Tourism and the hotel business are always difficult business in Pakistan. Perhaps the greatest obstacle to the success of the Pakistani tourism industry is the country itself. Recall the ill-fated “Visit Pakistan” campaign of 2007 that coincided with the advocacy movement, the siege of Lal Masjid, the state of emergency and the assassination of Benazir Bhutto (and all in a year).
Recently, the Pakistan Tourism Development Corporation (PTDC) announced the 2020-2030 National Tourism Strategy. This strategy included laying off 450 PTDC employees and closing at least 30 motels in northern Pakistan. It did so despite the constant fire from foreign travel bloggers through the state (one wonders where these bloggers are going now).
All in all, it’s hard to keep a hotel going. And then 2020 happened. The global pandemic of Covid-19 brought international travel to a standstill. Not that Pakistan was already on the map, but even domestic tourism has been closed after lockdowns across the country. And the effects are reflected in the company’s annual financial statements. Benefit took a look at the Pearl Continental Chain and Regent Plaza in Karachi to assess the damage.
First, Pearl Continental. The chain is practically as old as the country. Pakistan Services Ltd (PSL) group, operated by the Hashwani family, was founded as a public company in 1958. The company owns and operates the chain of six Pearl Continental hotels in Karachi, Lahore, Rawalpindi, Bhurban, Peshawar and Muzaffarabad. The total capacity of all six hotels is 1,526 rooms, which are managed by over 3000 employees.
The actual name “Pearl Continental Hotel” and the famous “PC” logo have been around for two decades. The brand was recently awarded to the ‘Zaver Pearl Continental Hotel’ in Gwadar, owned by Hashwani Hotels Ltd. is located. Pearl Continental is also affiliated with the budget chain Hotel One, which is also owned by PSL.
The company recorded fluctuating profit after tax between 2015 and 2018 (the highest profit recorded was Rs 1,149 million in 2017) before posting a loss of Rs 863 million in 2019 and a loss of Rs 1,744 million in 2020. This despite the fact that sales were healthy over the same period, from Rs 7992 million in 2015 to Rs 10,527 million in 2018 to Rs 8,130 million in 2020. Most of this income came from Pearl Continental Lahore followed by Pearl Continental Karachi.
So what happened According to the directors’ report, the hotel suffered immensely from the Covi-19 pandemic, particularly in the third quarter of fiscal 2020 when the lockdow began. “In accordance with the guidelines of the federal and provincial governments and administrative agencies they controlled, the company closed its four business units: Pearl Continental Hotel Bhurban, Pearl Continental Hotel, Muzaffarabad, Pearl Continental Hotel, Peshawar and Pearl Continental Hotel, Rawalpindi. ”
However, something worrying was also noted in the auditor’s report: the company’s long-term debt has increased over the past five years from just Rs 685 million in 2015 to Rs 9,325 million in 2020. According to the report, current liabilities exceed current assets by Rs 160 million. Coupled with the 2020 loss, these indicate that there is material uncertainty about events or conditions that could cast significant doubts on the Company’s going concern.
However, the company remains optimistic: “The company is at an advanced stage in negotiations with banks about debt rescheduling and accrued interest payments, which will have a positive impact on the company’s liquidity. Additionally, after the end of the year, lockdown restrictions eased and the company’s hotel properties have resumed operations and management expects room occupancy and sales at its hotel to continue to improve, ”it stated.
According to Pakistan Services, “lockdowns are being eased, businesses are reopening, travel restrictions are being phased out, social restrictions are being removed, and social gatherings are being allowed after SOPs, banquets, restaurants, hotels and economic activities are growing steadily. “The company expects the sector to recover in about six months. There are also plans for a Pearl Continental Hyderabad and Pearl Continental Bahria Town, Rawalpindi.
Regent Plaza didn’t have the best years either, although it fared better than Pearl Continental. The luxury hotel is owned by Pakistan Hotels Developers Ltd (formerly Taj Mahal Hotels Ltd), which was founded in 1979 and converted into a public company in 1981. The hotel caught fire in December 2016, killing 12 people. The company ceased operations and resumed partial operations in August 2017. A new fire alarm system has been set up in 211 of the 440 rooms on Regent Plaza so far and is due to be completed by June 2021.
The hotel has suffered a bit since the fire. In 205 and 2016 the company had sales of over Rs 600 million and an after-tax profit of over Rs 130 million. In the following years, sales ranged from 300 to 400 million rupees. The hotel recorded an after-tax profit of Rs 28 million in 2019 and just Rs 442,000 in 2020.
This massive drop is due to the pandemic. However, the company noted that “Pakistan has had some success in fighting coronavirus disease and hopes the situation will normalize by the end of the current calendar year.” Reasons given for hoping for the tourism sector included an improvement in the legal and regulatory situation, initiatives by the new government, developments in the CPEC and the arrival of more international and local tourists in Pakistan.