Hongkong & Shanghai Hotels Stock

Good afternoon, ladies and gentlemen, and thank you for joining The Hongkong and Shanghai Hotels 2026 Interim Results Presentation. I'm Aiden Fung, General Manager, Corporate Finance and Investor Relations. The interim results announcement was released earlier today through the Hong Kong Stock Exchange website.

Joining me today are Christobelle Liao, Chief Corporate and Governance Officer; Keith Robertson, Chief Financial Officer. With that, let's begin.

Our presentation will cover the key messages, financial results, operational highlights and outlook for the remainder of 2026, followed by a Q&A session.

I will now hand over to Christobelle.

Good afternoon, ladies and gentlemen. Welcome to our analyst presentation. We're pleased to announce that the first half of 2026 marked another step forward in our recovery and growth journey. While the broader travel environment stayed uneven through the first half, demand at the top of the market proved resilient and HSH, with its iconic assets, heritage and focus on service excellence, is well placed to benefit from this.

Our firm focus on driving top line performance resulted in growth in key markets with strong double-digit RevPAR gains in Greater China and United States. Firmer trading and improved hotel margins carried the group back into the black, delivering a HKD 23 million profit attributable to shareholders in the first half of 2026 compared to a loss of HKD 289 million in the first half of 2025.

We're also delivering on our Vision 2035: Perform and Transform strategy. We're seeking to unlock the full potential of our existing assets while shaping our future. We are reinventing our flagship properties with the Board having approved an aggregate investment of over HKD 2 billion for The Peninsula Hong Kong and The Peninsula Tokyo renovations.

On the financial highlights, you will see that we delivered strong improvements across all of our key financial indicators. As mentioned earlier, the group returned to profitability with HKD 23 million attributable to shareholders versus a loss of HKD 289 million in 2025. Revenue from operations increased by 8% year-on-year. Operating EBITDA increased by a much larger percentage of 20%, reflecting strong flow-through from revenue growth and disciplined cost management. Cash generation remained healthy with net operating cash flow before working capital movements increasing by 22%.

Our balance sheet remains strong with net external debt stable at 22% of total assets and an A credit rating from both JCR and R&I. We also continued to make progress on residential sales at The Peninsula London.

As part of our long-term growth strategy, we are undertaking a HKD 2 billion plus strategic investment program focused on 2 of our most important flagship assets, The Peninsula Hong Kong and The Peninsula Tokyo. These projects are designed to enhance guest experiences, modernize key facilities and reinforce the long-term competitiveness of both hotels whilst preserving the heritage and character of what defines The Peninsula brand. We view these investments as an important commitment to future growth, ensuring that our flagship properties continue to deliver exceptional guest experiences and create value for shareholders over the long term.

Turning to performance by division. The earnings recovery was broad based. In hotels, we achieved RevPAR growth across all regions, led by Greater China, up 29%, the United States, up 16% and Europe, up 11%. Performance was supported by stronger occupancy, improved average room rates and continued cost discipline across the portfolio.

Commercial properties also continued to provide a stable earnings base, supported by robust leasing at The Repulse Bay and improved performance at The Peak Complex.

Peak Tram, retail and others continued to grow modestly. The Peak Tram's performance was affected by softer visitor demand due to adverse weather this year. At Peninsula Merchandising, retail network optimization enhanced strategic focus and profitability, helping to strengthen the business and position it for sustainable long-term growth.

I'll now hand over to Keith to discuss the financial performance in greater detail.

Thank you, Christobelle, and good afternoon, ladies and gentlemen. All figures presented are in Hong Kong dollars, unless otherwise specified. The revenue from operations increased 8% to HKD 3.5 billion. Including Peninsula London residential sales, total revenue reached HKD 3.9 billion. EBITDA increased 20% to HKD 770 million and lower financing costs and improved contributions from JVs and associates further supported the earnings. As a result, profit attributable to shareholders improved to HKD 23 million compared with a loss of HKD 289 million in the prior year period.

Underlying loss also narrowed substantially, demonstrating the significant progress made during the first half of the year. Growth was broad based across the group. Hotels delivered the strongest increase in both revenue and EBITDA of 9% and 21%, respectively, reflecting stronger performance across most markets and a continued recovery in international luxury travel.

Commercial properties continued to provide a stable earnings foundation, supported by healthy occupancy and leasing activity. Revenue from commercial properties, excluding the sales of The Peninsula London Residences, increased 7% to HKD 486 million. Revenue from The Peak Tram, retail and others divisions increased more modestly by 2%. The overall improvement was partially offset by softer trading at The Peak due to inclement weather and the Peninsula Merchandising in the second quarter.

Notably, all divisions delivered positive flow-through to EBITDA. Since first half of 2024, revenue has grown at a compound annual growth rate of 10%. Over the same period, EBITDA has grown at a compound annual growth rate of 40%. EBITDA margins have increased from 13.6% to 21.8%. This really demonstrates our ability to convert revenue growth into meaningful earnings expansion through disciplined cost management and operational efficiencies. The improvement in profitability also translated into stronger cash generation.

Net cash generated from operating activities before working capital movements increased 22% to HKD 727 million. This primarily reflects improved EBITDA performance across the group. Our balance sheet remains a key strength and continues to provide the financial flexibility to support both our operations and long-term investment plans. The group's consolidated net debt was at HKD 11.9 billion. Our credit metrics remain healthy with net debt-to-total assets of 22% and HKD 1.9 billion of undrawn committed facilities, providing ample liquidity.

We further improved our debt profile, reducing our weighted average gross interest rate from 3.9% to 3.7%, while maintaining an average debt maturity of 1.7 years. Approximately 43% of our borrowings are at fixed rates. During the period, we continued preparations for the refinancing of our HKD 6.5 billion club loan, targeting for completion in the second half of 2026.

Finally, we maintained our A credit ratings from JCRA and R&I with 58% of committed facilities classified as green or sustainability linked. We will regularly review the capital structure to ensure there's ample headroom for obligations and our commitments.

Next, I'll talk you through the operational highlights. Operational performance improved across all regions. Greater China especially delivered a strong first half performance with RevPAR increasing by 29% year-on-year. The improvement reflected higher occupancy, stronger average rates, increased overseas visitation and disciplined cost control across the region. The Peninsula Hong Kong continued to demonstrate the value of its heritage, location and loyal customer base in a competitive market with The Peninsula Arcade benefiting from recovering luxury footfall and high-quality tenant demand. The Peninsula Shanghai performed strongly, supported by individual travelers and a more international guest mix.

Peninsula Beijing benefited from diplomatic delegations, MICE groups and a renewed demand from international travel partners and corporate groups. The United States delivered a strong first half performance with RevPAR increasing by 16%. This improvement was supported by resilient domestic demand, high average rates and healthy group and leisure segments.

The Peninsula New York continued to benefit from its recent renovation. Peninsula Beverly Hills achieved strong rooms performance, and The Peninsula Chicago was supported by a solid group base as it marked its 25th anniversary in June 2026, a meaningful milestone for both the hotel and for the city of Chicago.

Europe made a stronger contribution to the group's first half performance with RevPAR increasing by 11%. This improvement was supported by The Peninsula London's growing market presence, continued pricing discipline at The Peninsula Paris and encouraging progress at The Peninsula Istanbul, despite geopolitical uncertainty in the wider Middle East region affecting travel sentiment. Asia, excluding Greater China, recorded a modest improvement in the first half with RevPAR increasing by 1%.

Performance was supported by stronger occupancy in Bangkok and Manila, while The Peninsula Tokyo maintained its leading market position and commanded stronger rates despite softer overall demand to Japan.

The Commercial properties division continued to provide a stable earnings base for the group. The Repulse Bay performed well, underpinned by robust residential occupancy at 97%, a quality tenant base and continued initiatives to enhance its appeal as a distinctive lifestyle destination. Curated cultural and community-led activations supported footfall, tenant engagement and the long-term relevance of the property.

The Peak Tower delivered year-on-year growth in the first half, supported by disciplined cost management and commercial initiatives, including a major collaboration with HSBC Life to create an illumination and 3D mapping spectacle for visitors. This helped offset softer visitor traffic and adverse weather during the period, particularly in the month of June. The Peak Tram remains one of Hong Kong's most recognizable and enduring visitor experiences. While performance during the period was affected by softer visitor demand to The Peak due to the weather, we continued to build the appeal of The Peak Tram through targeted partnerships and destination-led activations designed to enhance the visitor experience.

Peninsula Merchandising continued to operate in a cautious retail environment. During the period, we rationalized the retail store network in Japan and China, allowing the business to focus more clearly on product elevation, hotel destination retail and opportunities that are more closely aligned with the Peninsula brand experience. We're also seeing encouraging wholesale opportunities for our confectionery items, which offer a more scalable way to extend selected Peninsula products while protecting brand quality and margins.

I will now hand you back over to Christobelle to discuss the outlook for 2026.

We enter the second half of 2026 with improved operating momentum, stronger EBITDA and a materially better earnings position than a year ago. The external environment remains mixed with global travel continuing to grow and luxury hospitality benefiting from a structural shift towards experiences and hyper personalization.

However, geopolitical uncertainty, currency volatility, cautious luxury retail spending and higher operating costs continue to require careful management. For hotels, we expect demand to remain positive in the second half, supported by continued international travel recovery, resilient luxury demand and a growing preference for highly personalized experiences. We will remain focused on capturing high-quality demand, strengthening direct and relationship-led business, improving operating efficiency and innovating, particularly with our restaurant offerings, while recognizing that some markets may continue to be affected by geopolitical developments, currency movements and shorter booking windows. For commercial properties, we expect residential leasing to remain resilient.

Office leasing in Hong Kong is showing signs of improvement in core locations, but overall market conditions remain competitive. Our focus will, therefore, be on maintaining the quality of our tenant base, enhancing the appeal of our assets and managing occupancy and rental levels with discipline.

For Peak Tram, retail and others, we expect second half performance to be supported by disciplined cost management, new commercial partnerships and increased seasonal demand.

We will continue to execute the ambitious Vision 2035: Perform and Transform agenda. Across the group, our priorities for the remainder of the year are clear: to drive revenue, to protect profitability through operational discipline, to deepen guest engagement and invest selectively in the assets, people, technology and experiences that will strengthen the Peninsula brand over the long term.

We're happy to take any questions that you might have.

Thank you, Christobelle. We will now move on to the Q&A session. If you do have any questions, please feel free to type that into the Q&A box.

So we have our first question. Under your strategic plan, one of the key pillars is transform. Can you give us an update of that transform progress?

I'll take that one. Yes. When it comes to expansion, I think our approach has always been to grow intentionally. Any new opportunity must meet our financial, strategic and our brand criteria. We're prepared to be patient and take time necessary to identify, obviously, the right locations, the right assets and, more importantly, the right partner.

I think in parallel, transformation is not only about adding new hotels, it's also about enhancing the existing portfolio through selective investment, elevating the guest experiences, leveraging technology, obviously and creating new partnerships that strengthen our expansion and brand relevance. I think our HKD 2.1 billion investment program at The Peninsula Hong Kong and The Peninsula Tokyo is a clear example of this approach, ensuring our flagship properties remain competitive and relevant for this next-generation of luxury travelers to come.

Thank you, Keith. Second question. How would the company control or protect the brand quality under the transform strategy, especially some of them will be asset-right or asset-light?

Sorry, how will the...

The company control or protect the brand quality.

I think as Keith was saying earlier, really sort of the selection of any new locations or new hotels is really about getting the right location, the right partners, meeting the criteria that we have set internally on sort of the transformation process in identifying the right opportunity.

And of course, it goes to -- sort of goes to our negotiations and ensuring that we protect the brand, whether it's sort of -- it's hardware as well as our service level as well.

Thank you, Christobelle. Another question on The Peninsula London Residences. Given we have generated HKD 395 million of sales, but the margin appears to be quite low. Can you explain a little bit more on this point?

So we have in total 24 London residences, of which there's now 4 remaining for sale. Our approach has always been disciplined. We assess sort of each case on a sale-by-sale basis. And I think you have to take into account the specific unit. I think you have to take into account the proceeds over all 20 units sold to date and obviously, the 4 remaining.

Obviously, we want to be competitive. London is a testing market at the moment for residential sales. But we do assess each sale on an asset-by-asset basis. And also in addition to that, when we did build the property, we put a significant amount of capital expenditure into those assets as well. So it is very much on a case-by-case basis as to how we assess the profitability of each sale.

Thank you, Keith. Next question. The Repulse Bay give us a good proportion of our fair value in terms of our total portfolio. But in terms of yield, it's relatively not as high as we think. So how does the management think the role of The Repulse Bay in the company's total portfolio?

The Repulse Bay is an extremely important asset for Hong Kong and for ourselves in terms of bottom line profitability. Obviously, at a 97% occupancy, it's extremely important from a liquidity and cash flow point of view as well as a bottom line EBITDA point of view.

We're constantly enhancing the product, as you've probably seen, if you've been to The Repulse Bay recently. There's a lot of capital expenditure being spent to enhance the look and feel of the product, and we'll continue to do that. It's an extremely important asset for us.

Thank you, Keith. Next question. EBITDA margin for the company has been improving. Is there a target EBITDA margin that the company expects to achieve? And what is the expectation of EBITDA margin growth for the next few years?

We do expect EBITDA to grow. I think if you look at 2025, I think it was over 40%. It's now currently 20% plus. We do expect it to grow in the future. We have targets under the strategic plan and Vision 2035 to achieve certain levels of EBITDA. I won't disclose what those numbers are, but they will grow substantively, we hope, over the coming years.

Thank you, Keith. If you do have any more questions, feel free to e-mail to the company Investor Relations mailbox.

Thank you for attending this presentation for today. Thank you.

Good afternoon, ladies and gentlemen. Welcome to the Hong Kong and Shanghai Hotels' 2025 Annual Results Presentation. My name is Aiden, General Manager, Corporate Finance and Investor Relations for the company. The result announcements were posted on the stock exchange website earlier this afternoon. Our presentation will begin with 2025 annual results, followed by an overview of our strategic review vision and finally, a Q&A session. [Operator Instructions] Today, we are pleased to welcome the following speakers: Mr. Benjamin Vuchot, Chief Executive Officer; Mr. Keith Robertson, Chief Financial Officer; Mr. Gareth Roberts, Chief Operating Officer. We would now like to invite our CEO, Mr. Benjamin Vuchot, to begin the presentation.

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We achieved a material strengthening in financial performance compared with the prior year and this reflects the enduring quality of our assets, the strength of the Peninsula brand and disciplined execution across the organization. Importantly, this performance translated into a return to profitability, a clear demonstration of operating leverage and cost discipline throughout the business. But 2025 was not only about delivering results. It was also about taking a hard look at where we stand and where we need to go. Over the past year, we undertook a comprehensive strategic review, a deliberate fact-based assessment of our position, the evolving luxury hospitality landscape and the choices required to ensure HSH remains distinctive and value creating over the long term. So I will share the outcome of that work with you in a second and in the second half of this presentation. But now let me briefly take you through the financial highlights for the year. Our 2025 results reflect a group that is financially stronger and more resilient, providing a solid platform for the next phase of our strategy.

Revenue from operations increased by 11% with growth across all core divisions. Operating EBITDA increased by 43%, reflecting strong flow-through from revenue growth and disciplined cost management. As a result, the group delivered an underlying profit of HKD 105 million compared with an underlying loss last year, a meaningful turnaround. Net cash from operations increased by 69%, highlighting the improving quality and sustainability of earnings. Our balance sheet remains solid with net external debt stable at 23% of total assets and an A credit rating from both JCR and R&I. We also continued to make progress on residential sales at the Peninsula London. Turning to performance by division. Results were positive and broad-based in 2025. In hotels, we achieved RevPAR growth across all regions, driven by the post-renovation rebound of New York, the ramp-up of London and Istanbul and the record-breaking performance in Tokyo.

On the commercial property side, we continue to provide a stable earnings base, supported by robust leasing at The Repulse Bay and improved footfall and tenant mix at The Peak Complex. In Peak Tram, retail and others, our performance benefited from increased patronage, successful brand collaborations, refreshed retail concepts and the launch of Primo Posto, our first freestanding restaurant concept in Hong Kong. Overall, this was a year where a stronger execution, cost discipline and prior investments came together to deliver tangible results. And with that overview, I will now hand over to Keith Robertson, who will take you through the financial results in more detail. Over to you, Keith.

Thank you, Benjamin, and good afternoon, everybody. All figures presented here are in Hong Kong dollars, unless otherwise specified. 2025, the group achieved significant growth in both revenue and EBITDA and returned to profitability during the year. Consolidated revenue amounted to HKD 8 billion. Excluding revenue from the sale of the Peninsula London Residences, it increased by 11% to HKD 7.6 billion. This is driven by robust performance across all divisions, which we will detail in the next slide. Operating EBITDA, excluding the sale of Peninsula London Residences, increased by 43% year-on-year to HKD 1.7 billion. After considering the residential sales, preopening, project and other nonrecurring expenses, EBITDA increased by 16% year-on-year. An underlying profit of HKD 105 million was achieved, a turnaround from an underlying loss of HKD 176 million last year. There is revenue and EBITDA growth across all divisions. The hotel division delivered notable improvements in revenue across all properties, achieving an overall 13% increase.

In particular, the division benefited from the post-impact renovation of Peninsula New York, the ramping up of the Peninsula London and Istanbul and record-breaking metrics at the Peninsula Tokyo. Revenue at the Commercial Properties division, excluding the sales of the Peninsula London Residences, increased 5% to HKD 929 million. The division was supported by increased occupancy of over 94% at The Repulse Bay and an improved tenant mix at The Peak Tower, partially offset by a softer market for St. John's Building and a decrease in revenue from The Landmark Vietnam as the joint venture approached its conclusion in mid-January 2026. Revenue from The Peak Tram, Retail and Others division increased by 6% to HKD 1 billion, driven primarily by the strong performance of The Peak Tram and of the Quail. There's also positive flow-through to EBITDA for all the divisions.

Excluding the cost of inventories for the Peninsula London Residences and project expenses, operating costs amounted to HKD 5.9 billion, representing an increase of 4% against the corresponding revenue increase of 11%. The hospitality industry, as many of you know, by nature, has a high fixed cost base. This positive EBITDA flow-through is a significant achievement, really reflecting our ongoing commitment to operational excellence and cost management discipline. Staff costs continue to be the primary component of our operating expenses, really reflecting the service-intensive nature of luxury hospitality.

In terms of cash flow, the group generated a cash inflow from operations of HKD 839 million, up 69% compared to 2024. This is particularly driven by the increase in operating EBITDA, as we stated in the previous slides. In addition, proceeds from the sale of 1 Peninsula London Residences unit were HKD 395 million compared to over HKD 3 billion from 7 units in 2024. Net cash inflow before dividends and other payments amounted to HKD 800 million. This decrease was primarily driven by fewer Peninsula London Residences units sold compared to the previous year.

Moving on to the balance sheet. The group's consolidated net debt was at HKD 12.7 billion, with net borrowings to total assets remaining stable at 23% as compared to 2024. Undrawn committed facilities amounted to HKD 2 billion. During the year, the group issued its debut private Samurai bond for HKD 16 billion with the longest tenure up to 6 years, becoming the first ever Hong Kong hospitality company to do so. The private Samurai bonds are rated A by both the Japan Credit Rating Agency Limited and Rating & Investment Information, Inc. The group has also successfully refinanced its GBP Green Club Loan of GBP 425 million with 9 banks. During the year, we've also optimized our debt currency mix from an FX and interest rate perspective. These are 2 main drivers for the decrease of weighted average growth rate from 4.69% to 3.9% in 2025. We would regularly review the capital structure to ensure there is ample headroom for its obligations and its commitments. Now I'll hand you over to Gareth to talk about the operations.

Thank you very much, Keith, and good afternoon, ladies and gentlemen. I'll first start with the Hotels division, which delivered a resilient and broadly positive performance across all regions in 2025. In Greater China, performance was stable, supported by inbound demand recovery and expanded visa-free travel to the Chinese Mainland. All 3 Peninsula hotels in Greater China delivered solid room and banqueting results, although food and beverage remained softer due to tightened consumer spending. RevPAR increased by 8%. In Hong Kong, performance strengthened in Q4, closing the year on a high note. We've seen continued growth in long-haul arrivals, which helped to grow performance. Shanghai strengthened in the second half, supported by visa-free policies and the return of major events with cost discipline aiding our margins. Beijing faced softer demand early in the year amid the ongoing long-haul weakness of U.S.-China geopolitical tensions. However, performance improved later on the back of numerous diplomatic delegations, which supported our occupancy and rate across key periods.

European operations delivered healthy results. RevPAR increased by 14% with strong momentum in rooms and events supported by sustained brand visibility and the positive reviews and accolades from guests and media of our new hotels in London and Istanbul. Paris also saw strong results with the continued post-Olympics demand. Our U.S. portfolio delivered solid year-on-year improvement, supported by strong domestic travel, the post-renovation rebound of our property in New York and steady group and leisure demand across major cities. RevPAR increased by 13%. And the rest of our Asia properties delivered improving year-on-year performance, supported by targeted rate strategies, strong banquets and weddings and successful regional programming, RevPAR for these properties increased by 19%. Specifically, Tokyo achieved record-breaking metrics driven by the robust inbound travel during the sakura season, international groups and delegations. And we're in the planning stages for a renovation of our guest rooms and other areas of the hotel to continue enhancing our services and amenities for our guests.

Moving on to our commercial properties. The Repulse Bay delivered steady year-end results, supported by robust leasing momentum and improved occupancy of over 94%. The retail Arcade benefited from an enhanced tenant mix and continued refurbishment, which helped to strengthen positioning and footfall. The Peak Tower recorded strong improvement in visitors, supported by refreshed offerings and The Peak Tram combo ticket success as well as some new high-end retail and food and beverage tenants. From June onwards, The Peak Complex collaborated with Hong Kong Disneyland to present the first-ever Mickey In Real Life campaign. Peak Tram's increased patronage supported by successful brand collaborations together with Disney and Pop-Mart helped drive revenue while cost efficiencies and initiatives supported strong EBITDA growth. Revenue at Peninsula Merchandising increased compared to the previous year, supported by the opening of our refreshed Peninsula Boutique at Hong Kong International Airport and the successful launch of our new Hong Kong souvenir's collection.

Our mid-autumn collaboration with Lane Crawford and the rollout of new lifestyle categories such as leather goods and whiskey were also highlights for Peninsula Merchandising. Meanwhile, Hong Kong's prime office market remains well supplied with high-quality office space despite our office market sentiment, St. John's Building remained resilient in 2025. The Landmark Vietnam joint venture has expired as of the 15th of January 2026, and we'd like to take this opportunity to thank our partners in Vietnam, the Board and all of our employees for their loyal contributions and for the great success of this property over many years. The successful launch of Primo Posto located in Soho, our first freestanding restaurant concept, featuring Milanese cuisine, marked an important milestone in expanding our food and beverage portfolio and has received very positive feedback from both guests and media alike. And with that, I'll now hand back over to Benjamin to discuss the future outlook.

Thank you, Gareth. Thank you, Keith. So turning to 2026. We remain cautiously optimistic about the outlook.

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Luxury travel demand continues to recover in several key markets and will continue to grow. While the operating landscape remains varied across regions, early indicators point to sustained appetite for authentic, personalized and culturally rich luxury hospitality. The Peninsula Tokyo is expected to remain a top performer for the group. And our U.S. portfolio is also expected to remain a stable source of demand and brand visibility. The newer flagships in London and Istanbul continuing to build brand presence. The commercial portfolio is expected to remain resilient, buoyed by steady demand in key residential and retail assets, robust visitor interest in flagship destinations such as The Peak and continued momentum in merchandising and experiential lifestyle platforms. So overall, we expect 2026 to be a year of steady progression.

And by leveraging our world-class brand, our heritage and pursuit of sustainable luxury, I believe we remain well placed to navigate the evolving landscape and the company's future growth. So we have seen that the group delivered a solid performance in 2025, reflecting the strength of our assets, our brand and the commitment of our teams. And those results provide an important foundation, but they are only part of the story. And I would like now to turn on the next chapter, our strategic review. This is about looking beyond the current numbers, stepping back and sharing how we see the future of HSH. It is about the choices we are making today to ensure that the group remains relevant, distinctive and value creating for many years to come. So I'll commence with our presentation just with a short video.

[Presentation]

So what would we like you to remember from today's presentation. We're going to try to make it easy for you guys. Well, the key messages that are important is that, first of all, we are starting from a position of strength. We have a powerful brand, The Peninsula brand. We have an exceptional guest experience, and we have deep expertise. But the luxury hospitality landscape is evolving. And therefore, this is the right moment for us to move from strength to renewal. That is the purpose of Vision 2035 Perform and Transform. This new strategy is built on a number of initiatives, but I would like to highlight 4. First, we will increase our operational and financial performance, unlocking the full potential of our existing assets. Let's do more with what we have. Second, we will engage in an acceleration of our portfolio growth through more partnership, less ownership approach, expanding selectively, diversifying into resorts and residences as well as doing so in a capital disciplined way.

Third, we will reinvent our flagship properties for another era of excellence, starting with the most iconic, The Peninsula Hong Kong. And finally, we will expand the Peninsula brand beyond the 4 walls of our hotels into experiences, deepening guest engagement and capturing where luxury demand is increasingly heading. Let me now take you through the thinking behind this strategy. To frame our strategic choices, it is important to start with the fundamentals of the industry in which we operate. The luxury hospitality is a large and attractive market and one that is expected to continue growing over the long term. What is particularly important is not only the absolute size of this market, but more the quality of its growth. Demand is being driven by structural trends, rising global wealth, continued importance of travel and experiences and the increasing premium placed on true luxury and differentiation. So this backdrop gives us confidence. It tells us that the opportunity is there.

And the key question and the focus for our strategic review, therefore, is how can Hong Kong and Shanghai Hotels position itself to capture this growth. And before presenting change, I'd like to remember something very important, which is very clear about where we stand today, and I mentioned that before. HSH is in a strong position today. The Peninsula brand enjoys genuine global recognition and remains synonymous with luxury. Our guests consistently rate their Peninsula estate as world-class and a large majority express a strong intention to return and to recommend us. We also benefit from distinctive expertise across multiple dimensions: service, facilities, design, where we are perceived to outperform. And beyond hotels, HSH is supported by a diversified portfolio of businesses and asset classes across geographies, providing balance and resilience to the group. So taken together, these elements give us confidence. They confirm that our foundations are strong and that we have the right platform from which to evolve.

To illustrate the strength of the Peninsula brand, it consistently performs above its physical scale. Across key geographies, brand familiarity among luxury travelers is strong and compares very favorably with significantly larger peers. What is important here to read on this chart is that at 51% brand recognition, the other number you want to focus on is the number of properties 12. We are only 20 percentage points lower than the leader in the market who has over 10x more properties than the Peninsula Hotel. So the brand genuinely enjoys global recognition, as I mentioned. And this dynamic really matters. It confirms the depth of our brand equity and the emotional connection we have of our guests -- with our guests. At the same time, it points to a clear strategic question, how can we thoughtfully leverage this strength over time without compromising what makes the Peninsula so distinctive? And while we start from a position of strength, we are, at the same time, confronted with a number of challenges. The luxury hospitality industry is being reshaped.

A new generation of luxury travelers is emerging with expectations that go beyond traditional markers of luxuries. They are looking for highly personalized service, authenticity and distinctive experiences. At the same time, competition is intensifying. Established peers and new entrants are expanding into new destinations, often with innovative concepts in areas such as dining, food and beverage, wellness and lifestyle and with a strong appeal to younger aspirational guests. We are also seeing important shifts in how capital is deployed across the industry. This is changing the competitive landscape and raising the bar in terms of speed and flexibility. So alongside these external dynamics, we have been equally honest about our own international -- internal challenges, sorry. I mean our asset base remains relatively small. We have 12 hotels. And this limits our ability to fully leverage the strength of our brand. And while our standards of quality are exceptionally high, we also see clear opportunities to further improve our operational performance.

And speaking about performance over the past 5 years, we have made very tangible progress. The group has recovered from the unprecedented disruption of 2020 and moved beyond pre-COVID levels. This is a result of disciplined execution, the commitment of our teams and a relentless focus on quality. At the same time, this trajectory also tells us something important. There is still meaningful upside ahead of us. In other words, our aim is to unlock the full potential of what we already have. So where are we headed? Well, Vision 2035 is our long-term ambition for HSH. It reflects how we see the future of the group and the balance we want to strike as we move forward. At its core, this vision is about building a celebrated, growing and innovative luxury lifestyle brand, one that performs strongly in the near term and transforms thoughtfully for the long term. And with that ambition in mind, let me now walk you through how we translate this vision into concrete strategic priorities and actions.

Our Vision 2035 is expressed through a very simple but very deliberate strategic framework, which we call perform and transform. At its core, this strategy recognizes that we must do 2 things at the same time. First, we must continue to strengthen the performance of what we already operate. This is about getting the group in the best possible shape, sharpening our fundamentals across brand and service, across dining, wellness and lifestyle, but also revenue management, operational excellence, culture and technology. And this is really the first train we're launching that has probably a 3- to 5-year horizon, this performance horizon. In parallel, we must also shape the future of the group. This is where the transformation comes in. And it is about placing selective, well-considered strategic bets that expand our opportunity set over time. It's about growing intentionally. It's about expanding the brand, reimagining what we have, which is our flagships and increasing our capital efficiency.

And these 2 dimensions are not sequential. They actually reinforce each other. The stronger we are today, the more ambitious we can be in the future. So having introduced perform and transform as this foundation for our strategy, let me focus a little bit more on the perform part because this is the foundation of our strategy. And we are focusing on 4 execution levers. First, and absolutely uncompromisingly brand and service. We will further strengthen what the Peninsula brand stands for, sharpen our commercial focus and deepen customer loyalty. At the same time, we will elevate service through ultra personalization, ensuring every guest experiences feel truly individual. Secondly, food and beverage, dining, wellness and lifestyle. Guest expectations continue to evolve, and our ambition is to differentiate the experiences through extraordinary dining concepts, renewed wellness and lifestyle experiences while increasing the pace for innovation.

Thirdly, revenue management and operational excellence. We see upside in elevating pricing. We see upside in reviewing distribution and yield management alongside continued progress in operational excellence, both at property level, but also centrally in our head office. And again, without compromising the guest experience. Finally, our organization, our culture and our technology adoption needs to continue to evolve. And to sustain excellence, we will continue fine-tuning our organization and investing further in technology, both guest-facing but also for our internal employees. So in short, perform is about disciplined execution, translating the strength of our assets and our brand into consistently stronger results. And with that foundation in place, let me turn to the transform part of the plan. And the first transform priority I would like to discuss is how do we embrace growth. And we want to grow intentionally. Our ambition is not to pursue scale for its own sake. It is rather to be present in more destinations that truly matter to our most discerning guests.

Let's go where our guests want us to go, while preserving the sense of rarity, exclusivity that defines the Peninsula brand. We will also evolve the way we approach capital and partnerships. While we continue to take equity stakes in selected developments where long-term ownership creates attractive value, in parallel, for other opportunities, we may adopt a management agreement model, working with like-minded partners and sharing investment and risk. An approach that allows us to rebalance from asset-heavy to purely an asset-light, no. It's going to be what we call an asset right, what is right for HSH to sustain the growth that we can afford and that is going to be accepted by our guests. Finally, we're very clear about where we want to grow. We focus on the most desirable global destinations, but with a broader mix that includes residents, but also includes a different class of assets, including branded residences and with the objective of achieving a more balanced geographic footprint over time.

Having explained the logic between our approach to growth, let me now illustrate what this means in practical terms for our development pipeline. Today, our hotel portfolio remains relatively concentrated primarily in Asia, but -- in terms of geography, but also in a number of assets. This reflects our history. We were born in Hong Kong and grew from Hong Kong, but also our deliberate selectivity over time. At the same time, as we look ahead, we see a clear opportunity to build a richer and more balanced pipeline over the long term. By 2035, we envisage a significantly expanded scope compared with today with a geographic profile that is more evenly balanced across regions. This evolution supports both growth and risk management while remaining fully consistent with our brand standards and our disciplined approach to capital. Beyond growth, another critical pillar of our strategy is to reimagine our flagships.

The Peninsula Hong Kong holds a truly special place in the world of luxury hospitality. In 2028, it will celebrate its 100th anniversary, a milestone that very few hotels globally can claim and one that carries both pride and responsibility. And we see this anniversary not simply as a celebration of the past, but as a unique opportunity to look forward. And our ambition is to elevate and reinvent this iconic property by repositioning it as the leading hotel of the 21st century. The Pen 100 anniversary program will also mark the beginning of a new chapter for the Peninsula brand itself, including a refreshed identity and a renewed narrative. So as we look to the future, we believe that the Peninsula brand has a potential to extend well beyond the traditional boundaries of the hotel itself. Luxury guests today are increasingly seeking experiences that are distinctive, immersive and memorable. There is an area where HSH already has strong foundations. Across the group, we are offering a range of unique experiences from motoring and lifestyle events to bespoke journeys on land, at sea and in the air.

So looking ahead, we are exploring how these elements could be brought together in a more intentional and connected way. For example, we may reflect on concepts that connect our properties, allowing guests to discover the Peninsula brand and the Peninsula world across regions in a way that feels both elegant and effortless. And in doing so, we aim to deepen our relationship with our guests, strengthen brand loyalty and thoughtfully expand what the Peninsula stands for, not just as a place to stay, but as a companion in the art of travel and discovery. So as we come to a close, let me just take a step back and reflect on the journey we have shared with you this afternoon. HSH stands on a very strong foundation. We benefit from exceptional brand, a long tradition of excellence, loyal guests and a dedicated team across the group.

At the same time, we operate in an industry that is evolving rapidly, and these shifts require us to continue adapting with clarity and ambition. Our Vision 2035 Perform and Transform is our response to this context. Our aim is to ensure that HSH remains not only competitive, but truly exceptional for the next era. And we will do so by unlocking the full potential of our existing assets, driving operational and financial performance, by accelerating the growth of our portfolio based on more partnerships, less ownership approach, diversifying into resorts, but also branded residences, revamping our flagship properties for another era of excellence, starting with The Peninsula Hong Kong and finally, expanding the brand beyond the 4 walls of our hotels into the fast-growing world of experiences. So I thank you for your attention, and we now look forward to engaging with you in the Q&A session that follows. Thank you.

Thank you, Benjamin. We'll now open the floor for questions. We'll start off with a question on the webcast. What is the company's plan to improve F&B profitability across the group?

Well, first and foremost, we want to make sure that we don't treat F&B purely as an amenity to our guests, but as a very strong performing business pillar for our business. And that includes revisiting our existing concepts, reviewing how do we make sure that at city level or at property level, we remain competitive with a very dynamic environment that we also embrace how talent is critical in the world of F&B in the world of restaurants, investing in that talent and unleashing the potential of some amazing talent we may have in our properties. I think we also have to be a bit more daring and innovative, but we are very encouraged by the resilience of the F&B world and by the strong competition that not only challenges us, but excites us to go above and beyond and regain the positioning of equally exciting room product and experiences with food and beverage experiences. In fact, as we may -- you may have heard in the presentation, we did a very innovative project in Hong Kong, which we did not report under the hotel business.

We report it under the others business. And we opened a beautiful restaurant called Primo Posto. There's no sign of the Peninsula. There's no sign of Hong Kong and Shanghai hotels. But this is a way for us to make sure that we are also able to engage with discerning audience to bring them something that is going to be innovative, it's going to be distinctive and bring the know-how of Hong Kong and Shanghai Hotels in hospitality, but adapting it to a new format. The results have been very encouraging. The restaurant will be turning 1 year old in a couple of weeks. And this, I think, paves the way also to expand further in the world of food and beverage as stand-alone, but also to bring back the learnings of maybe a more entrepreneurial approach back to our hotels, our signature restaurants and our all-day dining opportunities.

This is Jeff Yau from DBS. I got 2 questions. The first question is related to the existing hotel operation. Is there any disruption from the war in Middle East to the hotel operation year-to-date? The second question is about the more partnership and ownership approach. Does this apply to upcoming new hotels, new project or this also applies to the existing hotel in operation. This means would you consider introduce any third-party capital to your existing hotel operation?

Thank you. Let me answer the first question first. I think the geopolitical tensions that we have seen in the Middle East region is definitely impacting the travel industry and the hospitality industry overall. The restrictions on airlift makes that we, among everybody else in our peer group have been suffering some cancellations since the beginning of the conflict. However, I think it's a bit too early to say if this will have a material impact to our business. I tend to remind our group that we're actually quite well balanced from a geographical perspective, 25% of our hotels in the U.S., 25% in Europe, the rest in Asia, but again, between North Asia and Southeast Asia. In fact, we do not have any physical presence in the Middle East. However, the Middle East is an important geo mix to our business. We are very grateful to the patronage of many of our guests who originate from the Middle East who are probably equally frustrated not to be able to travel at the moment.

So I don't think this -- at this stage, it's too early to decide whether it's going to be a material impact, but we're definitely watching this closely. The second question was, I think, with regards to our business model and how do we treat our -- what I coined less ownership, more partnership. Maybe it's important to set a bit of context here as well. Out of the 12 properties that we have under the Peninsula brand today in the hotel division, 25% of them are already on the shared ownership perspective. It's all reported in our annual report. So I'm not revealing any in-house secrets, but we own 20% only of our hotels in the Peninsula Beverly Hills and in the Peninsula Paris. And we're in a joint venture at a 50-50 equity stake in Peninsula Istanbul. So partnership is not something new to HSH. What we are willing to establish going forward is to balance depending on the project, depending on the geography, depending on the expertise, 2 different things.

One, do we want to continue to own 100% of the operations? Or do we want to find a partner? And what level of equity do we want to take in. But also very importantly, and that's why we start to finish on that, we are -- we want to play within asset-heavy and an asset-light model and decided what sometimes we decide to put equity or not and what I coined again, the asset-right strategy rather than asset-light or an asset heavy. So that's the first thing. But there's another important component to how we want to really focus the business going forward is the diversification of the type of asset class that we have, particularly when it comes to branded residences. The branded residences offers another way to generate high revenues, but also bring more profitability to fund maybe more hotel projects, which we know require more patient capital.

So asset right when it comes to partnership, but also diversification and push into more residences like we have done in London recently. And we almost sold out of the 24 units in London. In fact, we sold one of the residences in the last quarter of 2025, which was not particularly a very forthcoming period in the world economy. I mean, it was particularly in London, nothing spectacular that could have engaged more people to confirm their intention to buy. But in fact, in the first 2 months of 2026, we have actually completed another transaction, and we are actively discussing a couple more. So we're actually quite energized and encouraged by the momentum despite the geopolitical tensions and despite the maybe less favorable real estate market in London. I think if you have quality, if you have commitment to excellence and you have a long-term vision, the products that we are going to put available in the market can attract the right level of investors who also have a long-term strategy.

This is Owen from HSBC. You mentioned that you're going to be looking at new experiences and new type of resorts. Will this be via new brands or you guys will leverage your existing brand? What would the strategy be in terms of diversification?

At this stage, we really want to focus on the Peninsula brand [Audio Gap] hospitality division. It's a uniquely celebrated brand, and yet it only has 12 properties across the globe. If you look at the type of property we have, they're very much city hotels, beautiful landmarks, some historical like this one here, some a bit more recent in the history. We actually -- in June 2025, we'll be celebrating the 25th anniversary of our Peninsula Chicago Hotel. And later in the year, we'll celebrate the 35th anniversary of The Peninsula Beverly Hills.

So those are our more recent city hotels, but still very important in the landscape of what we have. So Peninsula brand is our focus. At the same time, I think our guests are evolving. They are asking us to go where they want to go. And they're asking us to provide us alternative options to city hotels. Hence, the residences and hence, the resort ideas and the different formats, probably smaller number of keys, a strong residential component and in further away locations than the city centers that we have traditionally and historically and successfully invested in.

[indiscernible] from Mizuho. Just 2 questions from your transform strategy. By 2035, do you have sort of like a targeted number of assets or hotel or resident you would like to have? Obviously, it depends on situation. And second question is, as you mentioned, you want to have a more balanced portfolio amongst EMEA, Asia and Europe. currently or down the road in the plan, are there any preferred or focus cities/countries that you'd be looking at?

Sure. I mentioned before that we're not chasing growth for growth. It's not a numbers game. We haven't set ourselves a target of how many hotels to reach. Why? Because there's so much respect for the exclusivity that the Peninsula brand holds that we don't want to dilute that exclusivity by going too fast or by just trying to achieve a target for a target. And more importantly, we really want to make sure that we grow where our guests expect us to take them to. But we have an ambition that we want to reflect. The second thing I would like to say, and I don't want not to commit to a number, but I want to explain more the logic. We set a 10-year strategy, right? But we wanted to balance it, balance it in what we can achieve without having to open hotels, and that's the perform plan. Let's do that anyway. We don't need to wait to open a hotel to do better with what we have.

And secondly, we know it takes a few years to open a hotel, and we need to activate our pipeline. So 10-year vision is quite far away. And given the constraints and the cycle, the length of the cycle of filling that pipeline and delivering the hotels, we don't want to have to be locked and constrained by a number that we would give you. We prefer to have strong beliefs, strong values in how we will intentionally grow and deliver that growth at the right pace at the right time. But I can tell you that these gentlemen and the whole team and ladies that we have in the team have set some pretty ambitious targets for themselves, and I hope we can deliver them. Second question is where should we grow [Audio Gap] to understanding where do our guests want us to grow. If we look at the trends and from the research that we've conducted last year during our strategic review, we definitely see a very strong appeal for more European destinations and particularly Southern Europe.

It's an interesting destination because it attracts European guests, which have been celebrating the brand with London, with Istanbul, with Paris. We celebrated 10 years in Paris last year. But there's also a very, very attractive market for American tourists and under normal circumstances for the Middle Eastern travelers. And so where do we -- we go where our guests want us to go. This is a region where they want to go. I personally think Japan is an underserved market for luxury hospitality and luxury branded residences. It's a new emerging product that we can see in Japan. It's quite underserved today. So we'd like to continue and ride on the success of almost 20 years of presence in Japan with a bit more focus. And the obvious question is we're not in the Middle East. Every peer and competitor has established a presence. And so while we have a great patronage from guests coming from the Middle East, being able to establish a presence going forward in that region would be, I think, also a big addition to our network.

We now take on one more question from the webcast. What is the company's dividend plan based on the new strategic plan?

Could you repeat the question, please?

What is the company's dividend plan based on the new strategic plan from the company?

So I'll defer the question to Keith when it's complicated. Can you please, I think, one more time, repeat the question please.

Dividend.

Dividend. Well, you can take that one.

Okay. So we do, as you know, we adopt the dividend policy of providing shareholders with a stable and sustainable dividend stream. [Audio Gap] obviously predicated on a number of things, including the underlying earnings achieved, commercial factors such as current and future cash flows, CapEx spend, financing costs, et cetera, et cetera. Each dividend payment being determined by the Board, obviously, and that's based on the assessments at this particular time. Obviously, we cannot provide guidance on a forecast for you at this current time. But obviously, the Board do look at this and do assess based on those factors.

Thank you, Keith. We have one last question from the webcast. Is the group considering disposing any of our existing assets?

I mean, at this stage, we have a very, very comprehensive collection of assets, some are trophy assets. Patient capital is something that has defined us. It's something that we've been celebrating. But at the same time, I think going forward, as we are going to reinvest into the business, we talked about reinvesting in Peninsula Hong Kong, fueling the growth. I think we have to, at times, maybe reconsider disposing of some of the assets. But no, nothing in the immediate short term that we have. But I think as part of the strategic review, this has enabled us also to reconsider and to really understand better what we have and how can we extract the most value out of it.

If there are no additional questions, we will now conclude our presentation. Thank you for coming. Thank you.

Thank you very much.

Thank you.