Four Seasons Hotels Inc. is looking to hedge currency risks and expand in booming Middle East markets to reverse a series disappointing quarterly results, the firm's chairman said.
The Toronto-based luxury hotelier cited currency fluctuations as one reason for a bigger-than-expected loss posted in the third quarter. In previous quarters this year, profits either shrank or fell below expectations.
"Our corporate costs escalated over these last few years. But that's a short-term problem that will straighten itself out," Four Seasons chairman Isadore Sharp said in an interview in Dubai, where the group won a new management deal.
The Canadian dollar has been one of the strongest performing currencies in the world this year and its rise against the U.S. dollar hurt Four Seasons.
"Devaluation of the U.S. dollar has really affected us," said Sharp.
"We are not hedging at this point. It's not a cash loss, it's a book loss. I think we will work out a hedging system for our corporate costs because they are in Canadian dollars."
Four Seasons has won a contract to manage a new leisure and residential property in Dubai's $10 billion Festival City development and is working on a new hotel in Bahrain.
Sharp was upbeat about the prospects for growth in the Middle East although in the third quarter its hotels in the region posted the group's lowest growth in revenue per available room (RevPAR), an industry barometer.
"Our pricing structure in the Middle East is lower. But they are moving up. We see the Middle East as a great opportunity and our percentage profits in the Middle East are the highest. It's a good market to build a hotel," he said.
Sharp said RevPAR at the new project would compare favorably with properties in the West.
The 1.5 billion dirham property built by regional conglomerate Al Futtaim will have 350 rooms, 100 apartments and 25 villas, the developer told Reuters, releasing the details after the interview earlier this week.
The Festival City development is one of several designed to cash in on a tourism boom in the Arab Gulf, the world's biggest oil exporting region.
Dubai aims to triple annual tourist numbers to 15 million by 2010 and other states are making similarly ambitious projections.
Analysts say Four Seasons is failing to translate healthy RevPAR into strong fee revenues. Revenue fell 17 percent in the third quarter, partly due to currency losses and a $4.9-million writedown on a management contract for a Malaysian hotel.
"The fundamentals of the business are still very strong. We look at 2006 as being a stabilizing year," said Sharp.
Four Seasons also took a hit from the attacks on the Indonesian resort island of Bali in October when suicide bombers killed 20 people and wounded 150.
Islamic militants have also targeted the tourist industry in the Middle East, most recently when suicide bombers attacked three hotels in Jordan.
But Sharp said the impact on tourism from such attacks would diminish.
"I think terrorism will have less of an impact on the industry as time goes on because its part of our lives," he said.
"It will not stop (people) from doing what they were going to do."