarter’s conference call to find out what else is in store. Haigh is going on a two-week leave, Fung said, and a successor is expected to be named “within a month.”

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