Hospitality
experts at HICAP discuss how creative companies approach growth and why
resilience is a key metric for hotel investment.
SINGAPORE — The CEO of Ace
Hotel knows that lifestyle brands can seem subjective in their approach
because they are creative companies. But he said at HICAP in Singapore last week that there’s an objective, even
scientific, method to approach their goals.
“I guess there’s an implication
that because we’re a creative company… that we think differently, but I think
ultimately our roles are all the same in that we optimize value for
shareholders today and provide sustainable value in the long term,”
said Chris Penn, CEO of New York City-based Ace Hotel. “Our creativity and
brand presence become our superpowers. So, that’s the thing that we can really
leverage to deliver extra value across a number of those stakeholders.
“I don’t think we’re different. What is different is some of the inputs that deliver the value are slightly different.”
I don’t think we’re different. What is different is some of the inputs that we put into our business that deliver the value are slightly different.
Chris Penn
Penn said another difference for
Ace Hotel is its ability to adapt to objectively changing consumer behaviors.
“If you look at how generations
have changed so much faster over the past 20 years and how consumer behavior
patterns are changing day-by-day and not year-by-year, we are a fluid and agile
company,” he said. “We continue to evolve and the great thing is we adapt and
remain relevant. That creativity, although it can appear subjective, is
absolutely an objective input for us to deliver long-term, sustainable
success.”
Penn was part of a “View from
the Boardroom, Round Two” panel on the second day of the 35th annual Hotel
Investment Conference Asia Pacific (HICAP) in Singapore. The panel included
Leif Bajarias, executive vice president for finance and operations for Cebu,
Philippines-based AppleOne Group; Bobby Hiranandani, co-chairman of Abu
Dhabi-based Royal Group of Companies; William Huston, general partner of
Singapore-based Bay Street Hospitality; and Hannah Yulo-Luccini, CEO of
Singapore-based Hotel101 Global Pte., Ltd. Hok Yean Chee, president of HVS Asia
Pacific, served as moderator.
Will it be relevant?
Bajarias said AppleOne also has
to consider operational efficiency in its hotel investments.
“But we don’t want to forget
about what happened three to four years back during the pandemic. It has
affected us in such a way that right now, when we look at hotel investments in
general, the main question to ask is whether this property will continue to be
relevant five years after it opened,” he said. “Resilience is a key topic for
us.”
The different chain scales of
properties will determine the amount of hotel investment needed, Bajarias said,
but the basic premise about customer behavior should remain the same.
When we look at hotel investments in general, the main question to ask is whether this property will continue to be relevant five years after it opened. Resilience is a key topic for us.
Leif Bajarias
“As you go from a standard type
of hotel to luxury, every penny spent will only be justified if your guest is
willing to pay for it and if they bring more guests to your property,” he said.
“So, we really keep that in mind in terms of deciding what type of property to
put in that market.”
Huston said Bay Street
Hospitality had a clarifying moment when internally discussing how to pitch to
investors.
“When we were fundraising, we
realized that a lot of people were saying that they didn’t quite understand how
we were identifying opportunities. I had a meeting with the team that
really changed the trajectory of how we started deciding to deploy capital,” he
said. “I said we need to make sure that from start to finish, we have a
sequential process that anybody can understand when they see it for the first
time. But also, if they decide not to allocate to the fund, it’s because we’re
not fit for what they’re doing, not because there’s some miscommunication or
disconnect in the underlying thesis.
“At this point, we’re able to
get in front of the right type of allocators that are open to the jurisdiction
where we’re deploying capital and help them do that in a much more efficient
manner because of a data-driven approach, as opposed to just taking a general
business test to a market.”
An HMA as a prenup
When discussing how to align
visions among owners, operators and board members, Hiranandani joked that a
hotel management agreement is actually a prenuptial agreement.
“You are defining the fate of
your marriage before you actually get together,” he said. “The good part is, as
the owner, you’re just looking at it when you enter any investment, your eyes
are wide open. You know what your capital allocation is for a particular
project you will be underwriting, and if you’re happy with that investment, you
take it forward.
“Whereas on the operator side,
they don’t look at it in such a vanilla manner. They will look at it through a
different lens. Do I want my brand in this country? Do I want to be in this
location? Where does this take me? Do I drive more revenue and incur costs?”
Hiranandani said it could be one
of the more misaligned relationships out there, but it still exists… and works.
If there is a deal on the table and the location is prime, we don’t need to look at new demand. We suck up existing demand, because the prices will be so compelling and we will have a very large-scale hotel.
Hannah Yulo-Luccini
“It’s keeping who you have your
relationships with, and when you trust your operators and investors, that goes
above all else, and that’s where you keep your alignment… and we all are
looking forward to a longer-term relationship, and not just a one-off.”
Sucking up existing
demand
Yulo-Luccini said that because
Hotel101 is in a rapid expansion stage, it keeps deal stakes pretty simple.
“From a viewpoint of our board,
if there is a deal on the table and the location is prime, we don’t need to
look at new demand,” she said. “We suck up existing demand, because the prices
will be so compelling and we will have a very large-scale hotel… The
decision-making is easier for us.”
Yulo-Luccini said that means
starting in the main citiy markets to make a statement and facilitate easy
expansion into secondary markets.
“In Spain, we did Madrid and
it’s very visible,” she said. “Today, we’re in talks with many different cities
in Spain, potential joint venture partners, licensees, because they can see it
now and we’ve proven the business model.”