TOKYO - H.I.S. Co., Ltd. (TSE1: 9603), a leading travel and airline ticket agency, has announced results for the full year ended October 31, 2016. Consolidated net sales were 523.7 billion yen, down 2.6% from last year; operating income was 14.2 billion yen, down 29.5%; and ordinary income was 8.6 billion yen, down 61.9% due to sharp foreign currency fluctuations. Net income attributable to owners of parent fell by 97.5% to 267 million yen compared to a year earlier.
The Japan travel market in 2016 continued to transition, with international tourists visiting Japan hitting 20 million for the first time, from January 1 to October 31, 2016. Travelers departing Japan exceeded previous quarters as well, following a surge in the value of the yen, and a zero fuel surcharge. Meanwhile, domestic travel was weak, affected by the Kumamoto quake, successive typhoons, and bad weather.
In this business environment, the H.I.S. Group will continue to prioritize customer safety and security by offering high-quality products and services and real-time communications with travelers using domestic and overseas networks and services, further improving services and enhancing ongoing product quality. We continue to challenge by creating new value through the rapid development of businesses designed with the future in mind.
Product Development. In order to revive travel demand for Europe, which had greatly decreased since the terrorist attack, H.I.S. partnered in an 'Atout France' campaign with the French National Tourism Organization and the national airline Air France. We strengthened services in the senior market with 'Tabi Tsushin', a monthly magazine which encouraged an increase in bookings through the print medium.
Domestic outlets. We further developed the concept of specialty stores, promoting the southern island of Kyushu through shops in central Tokyo, Nagoya, Osaka and Fukuoka, while further reinforcing specialized products and services at specialty stores for Bali and Okinawa. Finally, we actively introduced state-of-the-art technologies, such as simulated travel and Virtual Reality (VR).
Corporate and group travels. There was an increase in demand for incentive and corporate travel in Japan and abroad, and large-scale inbound travel, resulting in steady growth across this segment,
Domestic travel segment. We continued to place priority on Okinawa. This summer we launched "H.I.S. OKINAWA Beach Park" that boasts a competitive advantage, such as Okinawa's first 50m long water long slider. We acquired Activity Japan Co.,Ltd., one of Japan's largest activity providers with discovery and booking websites, thereby enhancing our experience-based packages, which have become increasingly popular in Japan as well.
Inbound travel segment. There was an increase in demand for FIT (Foreign Independent Traveler) type packages, reflecting the changes in consumer behavior. Therefore, the Group strengthened sales for day trips and parts, renewed its website to support individual travels, and launched "Tourist Information Center" in 35 domestic locations, through which further strengthening its support system for international tourists vising Japan. We also collaborated with central ministries and local governments, namely, Reconstruction Agency on the Tohoku reconstruction project to install an information counter in Sendai airport, and Kanagawa prefecture on inbound tourism promotion.
Overseas travel segment. We accelerated our effort to improve brand recognition in local markets by actively exhibiting at local travel fairs and launching multiple branches in the Southeast Asian region. Taking advantage of our local retail locations, we received orders for arranging world conferences hosted by public institutions. We have expanded our network to Addis Ababa in Ethiopia and Samarkand in Uzbekistan, as Japan's first travel agency, setting up tour desks. As of the end of October 2016, the H.I.S. Group global network now comprises 295 locations in Japan, and 230 retail locations in 141 cities across 66 countries.
The Travel Business recorded net sales of 465.7 billion yen, a decrease of 2.2%, and operating income of 9.0 billion yen, a decrease of 27.9%, compared to a year earlier.
Huis Ten Bosch Group
In July, Huis Ten Bosch opened the "Kingdom of Robots", the Japan's first robot composite facility which displays and allows you to interact with state-of-the-art robots. The Henn-na Hotel, whose 2nd Phase was launched in March, gained recognition from Guinness World Records as the world's first hotel employing 'robot' staff. We plan to export this ever-evolving Henn-na Hotel to Maihama, Urayasu city in Chiba prefecture, Laguna Ten Bosch, and abroad. In the "Kingdom of Water" held in summer, the Japan's largest water park made the first appearance and the swimming pool was lighted up at night. This event has been very well received by visitors. In the "Kingdom of Light Series", one of the world's largest extravaganzas, over 13 million bulbs lighted up the theme park. We worked to scale up its operation and enhance visitors' event experience. On the contrary, the number of visitors fell by 6.9% over last year to 2.894 million, due to factors including a negative impact on a large-scale group travels handled in the previous year, bad weather such as heavy snow and typhoon, and the Kumamoto quake in April. Further, the first special project "Osaka Castle Water Park" held in front of Osaka Castle, has received over 150,000 visitors and was successful.
At Laguna Ten Bosch, we worked to attract visitors by reaching out to a new customer base. The Art Theater was launched with the Huis Ten Bosch Revue Entertainment in residence and performing daily. We also launched "Flower Lagoon", an entertainment garden, where customers can enjoy a variety of flowers throughout the year.
The H.I.S. Group entered the commercial energy market and reinforced the sales system, with HTB ENERGY CO., LTD., which was included in the scope of consolidation in the first quarter of the current fiscal year.
The Huis Ten Bosch Group recorded net sales of 31.8 billion yen, a decrease of 2.2%, and operating income of 7.4 billion yen, a decrease of 18.3%, as compared to the previous year.
In Watermark Hotel Sapporo, there was an increase in group bookings, including international tourists visiting Japan. Guam Reef & Olive Spa Resort (Guam) saw its shares expand in the Korean and Taiwanese markets, contributing to a rise in the average unit price.
As a result of the measures taken to improve profitability at each hotel, the hotel business was strong and the Group reported record-high results, with net sales of 6.6 billion yen, an increase of 2.8%, and operating income of 556 million yen, an increase of 61.1%, both from a year earlier.
ASIA ATLANTIC AIRLINES CO. LTD., an international air charter carrier, began operating regular flights four times a week between Bangkok and Phuket in Thailand to Shenyang in China, along with regular charter flights between Bangkok and Chitose in Hokkaido, Japan to meet the demand for inbound travel. As a result of these measures in accordance with the needs, the Group recorded net sales of 3.3 billion yen, an increase of 21.0%, and an operating loss of 834 million yen, compared with an operating loss of 1.1 billion yen a year earlier.
The Kyushu Sanko Group
The Kyushu Sanko Group continued to provide customer-oriented services, but the business was impacted by flight cancellations and changes to bus routes following the Kumamoto quake, and the service suspension of transportation center and hotel businesses following the full-scale start of the Sakura-machi redevelopment. The Group recorded net sales of 20.2 billion yen, a decrease of 13.6% compared with the previous year, and an operating income of 89 million yen, a decrease of 91.4% compared with the previous fiscal year.
As a result, the H.I.S. Group's consolidated net sales of 523.7 billion yen were down 2.6% over last year; an operating income of 14.2 billion yen was down 28.5%; and an ordinary income of 8.6 billion yen was down 61.9%, due to sharp foreign currency fluctuations. Net income attributable to owners of parent fell by 97.5% to 267 million yen compared with a year earlier.
The global outlook is likely to remain uncertain, with broad political unrest and economic volatility such as sharp foreign currency fluctuations. The H.I.S. Group expects this uncertainty to continue. We further anticipate ever more significant change, with fiercer competition as rapidly evolving online travel agencies and new customer-to-customer business models emerge. Given these circumstances, the H.I.S. Group must fully leverage its global network and maximize group synergies, and promote business in accordance with market changes by, for instance, further evolving existing businesses or exploring new areas through M&A, while continuously improving on productivity, efficiency, and its performance.
In Huis Ten Bosch, we will add the "Kingdom of Dream and Adventure", the seventh kingdom in the series, using Virtual Reality and Augmented Reality, export the Henn-na Hotel concept worldwide, and undertake many new power generation projects. The H.I.S. Group will take up new challenge in ever greater business areas.
For Fiscal 2017, the H.I.S. Group anticipates exceeding the results of the current fiscal year.
About H.I.S. Co., Ltd.
H.I.S. Co., Ltd. was founded in 1980 and pioneered the Japanese discount airline ticket industry. Today the H.I.S. Group is comprised of 107 subsidiaries and 14 affiliated companies around the world, and has become a leader in the Japanese travel industry. For more information, please visit http://www.his.co.jp/english/.