Dear Fellow Shareholders
It is a great honour and privilege for me to address all of you onbehalf of the Board of Directors.
India is the fastest growing economy in the world. India's GDP grew by7.5% when compared to China's GDP of 6.9%. These figures were released a day before theBudget wherein the Government has projected the real GDP growth of 7.0% for 2019 - 2020.The Economic Survey explained that high growth can only be sustained if there is anincrease in savings investments and exports. It also mentioned the Services sector as akey driver to achieve high employment and growth. A priority for India is to create jobsand skilled manpower.
To create jobs in tourism investment has to come largely from theprivate sector. There are several reasons why private investment is not coming forward. Myrecently released book EVEN AGAINST ALL ODDS' contains several quotes with respectto this subject.
Hotels should be classified as infrastructure and made eligiblefor loans with a longer repayment scheme'
"Lower Interest rates are crucial if India wants entrepreneurs toplay a larger role in enhancing our Gross Domestic Product (GDP)."
In the recent budget the Government has raised the Income Taxsurcharge for individuals earning over Rs. 2 crores per annum. I feel that in order not todiscourage investment the Government should introduce an exemption that this additionalsurcharge will only be levied if the concerned entity does not invest in creating new jobsin India. For example in USA before issuing Green Cards under the EB5 investorprogramme the Government monitors the capital invested and the jobs created for locals.Hence if the Government were to provide some offsets in taxation to encourage investmentit would help increase growth. Another possibility that could be considered by theGovernment is to allow companies to buy capital equipment to avail 100% depreciation inthe year of purchase itself. This would kick-start the manufacturing sector and lead tooverall job creation. These benefits would be reaped by all of us Indians. These are someof the ways the Government can encourage local investment and can create jobs.
Our Honourable Prime Minister Narendra Modi's vision of India becominga 5 trillion dollar economy by 2025 will give a boost to the Tourism sector.
Despite the drop in foreign charter flights to Goa the number of roomsoccupied by foreign nationals in our hotel has increased by over 19%.
The World Travel & Tourism Council (WTTC) the global authority ontravel and tourism (of which I was the Chairman of the India Initiative) has done aresearch study called India 2019 Annual Research' which shows that travel andtourism in India contributed 9.2% of the GDP and provided 42.7 million jobs or 8.0% of thetotal employment. The largest contributor is domestic travel and tourism. This industryalso earned INR 1973 billion from foreign visitors and is a net exporter.
The Secretary of Tourism of the Government of India invited me andindustry leaders in June to give suggestions on how the Government could achieve itsobjective of doubling the foreign tourist arrivals in the next five years. Some of thesuggestions made by me were to drastically reduce the visa fee for foreign tourists toreduce the GST on hotel rooms to a flat 12% and to give incentives to hotels earningforeign exchange and to promote the beaches of Goa and Kerala.
As far as Goa is concerned the number of foreign tourists has remainedstatic while the number of charters flights has reduced.
Despite the drop in foreign charter flights to Goa the number of roomsoccupied by foreign nationals in our hotel has increased by over 19%. Our single hotelearned an equivalent of INR 118 million in foreign exchange as compared to INR 99 millionin the previous financial year.
The 28% GST on hotel rooms priced above Rs 7500 has played a major rolein negatively affecting the revenue of 5-star hotels especially in Goa as Goa is aleisure destination. Foreign tourists as well as domestic tourists are enticed to visitother countries where taxes are below 10%.
You will be pleased to know that your Company had the third highestReturn on Assets as compared to all listed companies in the hospitality industry.
For the financial year 2018-2019 our hotel achieved a record occupancyof 82.8% compared to an overall occupancy of Goa hotels of 72.1% and occupancy of 74.9% incompeting hotels in South Goa. Net revenue increased by 12.4% to INR 717 million excludingtaxes. Our Gross profits for the year before depreciation and finance costs were INR 176million.
I am happy to report that your Company's net profits after tax were upby 31.7% over the last year. You will be pleased to know that your Company had the thirdhighest Return on Assets as compared to all listed companies in the hospitality industry.
Our Company has also performed better compared to last year even forthe first quarter of the current financial year 2019 - 2020.
As per the report prepared by Horwath the occupancy of hotels in Goafor the months of April May and June was worse than last year. Inspite of this for thequarter ended June 30 2019 your Company achieved a Total Net Revenue of INR 165.7million as compared to INR 152.5 million which reflects an 8.7% growth in sales over thesame period last year. The Gross Operating Profit for this quarter grew to INR 30.9million from INR 22.8 million reflecting a growth of 35.5%.
This was achieved by recording 84.7% average occupancy in the month ofApril 84.7% occupancy in May and 90.9% occupancy in the month of June. The Average NetRevenue per Occupied Room per night grew by 8.1% in April to Rs. 11124 it also grew by12.1% in May to Rs. 10923 per room per night and grew by 3.7% in June to Rs. 9594 perroom per night.
The Profit Before Tax for the three months ended June 30 2019 alsogrew to INR 21.6 million as compared to INR 13.4 lakhs which reflects a 61.2% increaseover the same period last year.
Because of the excellent results and since this was the thirtieth yearof our listing on the Stock Exchange we declared a special dividend totalling to 100% forthe financial year 2018-19.
We hope to do better in the next year although there are a fewdisturbing events of late. The local economy and automobile sector is showing signs of apotential slow down. The airfares for travel within India have increased due to thediscontinuation of Jet Airways. We are concerned of the explosive situation in Iran. Thepotential slowdown of domestic corporate business and the economy of UK after BREXIT are aconcern.
I would like to thank all of you our loyal shareholders the Board ofDirectors our dedicated employees our professional vendors and consultants our travelagents tour operators and online travel agents our gracious guests my fellow hoteliersthe entire village of Varca the Government of Goa and the Ministry of Tourism and CivilAviation for supporting us over the last 30 years.
Sunder G. Advani
Chairman & Managing Director
Advani Hotels & Resorts (India) Limited