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Dear Shareholders,
This year marks a period of five years since I was elected Chairman of the Board of Danubius Hotels Rt. and so I am particularly pleased to be able to inform you about another successful year. I am sure you will agree that the last five years have seen enormous
progress in the development of your company. In 1995 revenues were 7.5 billion forints and in the year 2000 they were in excess of 30 billion forints.
This annual report sets out full details of our improved profits which have allowed us to continue our programme of expansion and investment, including further progress towards becoming an international company.
In my report to you last year, I promised an acce-leration in our programme of hotel refurbishment in Hungary. I am therefore delighted to report the completion of major capital projects in some of our most important properties, including the Hilton and the Grand Hotel, Margaret Island, together with the expansion of the "Danubius Premier" health and fitness brand into 6 of our hotels by later this year. In the autumn of last year, we also embarked on a total refurbishment of the Thermal Hotel Margaret Island. This will be completed by the summer - a construction programme of only nine months which is remarkably short for a project of this size. We believe this renewed hotel will be a unique product on the market, being a top-class spa hotel in a tranquil and green location, but nevertheless only a short taxi ride from all the attractions of central Budapest. Naturally, it will take a lot of hard work and some time for the full results of these investments to become apparent, but I believe they are all true to my often expressed goal of developing long term asset value, as well as improving returns to shareholders.
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In the middle of last year we announced our acquisition of some 65% of the Marienbad Spa company in the Czech Republic. Our ownership has, since the year-end, increased to approximately 95% in this company which has already demonstrated its potential with a very significant improvement in profits in the year 2000. Marienbad is a wonderful location which is now working hard to capitalise on its famous history as one of the most fashionable and beautiful spas in Europe. This acquisition is not only an important step towards making the Danubius brand more international but it is also major progress towards our goal of being recognised as Europe’s leading spa hotel owner and operator.
We are now well into a new year and I have to say that the group faces new and major challenges. Budapest has experienced an unprecedented boom in the construction of 4- and 5-star hotels and this extra capacity will have an impact on the market until it is matched by further growth in the customer base in the years to come. In addition, we have seen major problems in world stock markets and close to recessionary conditions in the US and other economies. All of this will have an effect on our business conditions in Hungary in ge-neral. Despite this, your group is in a strong position to tackle this increasing competition and we will continue our search for further investments in and outside Hungary, where these have the potential to improve our return on equity.
All shareholders will know the Budapest Stock Exchange has had a very difficult year and I am sure it is little consolation to you that the fall in the Danubius price has been less than many other well-known companies. We have conti-nued our policy, started last year, of paying a dividend, which we hope will be appreciated whilst we wait for the stock exchange to recover. Whatever the short-term fluctuations and assuming the continuation of sound economic policies leading towards EU membership, I believe the long-term prospects, for both our group and the Hungarian economy, remain very positive.
I would like to end by thanking you, our shareholders, for your support and also all of our customers and employees who have contributed to the substantial progress achieved in all areas of our business in the past year.
Sir Bernard Schreier
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