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[UPDATE] Far East Hospitality’s Arthur Kiong: Remaking the hotel industry

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Kiong: The pandemic brings us to the cusp of the third tourism evolution (Photo: Samuel Isaac Chua/EdgeProp Singapore)

SINGAPORE (EDGEPROP) - The quick return to tighter restrictions on July 22 highlights the importance of improvisation in business, which Arthur Kiong, CEO of Far East Hospitality, seems to have a knack for. (See also: Far East Hospitality Trust secures first sustainability-linked loan worth $125 mil from OCBC)

A former radio DJ in the 1980s, Kiong recounts an incident where he had to improvise an hour-long radio show with no preparation. He had arrived at the studio of the Singapore Broadcasting Corp (now MediaCorp) one day at 7.40am to find the door to his office locked. He ran over to the security guard to get the key, as he needed to retrieve a bag of letters, from people who had written in with their song dedications, for his programme that morning. But the guard refused to give him the key, saying it was “against protocol”. With just three minutes to air time, Kiong dashed into the studio, breathless and perspiring. “I had no letters, I was unprepared and didn’t even have my records,” he relates. “I had to make up this entire hour-long programme with nothing in hand.”

A hotelier for the past three decades, Kiong has the benefit of hindsight too. He sees the pandemic as an opportunity for Far East Hospitality to create new brand experiences, refurbish and renew older properties, expand the group’s footprint in the region, create new business streams as well as attract and retain talent. “The pandemic has brought us to the cusp of the third tourism evolution,” he says.

The 324-key The Clan Hotel located on Cross Street opened on March 1 this year (Photo: Samuel Isaac Chua/EdgeProp Singapore)

Singapore’s first tourism evolution was in the 70s and 80s, and it was the “me-too era”. Orchard Road, with its shopping malls and five-star hotels, was Singapore’s answer to Tokyo’s Ginza district, Hong Kong’s Tsim Sha Tsui, Paris’ Champs-Élysées and New York’s Fifth Avenue, Kiong relates.

The period from the late 1980s to 2000s marked the second tourism evolution or the “me-too-but-better”, says Kiong. “It was taking tested ideas from elsewhere and executing them better,” he adds. He points to the Singapore Flyer and the two integrated resorts as examples.

“This third evolution is about ‘quality tourism’, and it’s where we are at now,” says Kiong. “It’s about offering unique and compelling experiences to draw visitors. It’s the ‘me-only proposition’.”

View of the CBD and Tanjong Pagar area from the rooftop of The Clan Hotel (Photo: Samuel Isaac Chua/EdgeProp Singapore)

‘Forced change’

The pandemic has forced the hotel industry to change, says Kiong. Total hotel room stock in Singapore stood at 69,367 keys as at end-2019, according to Colliers International in its 1Q2021 Hotel Insights report. Prior to the pandemic, Singapore drew 19.1 visitors in 2019, according to Singapore Tourism Board (STB). Average occupancy rate (AOR) for hotels was 86.9% with average room rate (ARR) at $221.

Last year, the total number of visitors shrank 85.7% to 2.74 million. AOR contracted 30.2% y-o-y to 56.7%, with ARR at $152. In 1H2021, visitor arrivals slid to 118,660, a 95.5% y-o-y plunge from 1H2020. AOR decreased further to 44.94%, while ARR dipped to $147.43, according to STB data.

Singapore’s five key markets in terms of tourist arrivals are: China, India, Indonesia, Australia and Malaysia. Still, there are impediments, notes Kiong. “Even if our population is fully vaccinated, will the other countries allow their nationals to travel abroad? That’s the first impediment,” he says. “The second impediment is Singapore’s own travel restrictions, which have to be more judicious.”

The Clan Hotel was voted No. 1 among 367 hotels in Singapore, according to TripAdvisor (Photo: Samuel Isaac Chua/EdgeProp Singapore)

Most countries have to focus on domestic tourism for now. Singapore is no different.

For Far East Hospitality, the domestic market represents just 7% to 10% of its overall business, even if the proportion of staycations has increased, says Kiong.

However, he feels that staycations are not the solution for the post-pandemic era, especially for Singapore. “In fact, your best clients during the pandemic may disappear post-pandemic because this is the group of people with a penchant for travel and for new experiences,” he says. “As soon as they can travel abroad, they will.”

Far East Hospitality is banking on the resurgence of medical tourism. “Singapore is known for being clean and green,” says Kiong. “If one had to do a medical procedure, Singapore would be on the radar.” He sees opportunity in offering accommodation for such visitors during the convalescence period.

The Clan Hotel captures the mood and history of the Chinese migrant clans (Photo: Samuel Isaac Chua/EdgeProp Singapore)

‘Unlocking value of precinct’

With recovery in the tourism industry still uncertain in the short term, what is clear is that the supply of hotel rooms currently outstrips demand. “We need to be able to offer something that is unique and compelling to be able to draw visitors,” says Kiong.

This is where he sees the value in creating new brands. In Singapore, The Clan is a new brand that Far East Hospitality has launched. “We thought of ‘The Settlement’ or ‘The Crossing’, given its location at Cross Street, one of the oldest streets in Singapore,” says Kiong. “But we decided on ‘The Clan’ based on the history of the clans.”

The clan associations in Singapore were established by Chinese migrants in the 1800s to help new immigrants to find shelter and work, and build business relationships. The clans were organised according to their hometowns or provinces, such as Fujian, Guangdong and Hainan. “Using the inspiration of the clans, we wanted to create a hotel that told the Singapore story and the whole concept of the clans, from the product to service offering,” says Kiong.

“By doing so, we unlock the value of not just the real estate but the entire precinct,” he adds, noting the nearby boutique hotel, Amoy Hotel on Telok Ayer Street, which is part of the Far East Square mixed-use commercial development. Close by in Tanjong Pagar is another hotel, Oasia Downtown, managed by Far East Hospitality.

The boutique hotel, Amoy at Telok Ayer Street, has just 37 rooms and is located at Far East Square, just across the road from The Clan Hotel Hotel (Photo: Far East Hospitality)

Scaling up

In 2019, Far East Hospitality opened three hotels in Sentosa, namely Village Hotel Sentosa, The Outpost Hotel and The Barracks Hotel, with a combined total of 839 keys. Each hotel caters to a different market segment: Village Hotel is designed for families and tour groups; The Outpost is an adults-only hotel aimed at those who prefer exclusivity; while the third and most upscale, The Barracks, “provides a heritage experience, with personalised service”, says Kiong. The Barracks was ranked first among 17 hotels on Sentosa on TripAdvisor.

Slated to open in 2H2021 is the 191-key Oasia Resort Sentosa, which will cater to the wellness market, which is a new segment, says Kiong. “We have guests staying at The Barracks or The Outpost who will want to enjoy a spa treatment too,” he adds. “And Oasia Resort will cater for that.” Oasia Resort’s spa will be managed by Far East Hospitality, and marks the group’s entry into the spa business, which will provide a new revenue stream.

Oasia Resort is also Far East Hospitality’s fourth hotel on Sentosa Island, bringing its total hotel rooms there to 1,030. This is an example of the group’s strategy of scaling up within the same locale. By creating different brand experiences catering to different market segments, the group is able to reap the benefits that come with economies of scale.

The Barracks Hotel has been voted the top hotel in Sentosa, according to TripAdvisor (Photo: Far East Hospitality)

“Centralisation allows us to manage our costs more efficiently,” says Kiong. He points to the group’s ratio of staff per hotel room is 0.2, compared to the industry average is 0.4 to 0.5. “This cost saving is passed to the hotel owner, providing them with a reasonable return,” he adds.

Managing costs has become a priority for hotel players too. This is because while room rates stagnate, hoteliers face rising cost pressures. Automation requires investment in technology, which is expensive, especially the initial capital expenditure, explains Kiong. The pandemic has also highlighted the risks pegged to a reliance on foreign workers.

“In order to attract locals to the hospitality industry, it’s not just the salary level that has to increase, but the job scope has to be redesigned to enable the staff to become more productive,” notes Kiong. “One must also provide career paths for them to grow with the group.”

Orchard Rendezvous Hotel, located at the junction of Tanglin Road and Orchard Road will be refurbished, feature a new façade, and will also be rebranded (Photo: Far East Hospitality)

Refurbishment of old assets

Far East Hospitality is a 70:30 joint venture formed in 2013 between Far East Orchard (a listed company under privately held property group, Far East Organization, controlled by the family of the late tycoon Ng Teng Fong) and The Straits Trading Co, majority owned by the Tecity Group, an organisation founded by the late banker and philanthropist Tan Chin Tuan.

Legacy properties within Far East Hospitality’s portfolio that are being refurbished and will be rebranded include The Elizabeth Hotel at Mount Elizabeth and Regency House on Penang Road, both located in the heart of Orchard Road. Likewise, Far East Plaza, which opened in 1983 on Scotts Road, just off Orchard Road, will see its serviced apartments refurbished as well. Orchard Rendezvous Hotel, located on the corner of the prime Orchard Road and Tanglin Road, will undergo an extensive makeover, as will Village Residence West Coast, which sits above West Coast Plaza on West Coast Road.

“During this pandemic, we have quite an ambitious plan to remake our hospitality offering,” says Kiong.

Far East Village Hotel Yokohama, opened on June 1, is the second hotel in Japan by Far East Hospitality (Photo: Far East Hospitality)

Overseas expansion

Right now, Far East Hospitality has more than 16,500 rooms across 100 hotels and serviced apartments. It has a presence in eight countries — Australia, Denmark, Germany, Hungary, Japan, Malaysia, New Zealand and Singapore. Kiong aims to ramp up its portfolio to 25,000 rooms by 2025. That is a 20% growth rate, notes Kiong. “While aggressive, it would put us among the top 50 hotel companies in the world,” he says.

In 1H2021, the group opened three new hotels across Asia Pacific: the 324-key The Clan Hotel in Singapore on March 1; the 241-key Quincy Hotel Melbourne in Australia on March 12; and the 227-key Far East Village Hotel Yokohama in Japan on June 1.

Far East Hospitality intends to continue expanding its footprint in the region, especially in Australia, Japan and Vietnam. Far East Village Hotel Yokohama marks the group’s second hotel in Japan. Its first is the 306-key Village Hotel Ariake Tokyo. The property is a joint venture between Far East Hospitality and Far East Organization.

A deluxe room of the Quincy Hotel Melbourne that opened in March this year (Photo: Far East Hospitality)

In Australia, Far East Hospitality formed a 50:50 joint venture with Toga Group to create Toga Far East Hotels (TFE Hotels) in 2014. TFE Hotels is now one of the biggest hotel owners and operators in Australia. Brands include Adina Hotels, Vibe Hotels, Travelodge Hotels and TFE Collection. There are plans to bring some of the Australian brands to Singapore and vice versa, as in the case of Quincy Hotel Melbourne, says Kiong.

In 2019, Far East Hospitality made its foray into Vietnam, after signing a hotel management and technical service agreement with Five Elements Development, a real estate development company with a hospitality focus in 2019. The group is managing two boutique hotels, namely Lê Công Kiều Hotel and Ngô Văn Năm Hotel in Ho Chi Minh City. They have since been rebranded Hotel Rêve and Suzu Hotel respectively.

The Quincy Hotel Melboune opened in March this year (Photo: Far East Hospitality)

In April this year, Far East Hospitality signed a strategic alliance agreement with Artotel Group, a boutique hospitality and lifestyle group in Indonesia, whose businesses include F&B, event management and merchandising. The move was to tap domestic tourism in Indonesia, which has a population of 270.6 million as at 2019. “We see potential in domestic tourism, given its huge middle-class population,” says Kiong.

Artotel caters to the economy and mid-tier hotel segments, which Far East Hospitality currently doesn’t have a presence in. “We cater to a more upscale segment; hence, our businesses are complementary,” says Kiong.

He believes this pandemic is opening up new opportunities for the group’s expansion.

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