Dear Stockholder,
We are pleased to report that against the backdrop of the economic gloom that pervades globally, and the tumultuous political storm that unfolded in the country which dramatically changed the outlook for the tourism industry, your company performed notably well and can claim that the period under review was still considered an extraordinary season.
The moves made during the past years are the reason Waterfront performed remarkably notwithstanding the situation we are in. Precise planning, sound strategizing and mean marketing have carried the company through theses difficult times. Even though part of our business is gaming, the strides we accomplished did not come by chance.
While our report covers the period that will end in March 2001, we cannot ignore the series of contravening events, which obviously influenced and subsequently made a significant impact in the future of the tourism industry. It is for this reason, that our assessment looks beyond these unfortunate circumstances. But one this is certain, no matter what these problems pose, Waterfront will continue to offer the pleasures of life to its customers.
Though the hospitality industry has suffered a considerable number of cancellations, Waterfront Cebu Hotel continues to enjoy high rate of occupancy, relishing an average rate of 70%. There were even months that our hotels in Cebu were overbooked. This encouraging figure gave us an increase of P385 Million from the previous year’s revenue. That’s about 45% better than last year’s already favorable earnings. Our gross operating profit (GOP) did reasonably well at 34% of revenue in spite of the tremendous outside forces buffeting our nation. This goes to show that the level or our operating efficiency has reached a point that is very productive for Waterfront.
But not everything is rosy for Waterfront. There were some thorns we had to endure or even ferret out. Though we are proud to announce that the 562-room construction of Waterfront Cebu is already completed, it has to be depreciated and, not to mention, continuously upgraded. Market forces have also increased the cost and expenses of our operation to almost 46%. Likewise, the interest of our loan has increased by nearly 83%. The peace and order situation in certain parts of the country forced us to temporarily shut down one of our hotels. Cancellations and deferment of previously booked reservations caused a lot of confusion and resulted in the loss of business opportunities. Bank facilities became restrictive, making renewals and availments more difficult. Given all these setbacks, the consolidated loss of the company ballooned to P276 Million after deducting full depreciation of hotel properties, debt servicing and provisioning for anticipated losses resulting from the sale of Fort Ilocandia facilities and the temporary closure of the Waterfront Insular Davao for six months. The decision to flush out these losses was necessary to give the company a fresh breathing spell.
Waterfront recently forged relationships with what we call “International Gaming Operations.” These groups are now handling the task of promoting and selling our services to the international market. These tie-ups have put us in a position where we can be more competitive and more profitable, with less expense and headaches on our part. We are also aggressively recruiting travel agencies as part of our distribution network to sell Waterfront Hotels and Casinos locally internationally. We are eager to share the pleasures of life that only Waterfront can give.
As mentioned earlier, we have already completed the 562-room construction of Waterfront Cebu Hotel, which is continuously enjoying a high percentage of occupancy. But we have not stopped improving and upgrading our facilities, as you will notice new restaurants being opened and new facilities like the fitness center and the health spa being introduced, to attract more guests inside the hotel. But of course, one of the top reasons for the success of Waterfront Cebu is the Cebu International Convention Center, which continues to attract prestigious local and international conventions as it boasts of having the biggest ballroom in the Philippines. Waterfront Mactan is also bursting with excitement as it clinched a new deal to upgrade the restaurant of the Mactan Coral 18-hole Golf Club to first-class hotel standards. Also, one of the biggest news for Waterfront was the much-awaited reopening last June of Waterfront Insular Hotel Davao in Davao, now slowly but surely regaining its reputation as one of the classiest hotels in Mindanao. All these developments are complemented by professional people whose dedication and high morale is almost unequalled in the industry. Truly, we want you to experience the pleasures of life at Waterfront Hotels and Casinos.
In the midst of these developments, it cannot be denied that the past year was tumultuous and continues to be so. We are not blind to the present conditions around us. But we believe that the situation must not be met by despair but by a right dose of optimism mixed with an unyielding disposition to concentrate on improving. We are always ready to accept the challenges as we had met them in the past, even in the midst of adversity.
You will notice that we continue to make tremendous gains in an industry that is mostly affected in times of crisis. Thankfully, we have modestly held our own. Our operations are efficient enough to sustain our market position. Our joint ventures in the gaming business enabled us to effectively manage our risk. Our convention and exhibition centers continue to enjoy solid patronage. Our occupancy rate remains incredibly high. We have no time for negative thoughts for we are busy making gains, establishing footholds and building legacies for Waterfront – all of these are for the sake our nation and of our children.
At this point, we would like to give our heartfelt gratitude to the Management and the Board of Directors of Waterfront Philippines, Inc. Your support during the past year was our beacon of light in these challenging times. Please join us in welcoming the new appointees who will help steer our company in achieving its vision. We welcome Mr. Patrick C. Gregorio, the acting Chief Operating Officer for Waterfront Philippines Inc. (Hotel Group); Mr. Rexlon T. Gatchalian, the acting Vice-President for Sales and Marketing for Hotels; Mr. Steven Tan, the new General Manager for Waterfront Cebu City Hotel; Ms. Lourdes Yu, Executive Assistant Manager of Waterfront Airport Hotel; and Mr. Hembler Mendoza, the new Executive Assistant Manager for Waterfront Insular Davao Hotel.
To the offices and staff of the Waterfront Group of Hotels and Casinos who continue to represents the ideals of this company, to you we give our highest compliments.
And to our shareholders, our deep respect for staying with us and giving us the confidence to do our best in whatever situation we are in. It is our pleasure to give you our thanks.
DONATO C. ALMEDA
PRESIDENT
RENATO B. MAGADIA
CHAIRMAN