The Peninsula
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CELEBRATING THE PENINSULA 90 YEARS OF LUXURY HOSPITALITY T H S H, L ANNUAL REPORT 2018 Stock Code: 00045 In this year’s Annual Report we have moved further towards The objective of our approach is to provide a connected view integrated reporting as envisaged by the International of the different aspects of our performance by publishing this Integrated Reporting Council (IIRC – www.theiirc.org). Annual Report and a separate Corporate Responsibility and Sustainability Report to highlight our vision, strategy and our In the IIRC’s words “Integrated Reporting brings together achievements in 2018. Together with our company’s website, material information about an organisation’s strategy, the two reports enable our stakeholders to have a more governance, performance and prospects in a way that reflects informed assessment of our company. the commercial, social and environmental context within which it operates. It provides a clear and concise representation of Our integrated approach encapsulates a number of different how an organisation demonstrates stewardship and how it reference guidelines, including the International Integrated creates and sustains value”. Reporting Framework published by the International Integrated Reporting Council, The Stock Exchange of Hong Kong Limited’s (HKEx) Environmental, Social and Governance Reporting Guide, the Hong Kong Institute of Certifi ed Public Accountants’ (HKICPA) approach on corporate governance disclosure, and the Global Reporting Initiative Sustainability Reporting Guidelines. Our financial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards, the requirements of the Hong Kong Companies Ordinance and the applicable disclosure provisions of the Rules Governing the Listing of Securities on HKEx. We welcome your feedback. Please share your views with us by post or email. Contents Accomplishments and Results 2018 6 Company at a Glance 10 2018 Highlights 18 Financial Highlights 19 Non-Financial Highlights 20 Financial Review Summary 22 Ten Year Operating Statistics 23 Ten Year Financial Summary 24 Letter from the Chairman 28 CEO’s Strategic Review 39 Operational Review 72 Financial Review Creating Stakeholder Value 90 The Peninsula Hong Kong – 90 Years of Luxury Hospitality 98 Our People – The Heart and Soul of Our Company 108 Our Cities – A Masterpiece in the Art of Hospitality 112 Our Guests – A New Age of Innovation 116 Engaging Our Stakeholders 118 Awards in 2018 10 24 Governance 124 Chairman’s Governance Overview 126 Our Leadership — Board Members 132 Our Leadership — Senior Management and Key Functions 134 Our Leadership — Diversity 136 Corporate Governance Report 154 Group Risk Committee Report 162 Group Corporate Responsibility Committee Report 164 Audit Committee Report 166 Nomination Committee Report 168 Remuneration Committee Report 172 Directors’ Report Financial and Sustainability Data Statements 180 Independent Auditor’s Report 185 Financial Statements 252 Independent Assurance Report 254 Sustainability Data Statements Additional Information 256 Glossary 258 Shareholder Information 259 Reservations and Contact Addresses 90 98 108 112 Accomplishments and Results 2018 6 Company at a Glance 10 2018 Highlights 18 Financial Highlights 19 Non-Financial Highlights 20 Financial Review Summary 22 Ten Year Operating Statistics 23 Ten Year Financial Summary 24 Letter from the Chairman 28 CEO’s Strategic Review 39 Operational Review 72 Financial Review The Peninsula Door Lions Chinese door lions are believed to have powerful mythic protective powers, and traditionally stood in front of Chinese Imperial palaces and temples. The door lions always appear as a pair, one male and one female, sitting on each side of doorways or entrances. The lion and the lioness must be placed on the correct side of the entrance to ensure feng shui harmony. The Peninsula Hong Kong was the first hotel in Asia to adopt the idea of having the Chinese door lions at its grand entrance and today the tradition continues with the entrances to all Peninsula hotels guarded by these traditional architectural ornaments. Accomplishments and Results 2018 06 The Hongkong and Shanghai Hotels, Limited | Annual Report 2018 07 COMPANY AT A GLANCE HOTELS London Paris Carmel Chicago Istanbul Beijing New York Tokyo Shanghai Los Angeles Hong Kong The Peninsula Hong Kong The Peninsula Shanghai Yangon Established: 1928 Established: 2009 Bangkok Manila Rooms: 300 Ownership: 100% Rooms: 235 Ownership: 50% Ho Chi Minh City Operational hotels and properties Hotels under development The Hongkong and Shanghai Hotels, Limited (HSH) was incorporated in 1866 and is listed on the Hong Kong Stock Exchange (00045). HSH is the holding company of a Group which is engaged in the ownership, development and management of prestigious hotels and commercial and residential properties in key locations in Asia, the United States and Europe, as well as the provision of The Peninsula Beijing The Peninsula Tokyo tourism and leisure, club management and other services. Established: 1989 Established: 2007 Rooms: 230 Ownership: 76.6% Rooms: 314 Ownership: 100% HSH businesses are grouped under three divisions: hotels, commercial properties and clubs and services. The Peninsula Bangkok The Peninsula Manila The Peninsula New York The Peninsula Chicago The Peninsula Beverly Hills The Peninsula Paris Established: 1998 Established: 1976 Established: 1988 Established: 2001 Established: 1991 Established: 2014 Rooms: 370 Ownership: 50% Rooms: 469 Ownership: 77.4% Rooms: 235 Ownership: 100% Rooms: 339 Ownership: 100% Rooms: 195 Ownership: 20% Rooms: 200 Ownership: 20% Accomplishments and Results 2018 08 Company at a Glance COMMERCIAL PROPERTIES The Repulse Bay The Peninsula Office Tower The Peak Tower Hong Kong (residential and arcade) Hong Kong Hong Kong (retail) Established: 1976 &1989 Established: 1994 Established: 1996 GFA:1,058,455 sq. ft. Ownership: 100% GFA: 75,082 sq. ft. Ownership: 100% GFA: 116,768 sq. ft. Ownership: 100% The Landmark 21 avenue Kléber St. John’s Building Ho Chi Minh City, Vietnam Paris, France (office and retail) Hong Kong (office) (office and residential) Acquired: 2013 Established: 1983 Established: 1994 GFA: 44,218 sq. ft. Ownership: 100% GFA: 71,400 sq. ft. Ownership: 100% GFA: 175,903 sq. ft. Ownership: 70% The Hongkong and Shanghai Hotels, Limited | Annual Report 2018 09 CLUBS AND SERVICES The Peak Tram Thai Country Club Quail Lodge & Golf Club Hong Kong Bangkok, Thailand Carmel, USA Established: 1888 Established: 1996 Acquired: 1997 Ownership: 100% Ownership: 50% Ownership: 100% Peninsula Clubs and Tai Pan Laundry Consultancy Services Peninsula Merchandising Hong Kong Established: 1977 Established: 2003 Established: 1980 Ownership: 100% Ownership: 100% Ownership: 100% PROJECTS UNDER DEVELOPMENT The Peninsula London The Peninsula Istanbul The Peninsula Yangon Ownership : 100% Ownership : 50% Ownership : 70% Accomplishments and Results 2018 10 2018 HIGHLIGHTS With 130 years of service as one of the most popular tourist attractions in Hong Kong, we were delighted to receive approval from the Hong Kong Government to extend the operating right of The Peak Tram by 10 years from 2026 to 2035, paving the way for the HK$684 million upgrade project to begin, which will create a more exciting and comfortable experience for Peak Tram visitors. The upgrade project will result in covered, temperature-controlled queueing and waiting areas with entertainment features for up to 1,300 passengers. The new tramcars will be able to carry 210 passengers instead of 120 at present. The Hongkong and Shanghai Hotels, Limited | Annual Report 2018 11 The construction of The Peninsula London made good progress in 2018. Hoardings with Peninsula branding and historical information were constructed to introduce the Peninsula brand to the local community. The Topping-Out ceremony will be held in June 2019. Accomplishments and Results 2018 12 2018 Highlights Our 2017 annual report was awarded Best of Show – World’s Best Annual Report, the highest honour granted by The International ARC Awards Competition, along with 5 Grand Awards, 12 Gold Awards, 6 Silver Awards and 2 Bronze Awards. The annual report was also recognised by the Hong Kong Institute of Certified Public Accountants and Hong Kong Management Association with Platinum and Bronze awards respectively. In June 2018, Peninsula Merchandising launched A Journey to Treasure, a pop-up exhibition celebrating The Peninsula Boutique’s wonderful collection of gourmet and lifestyle gifts, at The Peninsula Hong Kong. The event was well attended by media friends, socialites, influencers and our VIP guests. The Hongkong and Shanghai Hotels, Limited | Annual Report 2018 13 Z Bar, the new rooftop lounge at The Peninsula Chicago, opened on June 18 to an unrivalled mix of flavours, sights and sounds from Chicago and around the globe. The name “Z Bar” is a tribute to Maria Zec, The Peninsula Hotels’ first-ever female general manager, and General Manager of The Peninsula Chicago for the past 17 years. The Peninsula Beijing achieved a “good” Building Research Establishment Environmental Assessment Method (BREEAM) certification, the first in Beijing for a newly renovated hotel. Accomplishments and Results 2018 14 The Hongkong and Shanghai Hotels, Limited | Annual Report 2018 15 2018 Highlights In collaboration with SRI International (Stanford Research Institute), we launched Kaleidoscope Lab, a 12-week mentorship-driven ignition programme for startups, the first of its kind