• Luxury looks to asset light

Banyan Tree Holdings and Dusit Thani both used their full-year results to discuss a move towards asset-light models.
The pair were both driving growth through management, as well as investing in existing properties.
At Dusit Thani, the group said that it would “continue to expand the business through asset light initiative. The company has considered the lease model for hotel business expansion both domestically and overseas as part of Dusit Thani’s plan to achieve the balance portfolio between asset light and capital investment. Lease model helps reduce the risk of a large amount amount of investment and allows the company to recognise greater revenue than the asset light model. “
Last year the group opened six new hotels under management and signed 14 new contracts; in the Philippines, China, Myanmar, Japan, Qatar, Bahrain and Thailand. The company also launched a new hotel brand, Asai, targeting Millennials, as well as expanding the group’s scope to include luxury villa management in Indonesia, Thailand, Maldives, Sri Lanka and Japan under the Elite Havens brand acquired as part of LVM Holdings.
This year the company plans to open 11 new hotels; in the Philippines, Singapore, China, Qatar, Bahrain and Kenya.
For the full year the group reported a 4.9% increase in Ebitda for the hotel business of THB894m (EUR24.8m). Revenue from hotel management was up 27.7% on the year to THB277m, with owned hotels’ revenue down 0.6% to THB4.36bn.
The company said that, under the second phase of its nine-year plan, it intended to open 10 to 12 new hotels annually from 2019 to 2021 with the estimated average capital expenditure at approximately THB1bn per year and the expected Ebitda margin of around 18% to 20%.
At Banyan Tree Holdings, Ho Kwon Ping, executive chairman, said: “In 2018, we continued our path of rebalancing assets to be more asset light by taking profit on our matured properties. We sold our Seychelles assets and also further reduced our shareholding in BTAC to a small minority stake. Amidst global slowdown and rising interest rates, we will be conservative and will deploy the proceeds from sale to reduce bank borrowings while continue to generate growth from existing core businesses.”
The group described forecasts of rising trade tensions and weakness in Europe, commenting: “Growth projections for China, our key market had been revised downwards due to slowdown in investment and export driven growth”.
Looking at the quarter past, the group reported a 13% fall in revenue in its hotel investments segment, to SD47.6m (EUR31.1m), pulled down by Thailand and the Seychelles. In the case of the former inventory shortage caused by ongoing renovations at the Banyan Tree Phuket and underperformance from Angsana Laguna Phuket due to absence of major events as compared to the fourth quarter of 2017. In the Seychelles the company consolidating its results after we disposing of the entire asset portfolio in November.
For the full year 2018, hotel investment revenue was down SD9m to SD192.5m, pulled down in the main by China, partially cushioned by higher revenue from Indonesia due to an increase in room inventory during the year. For the Maldives, a revenue decrease was attributed to a decline in tourist arrivals during the year, especially from China following declaration of state of emergency in the Maldives in the first quarter of 2018.
The beginning of the year saw analysts at STR note that there was “slight uncertainty in various markets” in the Asia Pacific region that began later in 2018, “as the pace of important international arrival segments such as that of mainland China has slowed down. The country has showed its resilience many times in the past to external factors, and 2019 is likely to provide another test”.
For 2018, STR reported that the Asia Pacific region had seen occupancy up 0.2% to 70.6%, with ADR up 1% to USD106.99 and revpar rising by 1.2% to USD75.53. Singapore saw the strongest performance, with its highest total-year occupancy level since 2012. STR analysts commented that strong demand (+6.7%) surpassed supply growth (+3.5%) as arrivals to the city-state continued to rise and the pace of new hotel openings slowed.

HA Perspective [by Katherine Doggrell]: Recent years have seen a number of luxury groups revisit their ownership structures, particularly in the Asia-Pacific region, which is the epicentre for some of the most-noted luxury brands in the world, commanding some of the most bankable customer loyalty.
Moving into management contracts has been the most popular route, with flags such as Mandarin Oriental embracing the chance, but other options are available. The end of 2016 saw Banyan Tree enter into a strategic partnership with Accor and, although the pair have not talked much about the arrangement since, it caught the eye of a number of similar groups at the time, offering as it did a way to remain independent but enjoy the comforting umbrella of Accor’s distribution – yet avoid taking the soft brand route.
As China starts to look a little more uncertain and the appetite for luxury hotel brands remains high, more may seek this form of shelter.

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