Wed, Oct 18, 2006 - Page 12 News List

Hotel business set to take control of restaurant chain

FOOD FOR THOUGHT Formosa International said that a deal will be finalized in the next couple of months with an unnamed culinary brand


Formosa International Hotels Corp (晶華酒店), which runs Grand Formosa Regent Taipei, looks set to take over a successful restaurant chain by the end of the year in a bid to expand its food and beverage (F&B) segment, chairman Steven Pan (潘思亮) said yesterday.

The international culinary brand, whose name was not disclosed, owns more than 20 outlets in Taiwan and the merger deal should be finalized within the next month or two, according to Amy Hsueh (薛雅萍), managing director of corporate business development.

The takeover deal could rapidly boost Formosa International's revenues and help its employees garner culinary know-how and management expertise first hand, she said.

This would mark a big step for the five-star hotel as it has temporarily put hotel expansion plans on the back burner due to the difficulty of acquiring land in Taipei and the prolonged break-even point in a competitive market.

"It's become increasingly difficult to run a hotel in Taipei. Profits made through building luxurious residential complexes and office buildings can be double those earned on hotels," he said after an inauguration ceremony to launch its wholly owned Japanese restaurant Wasabi in Hsinchu's Far Eastern Department Store (遠東百貨).

Formosa International currently operates four restaurants outside its hotels under three brand names -- Wasabi, Bando 8, a Chinese-style restaurant, and Spice Market (泰市場), which offers Thai cuisine.

The retailer is considering developing new culinary brands through either mergers or opening new restaurants.

The target is to double F&B revenues next year from current sales of more than NT$1 billion (US$30.2 million), Pan said.

Formosa International reported sales of NT$1.93 billion during the first nine months of the year, with F&B taking the lion's share of nearly 60 percent and room rates and rentals accounting for the remaining 40 percent.

During an extraordinary shareholder meeting earlier this month, the company passed a proposal to reduce capital by NT$1.56 billion, rewarding shareholders with NT$7.2 in cash per share, due to a conservative outlook for the nation's hotel market.

Although improving Taiwan-China trade relations have stimulated the tourism sector with several hotel projects in the pipeline, Pan expressed concerns that the hotel market might see supply exceeding demand, especially in central and southern Taiwan.

"Hotel construction takes time. If one starts building a hotel now simply eyeing the potential offered by Chinese visitors, I'm afraid that profitability will be worse than expected," he said.

Grand Formosa shares closed down 1.3 percent to NT$90.5 on the Taiwan Stock Exchange yesterday compared to a 2.88-percent decline in overall tourism shares.

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