Buoyed by first profit, property owner targets debt problems

Revival strategy under study; debt instruments mulled

Suvarnabhumi Airport Hotel Co, the owner of the property managed by Accor Group under its Novotel brand, is looking for ways to strengthen its financial performance in the hope of reducing its debt of Bt613 million incurred since the hotel opened in 2006.

Chairman Chaiwat Utaiwan yesterday declined to give a time frame, but said that in five years its financial performance would be better if all parties in the company worked together and lessened internal management conflicts. The company would also institute measures to control its operating costs and boost its revenue.

Under the plan, the company will have to minimise its operating costs, especially the cost of financing. The firm will look for instruments with low interest rates such as debt instruments if necessary. Even though the firm has suffered continuing losses, it has never planned to raise capital.

Strengthening its revenue from new services such as catering is a key focus. It might cooperate with hotels both local and international to transfer its guests among them.

Yesterday, the state enterprise under the Transport Ministry reported its first-ever profit - Bt15.68 million for its 2012 fiscal year ending in September. It lost Bt109.66 million in fiscal 2011.

It earned Bt25.84 million in the first five months of fiscal 2013. It now expects to make more than Bt30 million for the whole year instead of its original target of only Bt7.53 million.

Before its financial improvement, the firm got into difficulties during the airport hotel's opening. The executives from the three parties managing the company - the company itself, Universal Hospitality (UH) and Accor - have not headed in the same direction, leading to financial failure.

Once the firm even contemplated bankruptcy as a way to escape from the losses, but eventually abandoned the idea.

The firm was established with Bt1.01 billion in registered capital by Airports of Thailand, holding 60 per cent, Thai Airways International holding 30 per cent and Krungthai Bank holding 10 per cent. The firm hired UH to manage the 612-room hotel, and later UH chose Accor to run it. Some criticised the company's hiring of UH, saying this was an odd way to manage the property. Clearly, it has pushed up its operating costs needlessly. The firm should work with Accor directly, critics say.

Chaiwat has called for executives to work together cohesively. Shareholders and the Transport Ministry should also play a supportive role. Contracts will have to be fixed to ensure a fair deal in doing business. However, he declined to reveal details.