POOR revenues owing to the international travel restrictions have led the Hong Kong-based property giant, the Kuok Group, to temporarily close its Makati Shangri-La Hotel, and reorganize its hotel properties in the Philippines.
In a news statement, a company spokesman said, “Owing to continued low business levels and having considered all viable options over weeks of consideration and deliberation, we unfortunately must now make the extremely difficult decision to reorganize our workforce and operations in the Philippines as we continue to navigate an uncertain business environment.”
The spokesman added, “As part of the reorganization exercise, we will sadly be parting ways with a number of colleagues and we will be temporarily closing Makati Shangri-La, Manila.” It will take effect on February 1, 2021.
The hotel had undertaken several measures to manage its financial difficulties owing to the pandemic. “Multiple cost management initiatives have been implemented including salary reductions at management level, implementing shorter work weeks, hiring freeze and cuts in non-essential spending,” said the spokesman.
The 696-room hotel, which opened in April 1993, was only recently granted a certificate to operate as a staycation establishment by the Department of Tourism (DOT). Prior to this, it was allowed to offer rooms to returning overseas Filipinos and expats who quarantined while waiting for their Covid-19 test results.
In a news statement, the agency said it is “saddened” by the news of Makati Shang’s closure. “The hotel has been a pillar in the tourism industry in the country and has contributed to positioning the country in the region and around the globe. Nevertheless, we are hopeful that [it] will soon reopen its doors to international and domestic clients.”
Kuok’s Shangri-La Hotels and Resorts Group has five other properties in the country, and include Shangri-La’s Boracay Resort and Spa, Shangri-La’s Mactan Resort and Spa in Cebu, Edsa Shangri-La in the Ortigas Business District, JEN Manila by Shangri-La in Pasay, and Shangri-La at the Fort at the Bonifacio Global City in Taguig.
PHL inflates Shang Group’s losses
Corporate disclosures show that in the first half of 2020, the Shangri-La Group’s hotel properties in the Philippines have been hurting, like many others in the hospitality industry. Average occupancy over the six properties fell to 33 percent from January to June 2020, from 69 percent in the same period in 2019.
Also, the properties’s average daily rate slid to $177 from $201 in 2019. Revenue per available room, an important gauge of a hotel’s profitability, slumped by 58 percent to just $59 in the first half of 2020.
According to the Shang Group’s November investors report, its hotel properties in the Philippines posted a loss of $30.7 million in the first half of the year, contributing almost 33 percent to the group’s overall loss of $94.2 million (Earnings Before Interest, Taxes, Depreciation, and Amortization).
While the hotel sources could not disclose how many employees at Makati Shangri-La would be let go, a disclosure in 2019 showed the entire group, including its leasing properties, residences, and other non-hotel assets employed 1,166.
The Makati Shangri-La is the second major hotel in the country which has shuttered its doors due to the ongoing Covid-19 pandemic, that has kept many tourists at home. In June 2019, Marco Polo in Davao also closed down, due to poor guest bookings. (See, “Marco Polo Davao closure spooks tourism industry,” in the BusinessMirror, May 11, 2020.)
A company spokesman said, in the past 10 months, Makati Shang had also “provided assistance for our rank and file to help them through these challenging times. Despite our best efforts, the prolonged recovery timeline has resulted in increasing financial pressure on the company here in the Philippines.”
The hotel will also give a higher-than-mandated fair compensation package to its employees as well as extend “healthcare coverage and grocery support until 31 December 2021 to provide affected employees and their families peace of mind during these uncertain times.
We are also providing colleagues with career transition assistance to help them get back on their feet.”
The Shang Group underscored its commitment to the Philippines in which it has operated in for close to 30 years. “We continue to vigilantly monitor local and global developments and look forward to reopening Makati Shangri-La, Manila at a later date when business conditions have improved.”
Image credits: Makati Shangri-La website