Plan set to transform Singha Estate’s hospitality chain

BANGKOK – Thailand-listed S Hotels & Resorts (SHR) is on a quest to unlock its high potential assets with a target IRR of 12% to 15% through an asset rotation strategy. The hospitality arm of real estate developer Singha Estate also aims to expand its portfolio to an additional 50 hotels within five years through acquisitions and management contracts.

The company has a war chest of 15 billion baht ($454 million) for M&A opportunities over the next five years. Since 2019, SHR has sold four of its hotels in the U.K. and may divest more. In October 2023, it raised 1.3 billion baht through debentures and could do it again if need be. Cash is also flowing nicely; its net profit of 40 million baht in 1H24 is a four-fold increase over 1H23, which SHR attributed to stronger demand comeback, greater operational efficiency, market mix diversification and higher rates.

“We have a lot of headroom to grow. We’re in a good position to take advantage of acquisition opportunities. However, we put everything through our investment return criteria so that we’re not just growing for scale sake but for improving our profitability,” SHR CEO Michael David Marshall told Hotel Investment Today.

We’ve been strengthening the brand since I arrived so that we can grow it, either by investing in [new-builds], acquiring existing hotels and rebranding them to SAii, or through HMAs.

Michael David Marshall

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The company currently owns 36 hotels with 4,290 rooms, four of which are a 50:50 joint venture. The majority, 26 hotels with 2,678 rooms, are in the U.K., managed by third-party operator Ambridge Hospitality under largely a Mercure franchise. Outside the U.K., SHR hotels are in Thailand, Maldives, Fiji and Mauritius, either self-managed with its own brand, SAii, or by other brands, namely Hard Rock, Outrigger, Curio Collection by Hilton and Accor’s SO/.

While asset rotation started under his predecessor Dirk De Cuyper, Marshall, who joined the company in November 2023, appears to be intensifying the strategy. He’s also adding new color to the ROI growth plan, such as bringing in a new partner, Singapore-based Ascott, to manage four SHR properties in the U.K., starting with two hotels.

SHR is also putting a bigger focus on growing its homegrown SAii brand, which debuted in 2019 as an upper upscale lifestyle brand and is being enhanced further as a sustainable luxury escape to cater to a growing legion of eco- and health-conscious customers.

“Together with the board and the team, we see an opportunity to take SAii to the next level,” Marshall said. “The four SAii hotels [in Thailand and Maldives] are performing very well. They are all resort properties, but we want SAii to be in city locations, as well. We’ve been strengthening the brand since I arrived so that we can grow it, either by investing in [new-builds], acquiring existing hotels and rebranding them to SAii, or through HMAs.”

Overall, SHR wants to add more properties in Thailand and the rest of Asia, as well as Europe – but more in Southern Europe. “That would help me balance the seasonality factor, as the peak quarters for Thailand and Maldives are Q4 and Q1, whereas for Europe it’s Q2 and Q3, i.e., the summer season,” Marshall said. “Potentially we will add two to four properties in 2025, a slow start at first but gradually faster afterwards.”

Market changes

In the U.K., a key reason to divest or reposition assets is because the business of the hotel has changed.

“For example, the hotel was in a location that had a lot corporate, government or meetings business, which made it profitable,” Marshall explained. “But post-COVID, a lot of work-from-home continues, so companies decided to close their offices. If the hotel isn’t located in a tourist destination, there’s no other sources of business. So, we can’t see the long-term profitability coming from it anymore.

“We still have some hotels in locations where the business has changed. So, potentially, we may divest a few more, then use the funds to invest in other areas and other countries within the five-year plan. But we’re keeping all the key performing hotels in the U.K. These hotels are located in strong cities such as Edinburgh and Manchester, which have leisure, events and corporate [traffic].”

S Hotels & Resorts wants to lift the Grand Hotel Leicester's RevPAR by 15% following its conversion.

SHR is repositioning top performing hotels to maximize their returns further. Its Mercure hotel in Edinburgh and its Grand Hotel Leicester will rebrand as Mount Royal Hotel Edinburgh by The Unlimited Collection and Grand Hotel Leicester by The Unlimited Collection after renovations are completed by end-2024 and 2Q25, respectively.

Ascott launched The Unlimited Collection in 2020 and refreshed it recently, accentuating the brand’s focus as “a selection of upscale hotels with exquisite designs located in vibrant neighborhoods brimming with cultural charms.” There are 11 properties in operation and pipeline, with the two SHR hotels marking the brand’s debut in Europe.

Where others may smell a gamble in going with a brand that’s new to Europe, Marshall sees an opportunity to uplift the RevPAR of the two hotels by 15% following their conversion.

He said the collection brand is “the perfect match” and will rejuvenate the two heritage hotels as the go-to places for local celebrations and memorable stays. Domestic market aside, the destinations attract international guests from the U.S. and Asia, where Ascott is a household name.

Moreover, Ascott, which has acquired Oakwood serviced apartments, has a big distribution network and is investing a lot of money on Europe expansion, he said. “So, we get the international market and at the same time build up the local. I think it’s a good time to partner with them.”

A slew of collection brands has entered the market and Marshall could go with any of the Western behemoths. When asked about this, Marshall said, “Given our size, we will not be able to strike the same partnership with a big chain as we have with Ascott, where I deal directly with the CEO.”

Under the agreement, Ascott eventually will be managing two other hotels in key U.K. cities.

Over in Asia, Marshall is already seeing a better RevPAR from its self-managed hotels, thanks to the introduction of newly renovated room types at both SAii Laguna Phuket Hotel and SAii Phi Phi Island Village Hotel, which led to a 14% YoY increase in ADR in 1H24, pushing up RevPAR by 9%.

Its SAii hotel in Samui has also been transformed into a new adult-only concept featuring 52 pool villas from December 1.

SHR is targeting total revenue of 12 billion baht for 2024 and a 3% to 5% increase in EBITDA margin. The company reached almost 10 billion baht revenue mark in the first nine months of 2023.