Decline in accommodation and dining demand due to the spread of COVID-19 and its business impact

「Even after the infection subsides, tourism and business demand may not recover to pre-pandemic levels because changes in lifestyles and business practices may lead people to refrain from going out and reduce opportunities for overnight business travel.」

「During the cumulative first quarter, Japan's economy showed signs of a recovery in personal consumption as the normalization of socioeconomic activity was promoted, partly because the legal classification of COVID-19 was changed to Category 5.」

「For the full fiscal year, operating profit of ¥2,989.781 million and net profit of ¥3,215.044 million were recorded, showing a recovery in performance. In addition, the forecast for the full fiscal year ending March 2024 is expected to show a profit at every stage, after factoring in the completion of all whole-building leasing by the end of May 2023.」

「The Company recorded operating profit of ¥2,280.877 million and quarterly net profit of ¥2,282.446 million for the cumulative third quarter, indicating a recovery from the operating loss of ¥3,243.623 million and net loss of ¥3,261.097 million recorded in the previous fiscal year. The earnings forecast for the fiscal year ending March 2023, announced today, calls for operating profit of ¥2,651 million and net profit of ¥2,563 million. However, these forecasts are significantly affected by the whole-building leasing of 12 of the Company's 43 properties as accommodation facilities for people with mild cases of COVID-19 (13 properties through the end of July). If the recovery in business demand at the 31 properties operating normally is delayed, operating losses may continue after the end of the whole-building leasing arrangement.」

「The Company recorded operating profit of ¥1,297.224 million and quarterly net profit of ¥1,378.305 million for the cumulative second quarter, indicating a recovery from the operating loss of ¥3,243.623 million and net loss of ¥3,261.097 million recorded in the previous fiscal year.」

「Although the Company recorded an operating profit of ¥559.440 million and net profit of ¥576.736 million for the cumulative first quarter, it recorded an operating loss of ¥3,243.623 million and net loss of ¥3,261.097 million in the previous fiscal year. The outlook for the economic impact of the COVID-19 pandemic remains uncertain. In the hotel industry, tourism demand is expected to recover to pre-pandemic levels, but business demand is not expected to recover fully, and inbound demand is expected to take some time to recover. Accordingly, the possibility remains that the Company will incur significant operating and net losses in the current fiscal year, as it did in the previous fiscal year.」

「As the COVID-19 pandemic spread, demand for hotel use declined from February 2020 onward due to restrictions on activities, including requests from the national and local governments to refrain from travel. If this situation continues, it may have a significant impact on the Company's financial condition and business performance.」

「During the third quarter, the state of emergency was lifted on 30 September 2021 and restrictions on the number of people at dining and event venues were gradually eased, with travel beginning to recover. However, due to the impact of previous states of emergency and priority preventive measures, the Group recorded an operating loss of ¥2,926,319 thousand and a net loss for the quarter of ¥2,905,933 thousand during the cumulative third quarter. Events and circumstances existed that raised substantial doubt about the going-concern assumption.」

「During the cumulative second quarter as well, the spread of infections had not subsided, and the Group recorded an operating loss of ¥2,513,752 thousand and a net loss for the quarter of ¥2,351,603 thousand due to the impact of states of emergency and priority preventive measures. Events and circumstances existed that raised substantial doubt about the going-concern assumption.」

「The Group is currently implementing these measures, but material uncertainty exists regarding the going-concern assumption because uncertainty over the recovery of revenue and operating results has increased due to the spread of highly infectious COVID-19 variants, and negotiations are underway with financial institutions regarding the specific timing of support and additional funding measures.」

「The Group was significantly affected by the spread of COVID-19 during the fiscal year under review, recording an operating loss of ¥7,056,697 thousand and a net loss for the year attributable to owners of the parent of ¥7,518,460 thousand. As a result, as of 31 March 2021, the Group was in breach of financial covenants under loan agreements entered into with certain financial institutions.」

「The declaration of a state of emergency in response to the spread of COVID-19 brought requests for business closures and voluntary restrictions on going out into full force, resulting in a significant impact from the sharp decline in demand. In addition, the Group temporarily closed a total of 13 hotels in stages from 17 April through the end of May to limit losses and avoid infection risks, resulting in the recognition of a substantial operating loss and net loss for the quarter attributable to owners of the parent.」

「The state of emergency was subsequently lifted and conditions began to recover gradually. However, if a further resurgence of COVID-19 leads to reduced customer traffic, shorter operating hours and temporary closures due to requests to refrain from going out, this could have a material impact on the Group's financial position, operating results and cash flows.」

「As COVID-19 spread, demand for hotel use declined from February 2020 due to activity restrictions associated with requests from the government and local authorities to refrain from travel. If these conditions continue, they may have a significant impact on the Group's business.」