IHIF Asia Pacific

Monday’s roster began with keynote speaker Andrew Ness, CBRE Research’s Executive Director. He pulled no punches, stating that during a recession, people travel less and spend less on holidays. On the business side, he said that MICE growth was limited as corporate executives had their travel expenses cut. However, he also noted that mainland Chinese are travelling more domestically – which meant more trips to Hong Kong and Taiwan. “Mainland China is saving Hong Kong’s bacon,” he said. “And there is still a shortage of hotel rooms in Taiwan.” He saw tourism expanding in China, India and Vietnam, though the luxury end of the market has been the hardest hit with the value of upscale hotel rooms still on a decline. “Asia is still the growth engine for the world,” he stated. “Travel and tourism will rebound in Asia stronger than in the rest of the world.”

Following Ness’ keynote was a panel on hotel trends and investment. As expected, the discussion veered towards doom and gloom. “Offices and retail spaces are more attractive investments than hotels,” admitted George Agethen, Vice President with Macquarie Capital Advisers. “Hotels are not core investments because they have too much volatility,” said Andrew Heithersay, International Director with LaSalle Investment Management. “We cannot build shiny hotels like the Venetian. Instead, we buy and refurbish existing properties. It is more economical to buy existing rather than build new ones.” Si Ong Ooi, Head of Syndications Asia with ANZ Bank, added that hotels were the first to be taken out of the investment portfolio equation. “Hotel properties have adversely affected banks,” he said. “They rely heavily on banking markets.”
 
The tune was similar during a panel discussion on financing criteria the following day. “It is a vicious cycle,” admitted Morgan Laughlin, The Royal Bank of Scotland’s Regional Managing Director and Head of Real Estate Finance Asia Pacific. “We are early into the crisis, so hotels will continue to suffer for a period of time. We are conservative when it comes to lending to hospitality in Asia. It doesn’t make a lot of sense to be a hero. The speed which things can go from being beautiful to being ugly is remarkable here.” Marc Bosnyak, Standard Chartered Bank’s Director Origination & Client Coverage, CRE-HK, believes that lenders have done a poor job in recent years with the hotel industry, and now are taking a more cautious view. “Hotels are long term assets,” he stated. “Banks require short term liquidity.”

The tide turned after lunch with a more optimistic panel discussion on new hotel brands. Helmut Knipp, Langham Hotels International’s Senior Vice President, Development, sang the praises of Langham’s Hong Kong-based founder Dr K.S. Lo. “I was known as the gweilo (foreigner) who could make deals in China,” recalled Knipp. “Dr. Lo pulled me out of retirement and we began the rebranding process of Langham in 2004. Today, we have 10 hotels open or under construction. We are a small company with big dreams. For large operators, the next hotel is just another property. For us, failure is not an option. We bring focus and passion to the table.” Tom Monahan, Wyndham Hotel’s Executive Vice President, is more concerned about keeping his brand consistent in new markets. “Franchising has a chequered history,” he noted. “The brand is owned by the consumers, and it must be maintained. It is tough to franchise in China; Wyndham is one of the few who are successfully doing so.”

IHIF showed that while investors were cautious about financing hotels, the cream still rises to the top. Hoteliers that offer distinctive brands backed by singular properties and attentive service will still inspire loyal customers. Creativity and passion have never served the industry better than right now.

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