Growth of hospitality industry is highly depended on corporate activities, tourism, youth activities and increase in leisure related activities, which is reliant on the growth and better law and order situation. The Government of Pakistan has various projects underway in the areas of campaigns to decrease corruption, hydroelectric stations and improvement of urban transport systems such as motorways and construction as well as the modernization of airports.
Under the current scenario, the internal security situation has remarkably improved as a result of the efforts of the Armed Forces of Pakistan, which has immensely increased public morale and domestic tourism. Pak Army’s initiative under Zarb-e-Azb has completed two years of operations and the incidents of terrorism in the country have been remarkably reduced. The Army is highly determined to fight till the terrorism ends from its roots in the country.
The ‘cleanup’ operations by the Paramilitary Forces in the metropolitan and mega business city of Karachi have also shown encouraging results. The country enjoyed improvement in political stability in the current year especially in Pakistan’s largest city of Karachi, where target killing was at its peak from past 7 years.
All above reflect as an indicator that the hospitality industry in Pakistan is expected to grow in coming years as currently, China-Pakistan Economic Corridor (CPEC) is at spotlight as development projects in major sectors like energy, communications, road and rail networks and airports are in progress. In addition, United Kingdom, Turkey and Kazakhstan have also expressed interests in joining CPEC.
Stability in Pakistan’s economy is on the improvement path and as is clear with the recognition from international financial institutions including the International Monetary Fund (IMF), which expects 5 percent economic growth in current financial year. Still the irony is that the electricity generation capacity continues to be short of demand, the gap varying from 5000 MW to 6000 MW and causing a significant dent in the economy. But the government has initiated a number of power generation programs with the assistance of China, where the energy sector has been given high priority to overcome energy shortages by the year 2017-18, as 10,400MW is expected to be added by 2018.
The CPEC implementation purports an investment of US$42 billion towards large infrastructural projects, with a major focus on energy, is likely to result in a significant leap in the GDP growth. The CPEC will lay a strong foundation for incremental expansion of the economy.
Economic picture of Pakistan has potential to further improve given better fiscal management and a stabilized security situation. The federal government is making steady progress in the infrastructure development, particularly to the expansion of road and rail network, as well as improving electricity generation capacity with the construction of thermal, nuclear, hydel and renewable (solar and wind) electricity power plants.
Government is toiling on the CPEC projects, which is a connotation of end towards energy crisis, decrease in unemployment, increase in literacy rate and more investors coming to Pakistan, gives no reason to disbelieve that the future of the country’s economy is thriving. In recent few months, paltry increase in oil prices is seen which may have trivial repercussion on the economy.
Currently, Pakistan is suffering from trade deficit of over Rs2,109 billion which is Rs543 billion higher than deficit recorded in the comparative period of last year, hence deficit reaching record high. Escalation in imports and backsliding in exports resulted in widened deficit record.
The macroeconomic and structural reform program of the government will lead to better growth of the economy. Pakistan’s GDP growth is expected to reach 5.2% in the fiscal year 2016-17 from 4.5 percent of last year.
PERFORMANCE OF PAKISTAN SERVICES LIMITED
Pakistan Services Limited (PSL) is the corporate world for more than 50 years, incorporated in the year 1958 in Karachi. The company is principally engaged in the hotel business and owns operates the chain of Pearl Continental Hotels in Pakistan. It currently has six luxury hotels in all major cities of a country.
The Company has initiated projects including the construction of new properties in Multan and Mirpur Azad Jammu & Kashmir, expansion of existing properties and large-scale modernization for its growth.
Special emphasis has been laid on the improvement of guestrooms, restaurants health-clubs and business centers.
Latest technologies are being introduced in order to cope with various cyber threats and security systems are upgraded on regular basis to ensure physical securities of all business units.
The Company achieved total revenue (exclusive of GST) of Rs9,151 million during the year 2016 in comparison to last year’s revenue of Rs7,922 million, showing a growth of about 15.5%. The growth is due to better law and order situation resulting increase in business opportunities in the country.
The Company for the year under review earned a profit before tax of Rs1,216 million as compared to Rs1,557 million in the previous year. The reduction in profit is due to the provision of impairment losses on investment in associated companies.
The revenue (exclusive of GST) was Rs4,421 million against Rs3,775 million in the last year indicating a growth of 17.1%. In terms of revenue, the increase in this segment is Rs646 million. The Average Daily Rate (ADR) increased by 8.4% over the immediate preceding year while the average occupancy increased from 61% in previous year to 66% in current year.
The consolidated revenue of the Company in the reporting year was Rs9,251 million, crossing the mark of Rs9 billion, as compared to Rs. 8,026 million for the last year thus registering a growth of 15.26% amounting to revenue increase of Rs1,225 million. The consolidated profits before and after tax for the year under review were Rs1,225 million and Rs616 million respectively. This works out to a decrease in after tax profit by Rs345 million, mainly due to provision of impairment, when profit after tax is compared with last Year.
During the year the Company incorporated two new subsidiary companies, City Properties (Private) Limited and Elite Properties (Private) Limited. Principal activities of these companies are to set up, run, operate, manage and carry out business of real estate & property development.
Performance of food & beverage department: The revenue (exclusive of GST) was Rs4,328 million as against Rs3,768 million of the last year. It has increased by Rs560 million registering a growth of 14.9%.
Performance of other related services/license fee/travel & tour division: Revenue (exclusive of GST) from this sector during the year under review was Rs402 million as compared with Rs379 million of the prior year, indicating an increase of Rs23 million.
Corporate Social Responsibility: Pakistan Services Limited is actively engaging Corporate Social Responsibility, focusing on education, healthcare, vocational training and job placements of such trained human resources, as well as financial contributions. The goal of the programs is to alleviate suffering and empower disadvantaged communities and bring them into mainstream population.
Corporate philanthropy: The Company contributed a total of Rs332.5 million as donations to the well reputed NGOs enjoying good track record of work in the sectors of education, healthcare and welfare across the country.
Energy conservation: Company is keen on cutting down wasted energy by installing machinery which helps to obtain optimum level of efficiency, as the energy is in short supply and is a dominating component of operating costs. Promoting green technologies and trainings to operating staff for effective use of energy, resulted in saving energy considerably, which was in addition to reduction in energy prices.
Environment protection measures: Realizing the responsibility to protect the environment and making it more sustainable, the company, on regular basis organizes employee trainings to exercise extreme care for protection of the environment, saving water and energy.
Landscaping, development of flower-beds, grassy areas and planting of trees are part of the implemented environmental improvement programs.
Customer protection measures : For any successful organization customer feedback is considered highly valuable, therefore, our company’s requisite forms are made available to the facilities users. Also, staff visits the customers for their extremely appreciable comments and suggestions.
Moreover, online facility has also been arranged for the customers via ‘Revinate’, where they can give us the feedbacks. In order to meet our social and cultural prestige and sustaining international reputation, our products’ quality is reviewed on frequent intervals and improvements where required are made expeditiously. Customers’ health, safety and security are utmost priority for which adequate arrangements are implemented, hence prone to negligence is nil.
Business ethics and anti-corruption measures: The Code of Ethics and Business Practices are delineated clearly and each employee is made familiar with these.
Contribution to government exchequer: The Company in the year under review paid an amount of Rs3,212 million as against Rs2,791 million in the corresponding period of last year to provincial and federal governments in the form of customs duties, general sales tax, income tax and other levies.
PERFORMANCE OF PAKISTAN SERVICES LIMITED
Pearl Continental Hotels (Private) Limited, a wholly-owned subsidiary remained non-operational during the financial year under report. Earnings from these entities were limited to the interest income on short-term funds placements with banks.
During the nine months period ended 31 March 2017, the Company has achieved revenue (net) of Rs7,553 million, which is 8.2% higher than the revenue of Rs6,981 million recorded in the comparative period of the last year.
Gross profit recorded increase of 4.3% from Rs3,300 million to Rs3,444 million when compared to the corresponding period last year. Profit before taxation has been recorded at Rs1,600 million in contrast to Rs2,003 million, whereas after tax profit is recorded at Rs1,173 million against Rs1,530 million for corresponding period of last year.
The decrease in profit after tax is due to upkeep expenses as company is keen to upgrade and revamp its existing hotel properties in order to retain its customer loyalty. High finance cost, pertaining to financing facilities availed by the Company to execute its fervent plans to expand and diversify, is also a reason for lower profit after tax.
The Board of Directors has declared interim cash dividend of Rs. 5/- per share i.e. 50%, in addition to Rs. 10/- per share i.e. 100% already paid during the current financial year.
Performance of Rooms Department: During the period room revenue (net) was recorded at Rs3,697 million against Rs3,390 million for the corresponding period of last year, registering a growth of 9% which is because of increase in Average Daily Room Rate (ADR) by 13%.
Performance of Food & Beverage (F&B) Department: During the period an increase of 7% in net revenue from this segment has been recorded at Rs3,523 million as compared to Rs. 3,286 million for the same period last year.
Performance of Other Related Services/License Fee/Travel and Tour Division: The growth of 9% is recorded from this segment during the period under review, achieving the revenue (net) of Rs333 million as compared to Rs305 million of corresponding period of last year.
Future Prospects: Stable law and order situation and prosperous economic future of the country are vital ingredients for any company to pursue its plans to expand and diversify and your company is all set to take most of the benefit from such business-friendly environment. Company is continuing its policy of improving its properties, modernization and expansion of existing facilities and infrastructure is in progression which comprises renovation of guestrooms, restaurants and health clubs and deployment of latest Information Technology equipment and software.
All these projects aid the company to keep up the customer satisfaction and to be ahead of its competitors at Hospitality industry in Pakistan.