Raffles Hotel Singapore - Photo credit : Oxymanus
Asian Hotel Brands Make the Journey to Europe
By SONIA KOLESNIKOV-JESSOP
Published: January 22, 2010
SINGAPORE — International hotel brands are stepping up their investments in the Asia-Pacific region because of its outsized growth prospects. So it would seem almost counterintuitive for luxury hospitality brands based in Asia to be opening hotels in Europe, where growth is slowing.
Yet over the coming months, several well-known Asian brands, including Raffles Hotels and Resorts, Shangri-La Hotels and Resorts, and Meritus Hotels and Resorts, will open their first European properties.
The focus so far of most luxury Asian brands seems to be France, where the biggest-spending tourists are Chinese, according to an industry survey released this week. This summer, the five-star Royal Monceau in Paris is set to reopen as a Raffles property after a refurbishment that took 20 months and cost 100 million euros ($141 million).
The first European Shangri-La Hotel will open near the Trocadero, in what was once the palace of Prince Roland Bonaparte, Napoleon Bonaparte’s grandnephew. In 2012, Peninsula Paris will open in the 1908 building that currently houses the Centre International de Conférences.
Shangri-La also has projects in Vienna, London and Moscow, while Meritus is working on its first European foray in Frankfurt. Banyan Tree Hotels and Resorts and Six Senses Resorts and Spas are heading to the Mediterranean, focusing in on the Greek coastlines. Banyan Tree will open Angsana Corfu in 2011 and Angsana Santorini in 2012. Six Senses is planning to open a Soneva resort, its superhigh-end brand, on the island of Milos in 2012.
With more Asian tourists, especially Chinese, traveling to Europe, Asian brands, which have a reputation for high-end service in their own backyard, are hoping to capitalize on their name recognition. And they are also hoping the European outposts will become “feeder” outlets for their hotels in Asia.
Like all tourism-related companies, the Asian chains have lost revenue during the economic downturn. In 2008, Banyan Tree Holdings had sales of 427.9 million Singapore dollars ($305 million), nearly double that of 2004, attesting to its rapid expansion. In the third quarter of last year, however, the Singapore company’s revenue fell 14 percent from a year earlier. But its operating profit increased 70 percent, reflecting strong performance in hotel management and investment.
Mandarin Oriental operates 25 hotels, including 12 in Asia, 8 in the Americas, and 5 in Europe and North Africa. It has 16 more under development. In November the chain issued an interim management statement saying that weak demand from both the corporate and leisure segments continued to put pressure on occupancy levels and average room rates in all regions. But conditions in Europe were better than in Asia and the Americas, it noted.
Ho Kwon Ping, executive chairman of Banyan Tree Holdings, said the projects that were about to open would have been decided on as long as three years ago, at the height of a tourism boom — “when everybody was toppish about Europe,” he said. “What you’re seeing now is the outgrowth to that.”
Mr. Ho said he believed Asian brands’ decisions to move into Europe reflected the confluence of two things: “First, European developers are looking toward the Asian market, and also an Asian kind of hospitality, to distinguish themselves from the European brands. Second, Asian brands themselves are looking toward extending to other parts of the world, partly to satisfy the demand from Asian tourists traveling more and more toward other parts of the world.”
Economic indicators suggest that European markets are unlikely to recover as quickly as Asian markets. Worldwide international tourist arrivals fell 4 percent last year amid the severe global economic crisis, and Europe was hit harder, according to the United Nations World Tourism Organization. European arrivals declined 6 percent on an annual basis, compared with a 2 percent decline in the Asia-Pacific region and a 5 percent slide in the Americas.
Hotrec, a trade association of hotels, restaurants and cafes in the European Union, recently said that hospitality business trends across Europe were still very worrying and that a recovery was currently not in sight in many European member states.
“Occupancy rates of hotels in all major cities in Europe went down between January and August, compared to the same period of 2008,” Marguerite Sequaris, the chief executive of Hotrec, wrote in an e-mail message, adding that the rates for major destinations such as London, Paris and Rome fell by less than five percentage points but that the overall picture was showing a more severe decline.
“Most participants to the general assembly reported calamitous business trends in their respective countries,” she added, “and most consider that the recovery is not in sight yet, as 2010 will probably be on the same level as 2009.”
Tourist arrivals in Spain, one of Europe’s top tourist destinations, fell 8.7 percent last year on an annual basis, according to a recent report on the sector by the Spanish secretary of state for tourism, Joan Mesquida. According to Eurostat, the statistical office of the European Union, the latest figures available for some of the European countries, for September and October, still show a decline in occupancy rates.
But Asian brands are pushing ahead with global expansion plans.
“This is part of the group’s growth strategy to extend our presence to key cities and sought-after resort destinations where there is demand for luxury travel and dining experiences,” said John Johnston, president of Raffles Hotels and Resorts.
Milton Pedraza, chief executive of the Luxury Institute, a research company in New York, said that Asian brands’ reputation among wealthy Europeans for providing top facilities and highly rated customer experiences gave the brands fairly high chances of success.
“Mandarin Oriental has already proven its viability in competitive markets such as London,” he said. “As long as they stick to a few major cities or locations in Europe, the Asian brands have low risk of becoming too ubiquitous.”
George Morgan-Grenville, group managing director of Abercrombie & Kent, a high-end travel agent and tour operator based in Britain, said he believed that Asian brands would be “warmly welcomed” in Europe in part because they were “built around an intrinsic service culture.”
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“What Asian brands seem to grasp more profoundly than their Western counterparts is a more holistic approach to a guest’s stay, from remembering names to dealing with the smallest detail,” Mr. Morgan-Grenville said.
“Of course, when brands migrate West, the danger is they face some tough competition from established hotel brands who already know how to operate effectively under Western economic conditions,” he added. “But the fact remains that, culturally, the Asian brands have been quick to grasp consumer needs in the 21st century.”
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