www.lbr.lk, Monday 19 July 2010, Hotels revenue may overtake FMCG as the largest contributor to the top line says Chief Executive

Hemas group will invest 75 million US Dollars or 8.5 billion rupees to expand its existing hotels and build new ones in the next five years, its chief executive Husain Esufally said.

"There are many more significant opportunities for the hotels and tourism area than there may have been in the past. By virtue of that the composition of the group may change as we go forward," he said.

Hemas is one of the largest listed conglomerates on the Colombo stock exchange with a market cap of 12.2 billion rupees.

The 72 percent Esufally family controlled firm has businesses in fast moving consumer goods retail which markets brand like personal care brand Baby Cheramy and Clogard and laundry detergent brand Diva.

The group also has two hospitals and a pharmaceutical business. It's transportation business includes freight, shipping and courier services. Hemas has also invested in power generation.

Hemas' leisure business includes two beach hotels one resort and a travel agency - Hemtours, managed by the Thai Diethelm Group. The three hotels are owned and managed by Serendib Leisure, a listed leisure firm in which Hemas has 51 percent stake.

The three hotels together consist of 320 rooms.

"They are all three star hotels and we hope to upgrade them to four star category", said Esufally.

Plans for a 500 million rupee upgrade at hotel Club Dolphin, located in a quaint fishing village in Waikkal on the island's Western coast is already on the cards, he said. The hotel has 50 sea side cottages and 96 rooms on a 20 acre land. Last year the hotel maintained an occupancy rate of 87 percent.

"Then we will be immediately looking at Serendib and hotel Sigiriya to upgrade and reposition those," said Esufally.

Hotel Serendib, an eighty nine room hotel in Bentota designed by renowned architect Geoffery Bawa will also be upgraded. Sixty five percent of the rooms at the Dutch inspired 18th century hotel was occupied throughout last year.

Forty rooms at Hotel Sigiriya were refurbished last year while the rest are to be upgraded this year. Year round occupancy at the hotel last year was only 53 percent. The hotel failed to make profits in 2009.

The Hemas group also owns land in Tangalle and Kandy on which it hopes to develop more leisure properties.

"We will have to raise the money for this. Of course there would be debt," said Eusufally referring to funding plans.

"Serendib Leisure is listed company so obviously one of the options would be to raise money via a fresh issue of shares," he added.

The group will also expand its hotel footprint to the East, said Esufally.

"This is actually a part of a government plan where they have allocated some land for us at Kuchchiweli. I think the government is trying to develop it as a tourism zone".

However Esufally does not expect this project to become operational in the near future.

Esufally expects the tourism business to drive the firm's bottom line overtaking its FMCG business. FMCG accounts for over one third of the group's profit. Last year the sector posted a profit of 636 million rupees. The leisure sector made 33 million, an improvement from the 1.2 million it made in the previous year . The sector still returned a loss of Rs. 6.4 Mn after minority interest