Michael Kadoorie, 82, remains at the helm of Hongkong and Shanghai Hotels, parent company of Peninsula Hotels, despite succession rumors, as the company suffers a loss of HK$448 million in the first half of 2024, mainly due to pandemic-related challenges and renovation costs at its properties. The succession of CEO Clement Kwok, however, remains a major concern.
While Hongkong and Shanghai Hotels, the operator of the Peninsula luxury hotels, is going through a period of financial turbulence marked by a net loss of HK$448 million (US$57 million) for the first half of 2024, its long-standing chairman and second-generation descendant of the group’s founders, Michael Kadoorie, remains determined to maintain his role at the helm of the company. Kadoorie shows no signs of handing over, while steering the company through major challenges, including a stalled hotel project in Burma and disappointing performance in Hong Kong.
Unwavering leadership in the face of challenges
Despite the pressures of his age, Michael Kadoorie, Chairman of Hongkong and Shanghai Hotels since 1985, reaffirmed to the press last May his commitment to remaining in his post for as long as his health allows.
Interviewed at the company’s annual general meeting, Kadoorie said: “As long as I feel I can bring value, I will continue, as long as I am in good health”.
His father, Lawrence Kadoorie, and his uncle Horace Kadoorie formed the second generation of one of Hong Kong’s most powerful business dynasties, alongside Li Ka-shing’s Cheung Kong Group.
At 82, Kadoorie, whose father passed away at 94 but remained active to the end, seems determined to maintain the family tradition of prolonged leadership.
However, the company faces the imminent departures of Clement Kwok, CEO for 22 years, and Peter Borer, COO, at the end of October and July 2024 respectively.
The question of succession remains pressing. Philip Kadoorie, Michael’s son, is tipped to take over eventually. Although absent from the press conference, Michael stated that his son was “ deeply interested in the hotel business ” and well placed to continue thefamily legacy. The forthcoming transition will be crucial for the company’s future, especially as it has already gone through many successful successions in the past. Stable leadership will be essential to navigate the current challenges.
Financial losses and uncertain international projects
The challenges facing the Hongkong and Shanghai Hotels Group are not limited to the question of succession. For the first half of 2024, the company reported a net loss of HK$448 million (US$57 million), after briefly returning to profit post-COVID. The company’s financial situation has intensified as a result of several factors.
The renovation project at the Peninsula hotel in New York weighed on results, while the new hotels in London and Istanbulhave yet to achieve their full financial performance, while depreciation has already begun. Financing costs also increased, with net interest reaching HK$366 million (US$43 million), due to high interest rates and the discontinuation of interest capitalization on the Peninsula London project.
In addition, the company incurred a revaluation loss of HK$139 million (US$18 million) on its investment properties, notably the Repulse Bay complex in Hong Kong. The Peninsula Hong Kong hotel’s low occupancy rate, down to 38% in the second quarter of 2024, reflects ongoing difficulties in a local market where international travelers are slow to return.
The US$130 million hotel project in Yangon, Burma remains another point of concern. Originally scheduled for 2022, the project was suspended due to the military coup in 2021, resulting in an impairment charge of HK$679 million(US$87 million). Although Chairman Serge Pun of local partner Yoma Group was recently replaced by his son Cyrus, the project remains frozen. Kwok insisted that the company retain its development rights on this strategic site, despite the political and economic uncertainty.
Hongkong and Shanghai Hotels thus finds itself at the crossroads of internal succession challenges and external difficulties arising from the global economic and geopolitical situation. The company’s ability to overcome these obstacles will largely depend on the strength of its leadership and its resilience in the face of uncertainty.
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