Though Sri Lanka’s tourism sector has recovered its Covid-19 losses, with hotel operators seeing gross profit margins significantly improving, certain operators’ net profitability margins are yet to recover, SenFin Securities’ findings on the financial performance of the sample six operators, between the financial year of 2022 and 2026 shows.
The advisory, commenting on the performance of Hayleys Leisure said: “From FY22-FY26, the improvement in GP margin from 38% to 65% reflects the recovery in Sri Lanka’s tourism sector, supported by higher occupancy, room rates and tourist arrivals.”
Commenting on the Wattala-based beachfront resort, Pegasus Hotel, it noted that its GP margin improved by 7 fold, from 9% to 66%. The Kingsbury’s GP margin during this time had more than doubled from 24% to 52%, while Nuwara Eliya Hotels’ margin reached 81%, its highest level in this period. Meanwhile, The Lighthouse Hotel’s GP margin fluctuated between 69% and 80%, remaining resilient, through the tourism recovery.
Referring to the performance of the five-star beachfront resort Eden Hotels in Beruwala, the advisory identified a significant discrepancy between GP and NP that had persisted overtime, and is yet to see revenue growth alleviating its operational cost burdens. “NP margin remained deeply negative, improving from -274% to -30%, indicating that stronger tourist demand and revenue growth have yet to fully overcome the company’s substantial financial and operating burdens.”
A similar observation was made of Hikkaduwa Beach Resort, which saw its NP margin grow from -106% to -10%, reflecting the sector’s recovery, yet “under pressure at the bottom line”.
Notably, from the sample of six, Galadari Hotel’s NP margin has deteriorated from -10% in FY23 to -176% in FY25. “GP margin improved from 40% to 46% in FY23 before declining sharply to 0% by FY25, indicating a weakening recovery in hotel operations.”
The advisory noted that despite certain hotels experiencing wide NP margins – significantly improved NP that is thin yet substantial, particularly for companies like Hayleys Leisure, shows signs of positive recovery translating into bottom-line profitability. “NP margin’s recovery from -54% to 4% indicates that stronger tourism demand is gradually translating into bottom-line profitability, despite lingering cost pressures.”
The same was observed in the performance of Pegasus Hotels, though its NP remains negative, and is yet to see improvements in bottom-line profitability amidst a period of elevated operating costs. “NP margin remained negative, improving from -50% to -3%, suggesting that while tourism demand and gross profitability have recovered, elevated operating and other costs continue to weigh on bottom-line profitability.”
Source: The Morning
