Weak demand for Mandarin Oriental’s hotels contributed to a sharp decline in the company’s profits in 2016.

Releasing its full-year financial figures this week, the Hong Kong-based hotel group revealed that profits slumped 38% to HK$55.2 million (US$7.1m) in 2016, compared to HK$89.3m in the previous year. The company’s revenues declined 1% to HK$1.32 billion.

Mandarin Oriental said the downturn was caused by “softer demand in many of its key markets”, including Hong Kong, London and Paris.The London property was also impacted by an ongoing renovated project.

Looking forward, the company said that “challenging market conditions are expected to continue” in 2017. It added however, that continued portfolio development, including new properties in Qatar, Hawaii and Bali, will help improve its performance in future.