THE majority state-owned Pegasus Hotel recorded a $20-million loss for its June first-quarter — relative to a $30-million profit in the same-quarter of 2009 — as it operated within the context of the State of Emergency.

Nothing went the right way for the Kingston-based hotel, its revenues were down 12 per cent to $237 million whilst its expenses were up 6.6 per cent compared with the same quarter in 2009. It resulted in gross profit down 20 per cent to $136 million, which was completely eroded by expenses and led to a $17-million trading loss, relative to a trading profit of $30.9 million in the prior year’s quarter.

Pegasus managers were not immediately available for comment up to print time to explain the impact of the State of Emergency on its operations.

However in July The Jamaica Hotel and Tourist Association (JHTA), told this newspaper at its weekly Monday Exchange meeting that Kingston’s tourism industry was still heavily impacted by the West Kingston upheaval in May, which resulted in occupancy at some city hotels being down to as much as zero per cent due to cancellations.

According to Nicola Madden-Greig, JTHA vice president and chair of the JHTA’s Kingston Chapter, the prolonged travel advisories issued by the United States, Canada and the United Kingdom had affected the city’s recovery.

The State of Emergency, which began late May to the end of July resulted in the killing of over 70 civilians in Tivoli Gardens over two days in an attempt by security forces to issue a warrant to former Tivoli strongman, Christopher ‘Dudus’ Coke.

However, last week Wayne Cummings, the president of the JHTA, announced that he was still waiting for the Government to respond to its request for a stimulus. It followed announcements in May by Tourism Minister Edmund Bartlett who estimated losses resulting from the ‘civil unrest’ at US$350 million. Bartlett, however, did announce the launch of a massive US$10-million “promotional and advertising campaign” slated to begin in June to counter the negative image portrayed globally and woo visitors to the destination.

Prior to the State of Emergency, Pegasus, in its annual report ending March 2010, released this week to the Jamaica Stock Exchange, noted that the hotel was already faced with challenges. It recorded annual profit of $17 million versus $55 million the prior year. Despite the reduction in profit Pegasus “performed reasonably well” under severe economic conditions.

“While our occupancy levels and room rates fell, we seized the opportunity to invest in the improvement of the overall product in anticipation and preparation for the inevitable turnaround in business,” stated Desmond Young in the chairman’s report accompanying the financials released to the Jamaica Stock Exchange.

Those factors reduced annual revenues four per cent to $965 million over the period, which hurt management’s ability to offset the 12.6 per cent rise in administrative expenses to $289.4 million.

“The continuing global recession prompted downward adjustments of room rates which had major effects on our revenue, hence a reduction in profit for the year under review,” he said. He also mentioned increased competition in the market with the addition of the 112-room Spanish Court Hotel. Young, however, stated that increased competition provided an opportunity for growth.

“Although the addition of a 112-room new property in Kingston poses a threat, it is also viewed as an opportunity, as Kingston hotels will be in a position to go after larger meetings and convention business by pooling rooms and collaborating with each other,” he noted in the annual report.

The Spanish Court was cited by analysts as part of the reason Pegasus embarked on its costly expansion, refurbishing and upgrading of rooms. During the review period the remaining five-bedroom floors were refurbished completing the three years of refurbishing all the hotel’s rooms, which added $152 million to the hotel’s $5.7 billion in fixed assets. During the next financial period the hotel will upgrade its luxury suites as well as the hotel’s lobby area, the chairman stated.

The upgrade led the hotel to have a 10-year tax break effective March 2009. However, it recorded taxes of $5.9 million during the 2010 financial year versus $25 million in 2009. The continued tax relates to taxation on its operating profit to which Pegasus has begun consultations in a bid to determine its treatment.

“In order to be prudent, a provision was made in the accounts for corporation tax based on an apportionment method. Our tax consultants are seeking confirmation from the relevant authorities whether we are fully exempted from tax on operational profits. In the interim, tax charges for this period were calculated at $5.9 million. This amount was confirmed by our auditors PricewaterhouseCoopers as the worst case tax calculation. The final computation should see a reduction in the returns which are due March 15, 2011,” the company statements read which accompanied the financials.

Going forward, Young expects business traffic to increase and result in higher average rates per room. Young added that the hotel employs a number of strategies for growth and shareholder value creation including:

* direct selling activities;

* offering competitive rate packages;

* advertising;

* participating in overseas sales trips, trade shows and tourism promotions; and

* Internet marketing.