Esteemed Ladies & Gentlemen,
Welcome to Zara Investment Holding’s 18th annual meeting for the ordinary general assembly of the shareholders.
Following years of continued growth in operating revenues and profits, Zara Investment Holding (Zara hereinafter) experienced in 2011 one of the most tenuous years in its history. The challenges faced by Zara were due to various factors of which the political turmoil in the Middle East region reigned supreme. Consolidated Operating Revenues dropped by 12.8% over 2010 to JD 78.2 million versus JD 89.7 million in 2010. The drop in revenues was also closely correlated to the 30% drop in our Net Operating Revenues as compared with 2010.
Furthermore, although our Net Operating Revenues amounted to JD 21.5 million, our loss for the year amounted to JD 0.868 million. The loss was mainly attributable to the drop in Gross Revenues coupled with the financing and depreciation expenses which amounted to JD 6.6 million and JD 13.4 million respectively. Given the extraordinary circumstances witnessed by all and as we watched closely the unfolding of the events during 2011, we were somewhat reassured amidst all of that uncertainty that the drop in our business was in line, if not slightly better, with the overall drop witnessed by all players in the tourism industry in Jordan.
Moreover, the setback in the momentum of tourism growth was a global phenomenon confirmed by the World Travel & Tourism Council (WTTC) and the down review of its forecast of global growth rates from 4.5% to 3.2% in 2011 and from 5.1% to 3.3% in 2012. In the Middle East the WTTC reviewed its reforecasted growth rates for 2011 from 4.7% to (0.5) %.
The unrest witnessed during 2011 throughout most of the Middle East adversely affected the tourism sector in Jordan. This was evidenced by the drop in the number of visitors to Jordan by 19% amounting to 6.2 million visitors compared with 7.7 million visitors in 2010. The drop in the number of visitors was strongly felt in major tourism sites such as Petra where the drop in visitors reached 32% over the previous year, whereas in Madaba the same number dropped by 30% year on year. Visitors from the Gulf Cooperation Council (GCC), an important visitor segment to Jordan, also witnessed a decrease by 24% in 2011 over 2010. In addition, tourism receipts, one of the main contributors to GDP, also dropped by 16% to JD 2.03 billion compared with JD 2.4 billion in 2010.
Trip cancellations as well as avoidance of the area due to the prevailing political conditions in the region are among the leading factors for the decline in the overall number of visitors to Jordan. Other factors include inaccurate western media coverage linking the peaceful demonstrations taking place in Jordan to the more volatile ones in Egypt and Libya. Finally and just as important is the fact that most leisure tourists don’t usually visit Jordan as a stand-alone destination, but instead plan their trips to the area within a combined tour package that traditionally includes Syria and Egypt as part of the overall trip.
In view of this, the Ministry of Tourism as well as its marketing arm The Jordan Tourism Board (JTB) were quick to realize the severity of the situation, and they promptly launched intensive awareness campaigns about Jordan through social and other traditional media, in order to counter the misconceptions about the safety situation in Jordan. This was done in a concerted effort in which all industry players came together in an attempt to dispel the distortion of the image of Jordan overseas. Zara’s role was key in extending assistance to these campaigns through providing logistics and accommodation to many of the journalists invited to assess firsthand the situation in Jordan.
In 2011 Zara continued to maintain its leading market share of 5-star hotels and 5-star room inventory in Jordan. Our leadership was also evident in the number of human resources employed vis-à-vis the total number of persons employed in the hospitality sector. Employment in the 5-star hotels segment in Jordan reached 8,554 persons in 2011 of which approximately 28% are employed by Zara; while employment in the hospitality sector reached 41,749 in 2011 of which approximately 6% are employed by Zara.
Stemming from our strong belief that developing and sustaining the tourism sector in Jordan takes the efforts of all concerned in the private and public sectors, Zara played an active and leading role in the formulation as well as the launch of the National Tourism Strategy 2011-2015. Moreover Zara continued to work on plans in partnership with the Ministry of Labor to develop a center of excellence for hospitality training in the Jordan Valley. In addition, we are cooperating with the Salt Vocational Training Center where we are finalizing the light refurbishment of 23 accommodation rooms that would provide a revenue stream to the Center as well as an ideal training environment for the trainees.
Another area of business sustainability includes the issue of clean energy. In 2011 and within most of our properties we were able to successfully move away from the use of diesel fuel to clean-burning liquefied petroleum gas (LPG). We also migrated where possible to solar heating systems partially replacing the use of electric power as well as diesel fuel. Water management and water usage reduction measures were also introduced. We were delighted to see that our commitment to and responsibility towards the environment resulted in tangible savings that were achieved over the course of 2011. In addition to the savings, the decrease in our electricity and fuel consumption resulted in substantial reduction in emissions of carbon dioxide (CO2).
Taking into consideration the number of renovation and improvement projects that our properties have undergone over the past few years coupled with the unclear prospects we started 2011 with, we deliberately and consciously kept our current projects to a minimum. Such projects are only undertaken when it is absolutely necessary. In 2011 we began the complete renovation of the rooms and suites of the Grand Hyatt slated for completion in the first quarter of 2013. We also embarked on smaller projects needed to maintain the level of quality and service at all of Zara’s hotels and resorts.
In light of our objective to improve the capital structure, we raised the capital of Zara South Coast Development Company, owner of Mövenpick Resort and Spa Tala Bay Aqaba by JD 6 million to reach JD 30 million, increasing Zara’s share from 75% to 80%.
We also restructured the company’s outstanding loans in order to reduce significantly the financing costs starting January 2012.
Moving into 2012 we are fully aware of the potential uncertainties and challenges that could transpire in the months to come. However, our outlook remains positive that an eminent economic slowdown in Jordan would be softened by the various buffers enjoyed by the country. These buffers include but are not limited to the high level of foreign currency reserves and the well developed and regulated financial system capable of supporting both the public and the private sectors. In 2012, we remain energized and inspired by the momentum we experienced throughout the past few years. The resilience of our business model along with the strength of the tourism product in Jordan give us confidence in our ability to overcome challenges as they arise. However, given that uncertainties are still prevailing within the economic and financial markets home and abroad, we will remain vigilant in how we strategically plan for proceeding forward. The key areas that we will focus on during 2012 will be cost cutting measures and expense control to carry us through what we expect to be a difficult year. Given the proven savings that we have achieved so far, we will continue our ongoing program of clean production projects. We will also continue with projects that we have already started such as the renovation of the rooms and suites of the Grand Hyatt Amman. Another area of great importance to us will be to institutionalize the significant role that your Company plays in the local development of the communities in which it operates. Year 2012 is slated to witness the fermentation of our partnership with public sector institutions in the establishment of a comprehensive center of excellence for hospitality vocational training in one of the most touristically important areas in Jordan.
As we charted our way through 2011 and as we set our sight on the future, I am confident that none of our achievements and aspirations would be possible without the dedication and hard work of our entire team of professionals running our properties all over Jordan. To these wonderful women and men I extend my deepest thanks and appreciation for a job well done.
Finally and in closing, on behalf of the board of directors, I would like to thank all of our shareholders for their trust and continued support.
Sabih Taher Masri
Chairman of the Board of Directors