Asia leads Regent revival but it's not yet time to pop champagne

GLOBAL REPORT – At IHG takeover, there were only six operating Regent hotels left in the world. Currently, there are nine open and nine in the pipeline. Asia is leading the growth by far.

Not bad for a brand that had lost the plot due to serial acquisitions – first to EIE then Four Seasons, Carlson and Taiwan’s Formosa – before ending up in IHG’s stable in 2018. IHG owns 51% and the rest is held by Formosa, whose founder Steven Pan is the quintessential example of an Asian owner who loves the brand.

But it’s not yet time for the new brand ownership to gloat as Regent’s momentum in Asia isn’t translating elsewhere. There’s just one new opening in Europe, the Carlton Cannes, albeit that’s a significant conversion from sister brand InterContinental. And IHG has only recently cracked open the Americas to rebrand the Loews Santa Monica Beach Hotel into a Regent.

In the Middle East, GCC and Saudi Arabia, where luxury brands are jostling for dominance, Regent is as still as desert, although IHG is said to be close to signing a Regent in Abu Dhabi.

In contrast, there are indeed signs of a Regent revival in Asia. Next month’s grand opening of Regent Hong Kong is a confidence nod to the brand by Gaw Capital Partners, who led the hotel’s acquisition from IHG for $938 million and poured another $300 million to remake it into today’s Regent. It’s also an emotive story as the property was once a Regent.

Rajit Sukumaran, IHG’s managing director Southeast Asia and Korea

“When you launch a hotel like that, it creates a lot of buzz,” said Rajit Sukumaran, IHG’s managing director Southeast Asia and Korea, when asked about the potential upside from the opening. “But I wouldn’t downplay the importance of the other new Regent hotels that are coming up.

“We always felt that Regent Hong Kong must open first before interest in the brand would pick up, but actually that has already started.”

The first newbuild Regent under IHG opened in Phu Quoc, Vietnam, last year. On the heels of Hong Kong are openings in Bali and Shanghai later this year, Kyoto in 2024, Kuala Lumpur in 2025, then Jakarta, as well as Sanya, Chengdu and Shenzhen in China over the next few years.

“Regent was born in Asia, and its origin story remains in Asia. So it’s no surprise the brand resonates more vividly and responsively in Asia,” said Robert Hecker, managing director Pacific Asia, Horwath HTL. “For growth beyond Asia, it needs its own clearer voice that carries beyond its rich Asian history, or perhaps making more of it as a point of distinction.”

In Asia, Regent still conjures the pizzazz of its legendary makers. Bob Burns, Georg Rafael and Adrian Zecha created a brand that sizzled. M&As fizzled it.

Veteran luxury hotelier Ted Teng saw it all. The former president and CEO of The Leading Hotels of the World recalled, “The first two decades [of Regent’s 50 years history] saw great growth under the founders. Then it was sold to EIE, then Four Seasons. It was strategic of Four Seasons to acquire Regent; it weakened a potential competitor and converted some Regent trophy assets in locations such as Milan, Bali and Istanbul to Four Seasons. This stage seriously wounded Regent.

“Carlson ownership did nothing for the brand,” Teng continued. “Steven Pan is a great hotel investor and operator and did a great job in reviving a damaged brand in Asia but probably found global development expensive and risky. IHG is a great partner with global scale for him. Owners/investors looking for a luxury brand would now have more confidence with the IHG scale and efficiency and so would their lenders.”

Apart from legacy, Regent is growing faster in Asia than elsewhere because of continued growth of the Asian and global luxury travel market, Sukumaran said, adding that these travelers want to explore the amazing destinations in Asia, but those places lack luxury hotels and there’s capital required to build them.

The opportunities are there, but you need to be invited to the table. And you’re invited only if you command the respect of the industry and I think people’s confidence in IHG as a luxury operator has increased.

Rajit Sukumaran

Share this quote

Moreover, a “good proportion” of luxury hotels in Asia are unbranded, resulting in many ownership groups looking to brands for their distribution and global systems, Sukumaran added.

Seat at the table

Supply and demand for luxury hotels is expected to continue to grow over the next decade. By 2033, there will be 1.7 million luxury hotel rooms in the world, or 8% of total hotel supply, according to a JLL report.

“So, the opportunities are there, but you need to be invited to the table. And you’re invited only if you command the respect of the industry and I think people’s confidence in IHG as a luxury operator has increased,” Sukumaran said. “When we speak to owners, a lot of them don’t realize how big our luxury and lifestyle portfolio is today, comprising 460 hotels with 100,000 rooms in 70 countries, probably second only to Marriott.”

He maintains that Regent “is seeing strong interest in the brand across many of our markets globally, with some very exciting conversations right now.”

He also doesn’t believe that current high interest rates and higher costs of developing luxury hotels in the West than in Asia as limiting growth of the brand in the U.S. or Europe. “Investors and developers are always going to take into consideration the financing environment, but they are also looking over the long-term at the value of a deal,” Sukumaran said.

The rebranding of Carlton Cannes as a Regent may inspire other investors to consider the brand.

“Hotel icons such as the Carlton, or the Four Seasons Hotel George V in Paris, are older than the chains. Hotel groups need them to enhance their reputation, not the other way around,” said Richard Adam, a destination and resort development strategist who is currently involved with the NEOM project in Saudi Arabia.

And more than ever, it all boils down to ROI, added Adam. “Real estate owners increasingly question the fees and the value they get in return. After all, they pay significant money for an anticipated brand value,” he said.

Sukumaran could not agree more. “A lot of the ownership these days aren’t just building flagship crown jewels. The brand has to match up to returns. So, for us, it’s about being careful that the money is spent in the right areas that will give the highest returns. We never want owners to overspend for the hotel to look beautiful but will never make a return.”