Thailand’s Chatrium Hospitality charts new course

BANGKOK – Normally Thailand’s small independent hotel group Chatrium Hospitality is low key, despite or perhaps because of its family link to Bangkok Bank, one of the largest commercial banks in the kingdom with subsidiaries in Indonesia, Malaysia and China.

The group, part of real estate company City Realty, has been around for 15 years, quietly operating its own hotels and residences that are popular among expat families moving into Thailand, and domestic and foreign tourists who like its genteel ways.

These days, however, Chatrium Hospitality is emitting new energy. The opening of the Chatrium Grand Bangkok last November, a $150 million (5.5 billion baht) investment, marks its foray into the luxury segment. A second Chatrium Grand in Samui, along with two hotels in Phuket under its premium brand Chatrium, are in the works. These properties, developed by parent City Realty, will give Chatrium Hospitality a footprint in the beach resort market for the first time.

City Realty is headed by Chali Sophonpanich, son of the late Bangkok Bank Chairman Chatri Sophonpanich (hence the brand ‘Chatrium’). His brother, Chatsiri Sophonpanich, is president of the bank. Sister Savitri Ramyarupa runs Chatrium Hospitality as managing director.

Management push

Having established a name in the market, with 11 operating hotels representing 3,100 keys, Chatrium Hospitality is now seeking management contracts in Thailand, Vietnam, Indonesia and Malaysia. Its first deal was the opening of a Maitria hotel – its 4-star brand – in July 2021, a conversion from U Hotel Sukhumvit.

Chatrium Grand Bangkok

“If we go with just our own [hotel] investments, it’s heavy. We can only do one or two projects at a time,” said Ramyarupa in an interview with Hotel Investment Today. “So, we want to go asset light, which will help us diversify the business, grow faster, create more awareness for Chatrium Hospitality and gain economies of scale. We want to bring our expertise into the market and help other owners achieve [healthy] returns.

But while the pandemic has fueled conversion opportunities in Southeast Asia, particularly Thailand, competition is even stronger as a gamut of players chase management contracts. They include family-owned Thai groups such as Dusit International and Centara Hotels & Resorts, other Asian regional chains, the global behemoths and even companies founded by former hoteliers, such as Absolute Hotel Services, which operates the U brand.

It has taken a long time for Dusit and Centara to reach the scale each has today. As Bill Barnett, managing director of C9 Hotelworks, said, “We’ve seen other Thai groups grow via an asset light management company approach, including Centara and Dusit, but the transition has had many hits and misses.”

Barnett added, “Chatrium’s challenge is to develop a hotel management culture, which relies on significant human resource. It will be key to see if the group has the appetite to fund the process, which is not cheap and not easy.”

Currently, aside from Group General Manager Rene Balmer, its key personnel include directors for sales and marketing, revenue and digital distribution, marketing communications, human resources, special projects and IT.

Perhaps some brotherly love might help with funding. But when asked what influence Bangkok Bank might have on her growth plans, Ramyarupa emphasized that Chatrium Hospitality runs independently.

“Bangkok Bank helps us with checking the credit worthiness of partners,” she said. “We do ask for potential customers, and they would introduce if there’s no conflict of interest. But we still have to fight for it based on our own merits. It’s kind of an 80:20 rule – you don’t get a deal rightaway,” she said.

The challenge

On its own, industry observers agree it’s going to be an uphill task.

Competition between hospitality brands in Thailand “is crazy,” while going beyond Thailand is risky, said Bangkok-based real estate consultant Vimol Kogar.

Chatrium’s challenge is to develop a hotel management culture, which relies on significant human resource. It will be key to see if the group has the appetite to fund the process, which is not cheap and not easy.

Bill Barnett

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“When you go to overseas markets, it takes a while to understand the domestic landscape, client profiles, occupancies and customer requirements,” Kogar said. “Chatrium and Maitria are successful local brands that will find the international markets challenging to make profits. Any wrong turn in markets such as, say, Singapore can cost a million dollars in lost revenue.”

That said, Chatrium Hospitality does have some experience in overseas markets with one hotel each in Yangon, Myanmar and Hokkaido, Japan. The rest of the portfolio is in Thailand.

“Maybe markets such as Vietnam, China and India are still worth visiting,” Kogar added. “Personally, I believe the second-tier cities in Vietnam are the best bet.”

Added Barnett, “One niche opportunity they could potentially capitalize on is as a [serviced] apartment brand. Given Ascott’s acquisition of Oakwood, there is space for more players in this segment, and the group does have experience running those type of properties.”

Ramyarupa fully recognizes it won’t be easy. “Any new business is a challenge for us, but it is not impossible,” she said. “For instance, we started with Bangkok Garden rentals, then we went into serviced apartments with Emporium Suites, then residences. The business became blended. It’s having the right mindset that [this new challenge] is not beyond us plus we like the challenge of doing something new.”

Besides, Chatrium Hospitality isn’t going for volume of contracts, rather for “selected owners and properties.” 

Ramyarupa believes there is an opportunity to give owners “more value than they expect, in terms of revenue and cost savings.”

Ways to do that is to charge a single fee rather than non-transparent charges that global chains impose; focus on higher profit revenue streams such as meetings and weddings; maximize property space through retail rentals, pop-up restaurants and co-working spaces; and lower fixed costs to each hotel by maintaining centralized key departments such as sales and marketing, IT and revenue.

Observed Barnett, “Post-pandemic, with hotel development and conversions running rampant, Chatrium does have an opportunity to get traction. But getting to the tipping point of profitability is considerably longer-term proposition. So, the question is how patient and pragmatic can they be.”

At this stage, Ramyarupa rules out taking equity stakes to clinch management deals.

However, the development page on its website states that parent City Realty is prepared “to invest in operational hotels or greenfields to develop hotels, residences or condominiums on its own balance sheet,” or co-invest as the anchor investor and raise third-party capital to pursue asset acquisitions.

In particular, City Realty will invest in acquiring operational but underperforming hotels below replacement cost, to be rebranded as Maitria.

Ramyarupa said that may happen in the long term, as City Realty is already busy with other residential projects and the three hotels earmarked for development in Phuket and Samui.

Meanwhile, Chatrium Hospitality can’t afford to lose sight of the need to get the ROI of its first luxury Chatrium Grand Bangkok costing $150 million. The 582-room twin-tower hotel and residences counts Waldorf Astoria, The Peninsula and Ritz-Carlton as its competitive set. It is located next to the Siam Kempinski.

Ramyarupa expects the hotel to be profitable in 10 years, rather than the usual 12 years, she said.

“It depends on the rate, and Bangkok hotel rates are too low,” she said. However, the performance since we opened in November has been good, with occupancies averaging 40% and some days even 70% as travelers start to return to Thailand.

“Our projection is for an average occupancy of 56% and an average of rate of 10,000 baht net for this year,” she said.