Micro-owners, fort-nightly travel and chasing yields in Asia Pac

Unique ownership models

Yulo-Luccini discussed the unique ownership model for Singapore-based Hotel 101, which is a subsidiary of Philippines-based DoubleDragon, as well as what their select-service hotels were seeing during and after COVID.

Hannah Yulo-Luccini

“Our highest occupancy was during COVID, believe it or not. We had 96% occupancy. We saw many people liking our [one style of rooms] because we have a kitchenette. So, we were seeing a lot more longer-term stays there,” she said. “Today, we’re at about 86%, almost pre-COVID occupancy, and people are staying longer… What’s happening is people are looking for a better value, especially after revenge traveling."

Yulo-Luccini said Hotel 100 builds large-scale hotels -- 500-keys in a 3-star setting. “It’s a unique business model… We’ve seen consistently high occupancy and very good returns for our unit owners because we’ve fragmentized the ownership. That’s how we scale the business because we sell the hotel units strata-title to individuals who share in the revenue… They don’t have any operational risk. They take from the top line and not the bottom line, which is why it’s even easier to understand.”

Jihong He talked about another unique model of group owners for her company, Shanghai-based H World Group Ltd., formerly known as China Lodging Group. The company has 9,000 hotels but over 14,000 owners, often meaning several people coming together to own a property.

Jihong He

“We go to a totally different aspect with the ownership… Because our hotels are more limited-service, we really activate the individual owners,” she said. “Several people will put their money together — and then open a hotel, which is a stronger business.”

That’s a very important element of H World Group's growth. “We try to make lives easy for franchisees. They do not have to do anything if they don’t want to," He added. "They just need to select a location. They look at the hotel and [decide] what kind of brands they think it suits. We have the whole supply chain, we’ve got contractors, and we can get everything done for them. Then we also send hotel managers there; we recruit a whole management team for them. For accounting and booking, the whole financial system was centralized. They don’t have to deal with the localized financial bookkeeping stuff if they don’t want to… That is the key element of what we have learned. If they don’t have to worry about their construction, their management, their financials… then they’re happy to be your owners.”

‘Fort-nightly’ corporate travel?

When asked about the return of corporate and group travel, Baswal noted what he sees for Australia- and Hong Kong-based Ovolo Hotels. He said it’s more of an Australia-centric observation because the company has eight hotels there.

Dave Baswal

“We’ve seen a demand increase. Corporate is back to where it always was, or maybe slightly behind. But the corporate group segment for the smaller, minor and frequent kind of visitation has exponentially increased,” he said. “We’ve seen a major shift for corporate groups, and the average spend in that space has increased, as well. They’re spending a bit more time at the hotel.”

Baswal said he thinks that’s because of the new realities of hybrid work environments.

“It’s probably driven by the fact that people are not seeing each other in the office every day, but rather on a quarterly or fort-nightly or a monthly basis,” he said. “Instead of doing that one big annual event towards the end of the year or bi-annual event, they now need to meet more frequently to strategize, see each other and think where the business needs to go. The small format – 10, 20, 30 people coming together, spending more than one or two days at the hotel, working in the hotel and using the facilities — is definitely a growing trend for us.” 

Why Asia Pacific is the darling of capital

Speaking broadly about owners’ expectations now versus 10 years ago, Watts said the reason Asia Pacific hotels are the darling of capital right now is the ability to reprice on a nightly basis, pent-up travel demand and overall macroeconomics.

Alan Watts

“What we’re seeing is new capital that wouldn’t traditionally do hotels, looking for yields and coming to two places: hotels and our part of the world,” Watts said. “Institutional capital that, generally speaking, had more competency in the U.S. or Europe, has started to switch to Asia as they chase yields.

“If you had said to me, even five years ago, Blackstone would be a player in the casino business in Australasia, I would say they wouldn’t be brave enough to do that because they don’t know the markets well enough. Brookfield has re-headquartered in this part of the world. That is as much about us as it is about institutional capital needing to do what it does.”

Rethinking all-inclusive

Lanter discussed how the concept of all-inclusive has evolved from customers coming for the “all you can eat” bargain to choosing that type of resort because of the experience. He noted that Paris-based Club Med has radically changed its portfolio by closing 100 of its 120 resorts and then opening 50 new resorts.

Gregory Lanter

“There is no company that has closed 80% of its facilities and renew it to a new era type of facility… We now have this capacity which is premium and luxury… All-inclusive is the means to get somewhere, and the ‘get somewhere’ is bringing families together to have a real, full experience of life together with our staff."

Lanter said he is happy to see all-inclusive resorts grow in popularity.

“I’m happy to see that brands are coming from leisure to all-inclusive because I was starting to feel a bit lonely sometimes (audience laughs)… It’s a difficult business because, by definition, all-inclusive is a fixed-cost business where you need to provide everything. Whether you are at 20% occupancy or 80%, you have to have things ready, and dealing with this fixed-cost business requires an organization that is very structured toward all-inclusive.”