New business units diversify Dusit’s earnings

Thailand’s Dusit International is always associated with its legacy hotel brand, Dusit Thani, which defines gracious Thai hospitality. In fact, Dusit has grown from 27 hotels in eight countries in 2016, to nearly 300 properties now, including the luxury villas of Elite Havens, a Singapore-based vacation rental company which it acquired fully in 2018. But behind the scenes, the kitchen has been boiling with diversification heat since 2016, when the founding family welcomed an outsider as Group CEO for the first time in its history.

Suphajee Suthumpun, a Thai investment and technology executive who started her career as managing director of IBM Thailand and rose to become CEO of satellite company Thaicom, wasted no time working alongside second-generation Dusit hotel owner Chanin Donavanik to expand the volume of earnings through new revenue streams.

From two main earners, Hotels & Resorts and Hospitality Education, another two business units, Dusit Foods and Property Development have emerged.

We have two other projects in the pipeline now. But our property development must have a purpose – be it branded residences, senior living, wellness or startup living – where we can add more value and services. It’s not just about selling a unit but creating a recurring business wherever possible after the sale.

Suphajee Suthumpun

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Suthumpun, in an interview with Hotel Investment Today, said she expects Hotels & Resorts to account for 60% to 65% of revenues this year, from a hefty 90% in 2019, with the three adjacent businesses contributing the remaining share.

In five years, she said that ratio should be 50:50.

Deft piece of foodwork

Dusit Foods is growing fast, Suthumpun said, adding that an IPO for the subsidiary is slated by end-2024 or early-2025.

It all started in 2018 with Dusit acquiring a 26% stake in NR Instant Product, an established food producer and exporter in Thailand. This enables Dusit to produce ready-made Thai food pastes using its traditional recipes, to be shipped to its properties worldwide.

“Our purpose is to bring Asia and Thailand to the world,” Suthumpun said. “For us to deliver the same Thai food quality, taste and standards wherever we may be, we decided to create ready-made pastes, say Thai green curry or Massaman curry, and ship them to our properties worldwide. This also aligns with our sustainability goals as this process reduces waste management.”

Dusit Foods portfolio also includes Epicure Catering Thailand, which caters food to students of international schools in Southeast Asia. Dusit acquired a 51% stake in the company in 2019.

“What I like about it is the recurring income. They produce 40,000 to 50,000 meals a day to students at more than 40 international schools in Southeast Asia,” Suthumpun said.

There’s also a joint venture with South Africa's Real Foods Group to bring its healthy restaurant concept, Kauai, to Southeast Asia.

And in May last year, Dusit acquired a 55% stake in Port Royal, a baking factory in Thailand producing French-style pastry for clients such as Black Canyon cafes throughout Thailand and Dusit itself. Port Royal also franchises its Bonjour Bakery Asia currently comprising more than 50 branches across Thailand and one branch in China.

All this food work resulted in PTT Oil & Retail (OR), a subsidiary of state-owned PTT Group, to acquire a 25% stake in Dusit Foods in August last year. OR’s retail business includes operating 4,000 Cafe Amazon outlets, a homegrown brand, at PTT fuel stations, malls, etc., throughout Thailand. The partnership is aimed at further expansion of Dusit Foods, leading to the IPO.

Most significant project

In Property Development, the most significant project in the company’s 75-year history is jostling for position as Bangkok’s new landmark.

Dusit Central Park is a whopping investment of $1.3 billion (46 billion baht) spanning 440,000 sqm of prime real estate on the corner of Silom and Rama IV roads opposite Lumpini Park.

Dusit Central Park, Bangkok

Developed in partnership with Central Pattana, the mixed-use development will see Dusit Thani Bangkok making a new grand entrance as the chain’s flagship in mid-2024. A duo concept Dusit-branded residences with 400 units, a modern office tower and a high-end shopping mall will follow in 2025.

Despite an oversupply of office space, and more luxury hotel rooms and branded residences coming into the market, Suthumpun is optimistic about ROI.

“We have already sold 65% of the residences. We were lucky that were still able to sell the units even during COVD-19,” she said. “And we didn’t sell them cheap as the project, being high-end Dusit branded residences, come with our services such as housekeeping, 24-hour concierge and even medical/well-being for residents [through partnership with a nearby hospital].”

The average price per sqm is 350,000 baht ($9,885). More expensive units with park views rather than city views have commanded 500,000 baht per sqm.

She agrees offices are “challenging” due to oversupply and trends such as work-from-home. However, Dusit Central Park’s location is a deal maker. “We are the only location in Bangkok currently where the underground MRT station [Lumpini] meets the BTS Skytrain station [Sala Daeng, on Silom Road],” Suthumpun said. “People could connect directly to the MRT station and enjoy the lifestyle offerings underground, then walk up to connect to the Skytrain above ground, where we are building 11,000 sqm of gardens with water features, a nature sanctuary in the middle of Bangkok for people to enjoy greenery.”

On competition with other luxury hotels, she believes Dusit Thani Bangkok has its own unique offerings. “With just 257 rooms but a large events space, all with panoramic views of Lumpini Park, I don’t feel I need to compete with other hotels. In fact, we can be a feeder to them when we are full with global events,” she said.

While a lot of focus is being placed on Dusit Central Park, the company has also launched a 26-story high-end condominium, The Hampton Sriracha, in a 50:50 partnership with Origin Property. Located in Chonburi province, 80% of the project has been sold and transferred to owners, according to Suthumpun.

“We have two other projects in the pipeline now. But our property development must have a purpose – be it branded residences, senior living, wellness or startup living – where we can add more value and services. It’s not just about selling a unit but creating a recurring business wherever possible after the sale.”

She added, “Hotels are capital expenditure heavy. You have to invest and wait for 10 to 12 years for your ROI. With residences, you collect money from the buyer even before you start the project. And once transferred, you earn 100% revenue right away. Then there is income from recurring business afterwards, which is our model.”

Asset light

That said, Dusit is continuing to expand its Hotels & Resorts portfolio but reducing the number of owned assets and increasing management fee income. Excluding Elite Havens, there are 52 Dusit properties, including latest openings in Kyoto and Nepal. Of the 52, only nine are owned by Dusit.

The company said it has 60 hotels in the pipeline opening within the next three to four years.

In 1Q23, the group reported a core EBITDA of 356 million baht, an increase of 69.5% YoY and 44.4% QoQ, attributed to continued hotel business recovery and food business expansion. Increased ADR led to its highest quarterly RevPAR and highest quarterly hotel revenue since COVID-19. The food business also grew considerably.

While its peers such as Minor International and Centara Hotels & Resorts grew out of food and/or property business, it’s the other way round for Dusit International and marks a new swagger as the group celebrates its 75th anniversary this year.