S.A.I. Leisure, whose name stands for sea, air, and island, plans a listing in Hong Kong.
Founded in April 1997 by its chairman Tan Siu-lin, and his eldest son Henry Tan, its chief executive, the company has since grown from a single hotel property in Saipan to a diverse business in Saipan, Guam and Hawaii.
Tan Siu-lin is also the founder of local apparel manufacturer Luen Thai (0311).
S.A.I. Leisure's major leisure tourism business is in the tropical islands of Saipan and Guam, the United States' territories located in the western Pacific, about a five-hour flight from Hong Kong.
On average, 62.1 percent of revenue comes from Saipan and 37.3 percent from Guam.
The group held a 33.7 percent market share in terms of revenue in 2017 in Saipan's leisure tourism industry and was the largest player in Saipan's hotels and resorts industry in 2017 by revenue, number of properties and number of rooms sold, according to Frost & Sullivan.
With tourism revenue close to US$2.5 billion (HK$19.5 billion) in 2017, Saipan and Guam has each become a popular beach holiday destination. From 2013 to 2017, tourist arrivals in Saipan and Guam grew at a compound annual growth rate of 10.8 percent and 3.9 percent, respectively.
In 2017, revenue at S.A.I. Leisure increased by 10.08 percent from 2016 to US$89.43 million. About 75 percent of revenue was from the hotels and resorts, including Fiesta Resort Saipan (37.3 percent), Kanoa Resort in Saipan (15.6 percent), Century Hotel in Saipan (1.4 percent) and Fiesta Resort Guam (20.7 percent).
The luxury travel retail sector generated 19.6 percent of total revenue, and 5.4 percent revenue was from the destination services sector.
S.A.I. Leisure says that the current land lease underlying the Fiesta Resort Saipan is due to expire on June 30, 2021. Its directors are cautiously optimistic that the land leases will be renewed for a further 15-year term at a similar rental level by the first quarter of this year. The company says it is aware that no less than four other established market peers of comparable scale also have expiring land leases within the next five years and are currently in talks with the local government.
Also, the company warns that it may not be able to renew the lease agreements of boutiques.
Of the 18 leases of boutiques, six have an automatic renewal clause, or options to renew for an additional term. There are four lease agreements that expire by the end of 2019 and another seven expire by the end of 2020.
The boutiques contributed to 49.4 percent of luxury travel retail sector revenue in the six months ended June 30, 2018.
Meanwhile, Saipan and Guam are also prone to typhoons. On October 29, 2018, super typhoon Yutu tore through Saipan and caused the temporary closure of the Saipan International Airport and suspension of commercial flights for inbound travelers for around 15 days, resulting in a decline of occupancy at Kanoa Resort and Century Hotel.
The company intends to invest in the long-term development of its hotels and resorts with a US$56.7 million asset rejuvenation plan.
Part of the net proceeds from the public offering will be used to launch new travel retail boutiques and expand the brand and merchandise portfolio.
Some of the capital will be used to upgrade the internet technologies.
The company also plans to improve digital sales and marketing to strengthen online presence among leisure traveller communities particularly in China and South Korea.
The remaining funds will be used as general working capital.