Flexibility, alignment key terms for Asian conversions
 
Flexibility, alignment key terms for Asian conversions
25 NOVEMBER 2019 8:22 AM

Smaller and new Asian hotel firms are moving into new markets or segments via conversions and renovations and are looking for flexible brands and management companies to help them expand.

HONG KONG—Renovations and conversions need to replicate the trends and construction policies of new builds, but investment needs to be allocated sensibly, sources said on a panel at the Hotel Investment Conference Asia/Pacific.

Ultimately, such work must provide guests and owners something they want, especially as capital remains very ready to recycle itself to yield immediate revenue, sources added.

Speaking on a panel titled “Renovations and conversions,” Gonzalo Maceda, VP of development at Meliá Hotels International, said hoteliers must be intelligent about where and how to spend cash.

The Asian hotel market was the focus of the panel, but panelists said many of their concerns and advice are applicable globally.

“Even when we are talking to potential owners, our technical teams are working with theirs. We can be flexible in terms of standards, as we have done that for our own hotels,” Maceda said. “Historic brand standards often do not allow the hotel to be where it needs to be in five years. Do we really need telephones in bathrooms?”

Alignment is vital on the goal and the timeline, especially with an average build of three years, said Hirohisa Fujimoto, senior director of development for Japan and Micronesia at Hilton.

“Owners take a year to select a brand,” Fujimoto said.

Shin Hui Tan, executive director of owner-operator Park Hotel Group, said her family business recycles capital always with the notion as to how it can add value to a property.

“We look at efficiencies with use of space and analyze how markets have changed,” Tan said. “On our (Grand Park Orchard) hotel, the goal was always how to unlock the value from this prime real estate. Also we wanted to unlock the retail value on the ground floor, improve the frontage, and Singapore boomed in that period, too.”

For the designer coming in to enact required changes, it is not always the case that the different sides behind the renovation, conversion or rebranding have all the pieces in place, said Isabelle Miaja, founder and managing director at Miaja Design Group.

“I like them to have it all sorted out before I arrive, so my questions can be answered, but it is not always like that,” she said. “Rebranding versus renovation within the same brand is a little easier as everyone there knows the brand. Who is it being rebranded for? What is the competition? What are the sustainability aspects? You’d be surprised that a lot of people do not know what they want to spend.”

Fujimoto stressed the importance of listening “to the strength of the guest demands.”

Running the numbers
Matthew Gebbie, director at Horwath HTL and moderator of the panel, said Asian owners often hesitate to ask for third-party help.

“Our first piece of advice to owners is to hire a hotel consultant, which usually and eventually adds value to the project,” he said.

Tan expressed hesitancy.

“We are owners as well as third-party operators, and we know what we’d want, and we trust ourselves,” she said. “Our track record allows us to convince owners of our advice. If we do not believe in something and add it to our own hotels, we will not ask you to do it in yours.”

Fujimoto noted “brand standards come because our guests demand it, period.”

“Are you being a castle in the air, or do you trust in the numbers? You have to spend some money to attract the customer you are being repositioned for,” he said.

Tan said in Asia there is a lot less financing for new-builds, mostly because of supply.

“A business plan is critical. Banks do not care if it is a new-build or not, but they will be analyzing your holding power more on a new-build,” she said.

Maceda said “there are far more discussions now from banks on new-builds.”

He added Meliá values having an administrational presence in markets to get closer to owners and potential partners.

“Meliá has opened offices in Shanghai for almost 15 years, and our management there lose money,” Maceda said.

Attending to the timeline
Miaja said that the mathematics for boutique hotels often are more agile, as these assets focus more on the local community.

“(Design) is much more on an emotional basis as you tend to work with owners,” she said. “For bigger hotels and brands, renovations can be better planned, but the decision-making is slower, especially when you have not closed the entire hotel and there is more focus there on justifying the numbers.”

Gebbie placed the blame at the feet of management.

“Management is usually the reason projects get delayed or become complicated, not because of the designer,” he said.

Park Hotel Group’s Tan said it is critical for brands and management companies to understand the owners’ vision all the way through to the exit.

“We do not have many brands standards as the market changes so fast. We look for the right management company who thinks this way, or at least is open to conversation,” she said.

Fujimoto said this is the reason more brands are popping up, as the small hotel firms see this flexibility as a way of obtaining more opportunity.

Maceda agreed.

“We will not hand the brand over until renovations are almost complete, as we recommend pockets of investment, and sometimes owners do not comply,” Maceda said.

Miaja said designers must also be nimble.

“You have to be flexible when things change, and they will,” she said.

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