Hikkaduwa Beach Resort has decided not to invest the funds raised in an IPO in a proposed establishment of an ocean-based water sports facility as the returns would not justify the investment, the company said in a stock market disclosure.
The company said 50% of the approximately Rs. 57.6 million raised in an IPO were originally allocated for investments in water sports to be conducted outside the hotel premises. However, before investing in a facility the hotel has opened a desk to promote water sports in conjunction with third party operators.
It has been found that after a trial period the revenue generated by water sports did not justify the return on investment.
In light of that the company has decided to provide the option of ocean-based water sports/facilities with third party operators instead of making the investment to open a facility.
The company now proposes to utilise the funds in several other developments to enhance the ‘live-in experience’ of the hotel guests. The company said it will endeavour to raise the Average Room Rate following the improvements.
Accordingly, the company plans to make improvements of the swimming pool and attendant areas at a cost of approximately Rs. 20 million. Constructions will begin during the first week of April 2016.
Construction of aqua accessories and amenities shop at cost of Rs. 12 million will begin during the 4th week of April 2016. The premises will be leased to a third party.
Upgrading the ground floor rooms to cater to the surfers with all required amenities and additional spaces for equipment storage will begin during the 4th week of May 2016. The estimated cost is Rs. 10 million.
Construction of an aqua themed beach bar will begin during the first week of June 2016 at an estimated cost of Rs. 8 million.
Water activity area for children will be constructed at an approximate cost of Rs. 8 million. Construction will commence during the 2nd week of November 2016.
The company will call a shareholders’ meeting before the end of 2015 to get shareholder approval for the proposed projects.