Singapore brand making the industry take notice

Who doesn't love a good rags-to-riches story? If there’s a Singapore hotel chain that fits this bill, acquisitive Worldwide Hotels Group is it.

The family-owned business just shelled out more than $500 million on two hotels within a week. It acquired the 542-key Parkroyal on Kitchener Road Singapore from Pan Pacific Hotels Group for $388 million (S$525 million). In Australia, it bought a 472-room dual hotel, the Novotel & Ibis Melbourne Central Hotel, from Well Small Investment for $113 million (A$170 million). Both assets are freehold.

The deals marked the largest ever single-asset hotel transaction in Singapore, and the largest hotel transaction in Melbourne in six years, according to their respective brokers JLL Hotels & Hospitality Group and CBRE Hotels Asia-Pacific.

They came after a spree in Singapore in late 2018/early 2019, which saw the group acquiring a hotel plot in Club Street near the CBD for S$562 million, and an office/retail complex approved for hotel development at Short Street in the downtown Rochor area for S$276 million. Including construction and fitting-out costs, the whole pre-pandemic investment amounted to more than S$1 billion.

The two hotels will open by yearend. The former, with 989 rooms, will be Worldwide Hotels’ new flagship and usher in a new “lean luxury” brand, Icon Hotel. The latter will be its second Hotel Mi, a brand targeting next-gen travelers with unique ‘Mi’ experiences.

Meanwhile, the Parkroyal hotel will be rebranded Novotel under a franchise agreement with Accor that will be completed soon. Over in Melbourne, the hotel will continue to be managed by Accor as Novotel and Ibis.

“Worldwide Hotels is known to have a large war chest,” said Koh Tien Gui, a partner in the real estate team at Withers KhattarWong Singapore. “I note the price per key for the latest Parkroyal buy is close to S$1 million [S$968,635 per key], so I imagine they probably see this as a good bet.”

Koh believed the hotel was a strong performer for the vendor, Pan Pacific Hotels Group, which sold “perhaps because it didn’t fit anymore into its current rebranding strategy.”

As famous as Singapore Air

For Worldwide Hotels, the M&As fit into its mission to be recognized globally as the leading Singapore hotel brand which focuses on the mid-tier market and excels at delivering consistent guest experiences and exceptional value, said Managing Director and CEO Carolyn Choo in an interview with Hotel Investment Today.

Carolyn Choo

Choo is the daughter of Singapore tycoon Choo Chong Ngen, whom Forbes listed as Singapore’s 19th richest man in 2022. His net worth is nearly $3 billion as of July 23, 2023.

His rags-to-riches story is the stuff of legend. A school drop-out at age 10, he fended himself selling fish, textile and women’s clothing in Singapore’s heartlands before dabbling in real estate. He started buying and leasing out shop units in suburban retail complexes. Later he acquired land to build residential apartments, followed by budget hotels which he named Hotel 81 – after his house number. The first opened in 1995 in Singapore's red-light district, Geylang.

Today, there are 28 hotels in the Hotel 81 portfolio and they have shed their tinge of notoriety as “love hotels” that charge by the hour. The sprucing up of these hotels over the years, and the entry of low-cost carriers, have made them popular with travelers seeking affordable accommodation.

From the sole Hotel 81 some three decades ago, Worldwide Hotels now owns 41 hotels in Singapore (including Parkroyal, Club Street and Short Street buys). Outside Singapore it owns 10 hotels (including the latest in Melbourne) in Australia, Japan, South Korea, Thailand and Malaysia.

Challenging asset class

While dad has created the foundation, daughter Choo is leading the charge to corporatize and grow the business, not just in Singapore but overseas. She joined in 2002 and was made managing director and CEO in 2017.

“We’re in a very exciting phase two of our growth. We went on a corporatization drive and set up Worldwide Hotels in 2017 to consolidate all our hotel brands under this umbrella. We also aggressively started to invest in overseas hotels assets,” Choo said.

But hotels are a very challenging asset class, Choo admitted.

“The operating yield is very, very challenging – in fact negative yield – because of high interest rates now. You need to bear with it for the short-term and look at the long-term capital appreciation. Plus, hotels enable us to continuously build our capabilities and management efficiency. With office asset class, there’s not much else apart from the rental income,” she said.

“We have a long-term strategic horizon on all our assets; that’s why we are able to look beyond this period of uncertainty.”

All of Worldwide Hotels overseas properties are managed by third-party brands, including Oakwood, Holiday Inn, Ibis, Swiss Garden, Novotel and Travelodge. In Singapore, Worldwide Hotels manages all of its hotels under its own brands, except for the rebranding of the Parkroyal to a Novotel under a franchise.

“The rooms at that hotel are much bigger. It’s a full-service hotel with meeting rooms, restaurants and lots of commercial spaces. It’s an upper mid-tier hotel and we feel we can achieve better returns with a Novotel branding. But we still want to manage it ourselves [hence the franchise],” Choo said.

We always secure funding before we make an acquisition. We don’t go for high financing; we are only asking for 50% [the other half funded by shareholders]. And, of course, it’s built on more than three decades of long-term banking, in which we’ve established credibility and track record. The bank knows we know what we’re doing.

Carolyn Choo

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Choo is already building more muscles for Worldwide Hotels’ third phase of growth, which will include managing its own assets overseas, then going into third-party management.

“Hopefully when the third generation comes in, we can be at a scale that’s sufficient for us to have the same level of efficiency overseas and manage not only our own hotels but for other hotel owners,” Choo added.

Banks are loving hotels

After COVID-19, banks are more positive towards hotel financing, Choo continued. In fact, they see it as more attractive than office, whether in Singapore or overseas.

“We always secure funding before we make an acquisition,” she said. “We don’t go for high financing; we are only asking for 50% [the other half funded by shareholders]. And, of course, it’s built on more than three decades of long-term banking, in which we’ve established credibility and track record. The bank knows we know what we’re doing.”

Worldwide Hotels is always on the lookout for good acquisitions in Singapore, Choo said. Overseas, it is targeting to acquire another 10 hotels in the next few years.

When asked if, on hindsight, there’s regret in not buying any hotel asset during COVID-19, she said, “We actually learned that lesson after the Lehman Brothers collapse [2008 banking crisis]. There were assets that we didn’t buy. So, this time around, we made sure we didn’t miss out any opportunity and made sure we buy.”

One thing is certain for Choo: her father is an inspiration. “He has been through so many cycles. And each time, he’s steadfast and resilient. He’s also very strategic and focuses on the long-term. And he always sees opportunity when others don’t.”

She added, “If you are strategic, you need an effective leader to ensure the team executes. So that’s where we complement each other well. He doesn’t micro-manage me. And he’s passionate about the business. Sometimes, he walks the grounds and talks to room attendants and guest service officers, not just the managers. He’s involved in strategic decisions now, which is reassuring for me. As a daughter leading a company with 1,000 staff, I have someone I can turn to for advice. I have a mentor in him.”