HDL saga: Hilton feasts as Govt. loses
Despite a staggering Rs. 10.3 billion accumulated loss at the owning company of Sri Lanka’s premier five star hotel and the Government at large, world famous Hilton has been feasting with earnings, the Daily FT learns.
Following the release of annual accounts for two decades this week, questions have been raised by leisure industry experts over the highly exorbitant management fees and other charges by Hilton.
As exclusively reported on Monday, Hotel Developers (Ceylon) Plc as at end 31 March, 2010, had accumulated Rs. 10.3 billion loss.
The company yesterday released annual accounts for near 22 years starting from financial year ended on 31 March, 1999.
Except for three years the rest has been loss making whilst liabilities of HDL as at end FY 2010 amounted to Rs. 12 billion. The company also faces several litigations including a case for winding up.
Midst and perhaps oblivious to this mayhem of losses Hilton however has been enjoying its own share of earnings thanks to over 30% of Gross Operating Profit by way of fees slapped for management as well as Group charges.
Daily FT learns that at least during the past five years between 2005/2006 financial year and 2009/10, Hilton had raked in over Rs. 700 million whilst if the previous years’ amounts are added the figure could be over Rs. 1 billion.
Analysts opined Hilton’s take home percentage of 33 to 37% per annum was exorbitantly high.
Though not a strictly comparable to prove their claims these analysts cited the average 12% which Hilton takes via its engagement at Hilton Residencies. Industry experts also admit that 30% on average was a high figure for any star class property.
As per the 1984 signed agreement between Hilton USA and HDL the management deal spans 50 years.