04 DECEMBER 2002
By David Lindsay
In todays somewhat uncertain investment climate, shareholders of companies listed on the Malta Stock Exchange tend to be left feeling somewhat alienated from their investments.
But the Corinthia Group recently shattered this state of affairs, at least for shareholders of its subsidiary International Hotel Investments, and set a new benchmark in investor relations when it invited shareholders for a pre-opening stay at the latest jewel in the Corinthia crown the five star deluxe Budapest Corinthia Grand Hotel Royal.
More than 320 IHI investors took up a special offer to visit Hungary on purposely-chartered flights and to stay at the Budapest landmark hotel as its first guests. And judging from shareholders reactions, they couldnt have been more pleased with the way in which their funds were spent.
The occasion, to which members of the press were also invited, also served to reinforce the Corinthia Groups status as a quintessential example of how a Maltese company can use its business acumen to expand beyond Maltas shores and to tap markets presumed out of the usual reach of local companies.
The Group has managed to do just that once again and has, in fact, completely refurbished and converted a Budapest landmark building to its former glory, after spending some Eur100 million in the process.
Productive shareholder relations is an area all too commonly overlooked by the higher echelons of public companies and IHIs initiative in this respect was wholeheartedly welcomed by the shareholders on many occasions. Never more so than when, at a lavish dinner organised for them just one of the events co-ordinated by the company for its investors, it was announced that each person in attendance owned one or two bricks of the hotel and that they should enjoy it as such. The statement was greeted by all round applause.
When IHI acquired the Grand Hotel Royal - the Corinthias second five star hotel in the city - at the companys inception in 2000, precious little had remained of the hotels former glory, save its façade and its now elaborately restored ballroom, which had been demoted to serve as the Red Star Cinema during Hungarys communist regime. But the premises were subsequently abandoned in the late 80s and left to be vandalised and completely gutted.
But upon acquisition, the Group, through another Corinthia subsidiary, Quality Project Management, immediately began the daunting task of rebuilding almost the entire interior of the hotel. The end result speaks for itself and today stands as one of Europes finest hotels by any standards.
As Group Chairman Alfred Pisani explains, "Corinthias investment in the Grand Royal has proved to be a mirror not only of our commercial ambitions, but equally important, the rebirth of Budapests finest hotel. We want this hotel to be the nations hotel reviving the pride and glory that was once enjoyed by a society gone by. Our aim is to attract local and overseas visitors to once again enjoy an integral part of Budapests historical and architectural heritage.
"In restructuring this property, we have totally brought back to life the opulence and grandeur of this hotel. Primarily we have retained and restored the original façade - removing elements of construction that had been added in later years and which had been detracting from the turn of the century features of this warm and imposing elevation. We have also retained the very unique ballroom and redecorated its interiors back to its original designs.
"Otherwise everything you see in the hotel is new, covering a redevelopment of 59,000 square metres of new and delicate construction which we had demolished and rebuilt over a two year time span."
Certainly the re-opening of the Grand Hotel Royal has been hailed as a major milestone in Budapests continued revival, as the country shakes off the last of its communist shackles and, like Malta, is drawing close to EU membership in 2004.
As can be evidenced by Budapest residents furtive and inquisitive glances into the hotel as they pass by, the hotel enjoys a special place in the heart of most Hungarians and its rebirth has been widely welcomed. The property had for many years, following its first opening in 1896, been the focal point for the countrys long standing tradition of five-star hospitality and a meeting point for much of the countrys and citys cultural icons and intelligentsia.
The hotel now boasts the most complete range of facilities of any hotel in Hungary, including over 3,600 square metres of conference facilities, representing two-thirds of the conference space available in Budapests five-star hotels. Other highlights include 414 executive bedrooms, several fine restaurants, a unique 19th century spa located beneath the hotel, an executive floor, a 300-car multi-storey car park, 28 penthouse apartments and a casino nightclub. The hotel also holds two fully covered atriums, one of which is to serve as a commercial centre within the hotel.
IHI is the hotel investment and development arm of the Corinthia Group and, in addition to the Grand Hotel Royal, the company owns the Corinthia San Gorg Hotel in Malta, the Corinthia Alfa Hotel in Lisbon and the Corinthia Nevskij Palace Hotel in St Petersburg, Russia.
These investments and the companys future prospects contribute in no small way to the idea that IHI shares are perhaps one of the most undervalued on the MSEs equity list.
IHI is a business represented by traditional bricks and mortar a sight for sore investors eyes after so many drastic falls in new economy equities on the worlds stock markets - and a finely-tuned know-how for expanding overseas with great success.
Despite its reliance on the recently turbulent international tourism market, IHI registered a surge in pre-tax profits for the first half of this year of over 45 per cent, while turnover had increased, on a consolidated basis, by nearly Lm4.8 million from just under Lm2 million over the same time frame last year.
The substantial increase in turnover reflects the performance of the Corinthia Alfa Hotel in Lisbon, Portugal and that of the Corinthia Nevskij Palace Hotel in St Petersburg, which were acquired in August 2001 and January 2002 respectively.
IHI - a publicly quoted company set up with the objective to raise funds to invest in hotels, primarily in economies where long-term growth in real estate values and tourism are expected to run at higher averages - has firmly positioned among the principal European hotel investors and now aims to enhance this high profile by further redeveloping and upgrading its newly acquired properties.
IHI holds a 20 per cent stake in both CHI Limited, the Group's hotel management company, and in Quality Project Management Limited, the Group's construction and project management arm. Such strategic holdings have given IHI a unique edge over other hotel investors worldwide, by having a hands-on integrated knowledge of the hotel management and development business.
The strategy has certainly paid off and has never been more evident than in the Groups latest achievement.