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Far East Hospitality sees room for variety as it grows

Singapore

MID-TIER hotel operator Far East Hospitality's chief executive Arthur Kiong acknowledges the rosy statistics for the hospitality industry: tourism arrivals were up to 17.4 million last year and hotel occupancy this year hovers around the mid-80s.

Pointing to Singapore Tourism Board (STB) figures that show average room rates for the mid-tier segment between January to May standing at S$168.20, after falling from S$184.90 to S$167 between 2014 and 2017, he said a recovery could happen this year.

But there are still "undercurrents of concerns" in the industry, he told The Business Times in an interview.

Chief among them is what he views as the boom in supply in his mid-tier hotel segment in the past five years.

According to CBRE data, mid-scale and upper-midscale hotels contributed nearly 60 per cent of additional hotel rooms to Singapore's supply between 2014 and 2017.

Combined with low yields for hotel owners here, high land costs and foreign manpower constraints, hotel operators have been incentivised to provide "commoditised" offerings with many having "small rooms and limited services".

"This doesn't attract the diversity and richness that will make a destination vibrant."

He said FEH is adding offerings to hotels that he believes boast distinct "brand experiences".

One example: In the next few years, it will add over 800 hotel keys in the mid-tier hotel range in Sentosa, where FEH found 90 per cent of the market currently comprises luxury hotels.

The Village Hotel at Sentosa for families, groups and the MICE industry, as well as The Outpost for young couples, are set to open April 2019, while the heritage-focused The Barracks is slated to open in the third quarter of 2019.

In the Central Business District, it plans to open the 320-room The Clan in mid-2020, which will incorporate the theme of Chinese clan history in Singapore into the hotel, for instance, elements of a Chinese martial arts dojo in the gym.

FEH, a joint venture of Far East Orchard and Straits Trading Co formed in 2013, owns more than 10 hospitality assets and operates close to 14,000 rooms at 90 hotels and serviced residences in Australia, Denmark, Germany, Hungary, Malaysia, New Zealand and Singapore.

With brands under its belt here like Oasia, Quincy and Rendezvous, FEH's hotel occupancy last year in Singapore was in its high-80s, and the average room rate was about S$180.

This interview took place before the Competition & Consumer Commission Singapore (CCCS) on Aug 2 issued a proposed infringement decision against the owners and operators of several hotels including FEH unit Far East Hospitality Management.

Among other findings, sales representatives of FEH's Village Hotel Changi and Village Hotel Katong, as well as Capri by Fraser Changi City Singapore, allegedly discussed and exchanged commercially sensitive information in connection with the provision of hotel room accommodation in Singapore to corporate customers between July 3, 2014 and June 30, 2015. They have six weeks to make their representations to the CCCS from the date of issue.

Far East Orchard said in a Singapore Exchange statement on Aug 3 that it will extend its fullest cooperation to CCCS, takes legal compliance very seriously, but cannot comment on matters which are part of the ongoing investigations.

During the interview, Mr Kiong said FEH is taking steps to implement what he called "macro-innovation" - steps that would reduce its manning-to-room ratio and lift its RevPAR (revenue per available room).

Some examples include an ongoing pilot with the government to let guests check in at Changi Airport and have their luggage taken directly to the hotel room, allowing them to sight-see even if they arrive in Singapore before check-in time, and an upcoming trial to ease luggage retrieval using RFID tags.

As for its overseas strategy, he said: "We want to go into markets that feed Singapore in terms of visitor arrivals. . . we want to put brands in gateway cities so that we can also promote our properties here and feed Singapore."

As a result, it has expanded into Australia, a "top feeder market" where it is looking to grow its Quincy brand, as well as Japan where it recently bought a hotel in a joint venture with a Far East Organization unit.

"People may ask, why these two countries and not India and China? For Australia and Japan, rule of law and language for the former are low hanging fruits," he explained.

Beyond Malaysia where it already has a presence, growing further in South-east Asia remains of interest, but he noted unpredictability from geopolitical and economic fluctuations in some regional countries.

Another suggestion he has to diversify the offerings in Singapore is removing the current seven-day minimum stay for serviced residences.

Its revenue for its nine Singapore serviced residences is flat compared to last year, and rates were also about 10 per cent higher two to three years ago.

That is due to a mix of factors that include subdued corporate employee relocation services, and the growth of homesharing platforms here.

Mr Kiong argued that removing that cap could add diversity in the hotel landscape with apartment-hotels as a new class of rooms, despite the new supply.

He said that although this could add even more supply to the market, it is the "lesser of the evils" compared to what he sees as the "sea of sameness" in the mid-tier market.

"We are not just sitting on our hands and expecting external forces to help us," he said, pointing to efforts to boost his offerings such as the wellness-themed Oasia Residences serviced residence opened in 2016.

"We do a lot of differentiated offerings, but what's staring us in the face is this rather baffling regulation that may or may not be relevant today."