SINGAPORE — Banyan Tree, the manager and developer of premium ­resorts and hotels, suffered its worst loss in history last year after a “perfect storm” propelled by the financial crisis in Russia and a slowdown in the Chinese economy led to lower profit from hotel operations and stoppages in hotel design projects, and prompted the group to make provisions for doubtful debts.  

The company reported a net loss of S$27.5 million for 2015, with the fourth quarter accounting for S$18.4 million of that. Revenue increased 13 per cent to S$370.7 million for the whole of last year, and 34 per cent to S$123.2 million in the fourth quarter. The bottom line was also affected by the absence of fair value gains on investment properties.

“2015 was the perfect storm for the Banyan Tree Group. We started the year with great momentum in property sales and hotel bookings. But due to a confluence of factors, ranging from the devaluation of the Russian rouble to problems in many of our source markets, as well as stoppages in hotel design projects affecting our fee based income, we posted the worst loss in our history,” said Mr Ho Kwon Ping, Banyan Tree’s executive chairman.

This year is not looking much better, with forward hotel bookings for owned hotels currently 17 per cent below the same period last year. 

Due to the tough economic climate, Banyan Tree is streamlining its business and relooking at its business structure. In doing so, it is cutting about 12 per cent of its corporate workforce by removing an entire structure, as it seeks to “delayer the hierarchy”.

“We are not a big company. We have 40 hotels, but somehow the bureaucracy had crept in so much that our field people were telling us that there was a lot of bureaucracy affecting our ability to respond quickly to downturns,” said Mr Ho at an earnings briefing. “We expected much more rapid growth … than has resulted, so we have to respond to the situation by becoming more lean and mean.”

Russia’s rouble crisis has led to a severe downturn in Russian outbound tourism, affecting Banyan Tree’s business at its resorts in Maldives, Phuket and China. The company also has “quite a lot of Russian buyers of properties”, and are hoping those who have paid advances on their properties will not walk away from their purchases. 

Adding to its woes last year was the continued slowdown in China. “A number of our projects which were in the middle of being designed in China for hotels that were supposed to open in the next one to two years were completely stopped by owners in China due to shortage of cash,” said Mr Ho.

With the economic environment unlikely to improve any time soon, the company made allowances for doubtful debts of S$16.3 million last year. Mr Ho said the company is still trying to recover those debts and have sought legal action on some debts. 

Turning to consolidation in the hospitality industry, Mr Ho said that while there are certain benefits to being an independent company, he is open to the idea provided the synergies are there.

“We’re always being approached by people … In this whole exercise of consolidation, everybody is talking to everybody else. It’s like a big dancefloor and I hope we are pretty so people will like to dance with us too,” he said. “But there are many suitors we wouldn’t deal with at all, no matter what money they pay,” he added, saying that some players could be interested in Banyan Tree only for “bragging rights”.

“Those kind of buyers, we would never even consider. If there are partners, not buyers, whom we can really get synergies, of course we would consider.”