We have seen the damage on hotels and hospitality and also in airlines, says analyst
by NUR HANANI AZMAN / Pic by BLOOMBERG
GENTING Hong Kong’s troubles reflect an Asian tourism industry that’s largely been cautious about reopening and it could signal that other companies will be in similar trouble.
Malaysian University of Science and Technology’s Institute of Post-graduate Studies dean Dr Geoffrey Williams said the Genting Hong Kong issue has a tidal wave effect through the whole industry supply-chain and financing system.
He believes it will take a long time to recover because once the business closes there may not be buyers for the assets or companies prepared to risk starting in this business soon.
“This is another warning sign of the impact of the global lockdowns on the tourism and travel industry. We have seen the damage on hotels and hospitality and also in airlines like AirAsia Group Bhd and now an example from the cruise industry.
“It is due to the lockdown policies but also a classic example of the privatisation of profits and the socialisation of costs,” he told The Malaysian Reserve (TMR).
Genting Hong Kong has filed a winding-up petition in Bermuda, after the bankruptcy of its shipyard in Germany triggered US$2.78 billion (RM11.68 billion) of debt and forced Asia’s largest operator of sea cruises to be liquidated.
The owner of Dream Cruise Holding appointed Alvarez & Marsal’s Edward Simon Middleton and Tiffany Wong Wing-sze as provisional liquidators.
Williams said when things go well, the owners take all the money but when things go badly all stakeholders including shareholders, creditors, employees and customers suffer.
“In this case, the banks and the shareholders in the banks also suffer through our pension funds. In addition, supply firms and ship building companies and contractors also suffer.
“So everyone pays but the owners and managers walk away with big payouts and salaries. It is a failure of the governance and accountability system that this happens and the social market economy model tries to mitigate this for example,” he added.
Covid-19 has wiped out travel demand and cruise operations globally were among the first to be halted at the start of the pandemic in early 2020. Travel restrictions since then have led to a string of restructurings and insolvencies in the hospitality industry.
Genting Hong Kong, which has offered “seacations” amid a broader trend of cruises-to-nowhere, reported a record loss of US$1.7 billion in May. The latest developments come just as Hong Kong reimposes some of its strictest virus curbs since the pandemic began.
The biggest cruise operators, including Carnival Corp and Royal Caribbean Cruises Ltd, have been able to raise enough liquidity to get through the worst of the pandemic, even if some may need additional financing. Still, a handful of smaller operators have sought bankruptcy.
Spanish cruise line Pullmantur, partly owned by Royal Caribbean, filed in 2020, while Jalesh Cruises became the first operator in Asia to shut down the same year.
Prime Minister Datuk Seri Ismail Sabri Yaakob said yesterday that the tourism industry will suffer if Malaysia remains too rigid.
“We will not impose the Movement Control Order to restrict people’s movements, but will simply close the international border as foreign countries continue to record high numbers of cases and we remain cautious, despite having begun the vaccination travel lane with Singapore and discussing it with Indonesia and Thailand,” he said in a speech in Putrajaya yesterday.