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Asia a hot spot for hotels

UPSCALE Swiss international hotel chain Mövenpick Hotels and Resorts, which operates the Mövenpick Heritage Hotel (the former Treasures Resort) in Sentosa, unveiled its new Heritage Wing with 62 rooms early this month, bringing the number of rooms at the hotel to 191. The company owns six hotels and has another 10 properties set to open in the region. Mövenpick Heritage Hotel is its first property in Singapore.

"Singapore is a key city for us," says Andreas Mattmüller, chief operating officer for Middle East and Asia at Mövenpick Hotels & Resorts, who was in Singapore recently. The group is also looking for hotel property in downtown Singapore, but has yet to find a suitable location. "Land prices are very high," he laments. "In Singapore, the key destinations are Orchard Road, Marina Bay and Sentosa. With the creation of Resorts World [Sentosa], almost all the brands want to come in."

Meanwhile, luxury hotel operator, Langham Hospitality Group, doesn't have a presence in Singapore, but is actively looking for a suitable site. "Prime locations in the centre of the city are becoming scarce and [finding a place] away from a direct competitor in the same area is also a challenge," says Simon Manning, vice-president for sales and marketing at Langham Hospitality Group, who was in Singapore recently. The group is a subsidiary of Hong Kong-listed property company Great Eagle Group and currently manages 30 hotels.

Trudy Rautio, president and CEO of privately held international hospitality and travel group, Carlson, echoes the same sentiment. "I would love to have something in Singapore, it's certainly on my wish list," she says. "It's very difficult to find the right property and the right partners." Rautio, who had been chief financial officer for the group for 15 years, was appointed CEO in August this year, and was in Singapore recently. "But we are working on it and we continue to look at every project that becomes available to see if we can find the right one," she adds. "It's a really important market for us."

Record prices achieved for hotel sites

The challenge for most hotel players is the rising land cost in Singapore, especially for government land sites. A prime example is the 82,058 sq ft, 99-year leasehold hotel site located at the junction of Victoria Street and Ophir Road, released for sale on the Reserve List of the government land sales programme. Png Poh Soon, Knight Frank's director and head of research & consultancy, estimates that a 550 to 650-room, four-star hotel with a retail podium could be built on the site, which is located within walking distance of the Bugis MRT station and the upcoming Bugis Downtown Line, slated to open next year.

There is intense competition in the neighbourhood, notes Png, with Parkroyal Hotel at Beach Road, Landmark Village Hotel, V Hotel Lavender and the upcoming five-star hotel at the Duo Towers by Temasek Holdings and Khazanah Nasional. He is forecasting bid prices to be in the S$1,000 to S$1,100 psf per plot ratio (ppr) range.

He bases this on the winning bid of a white site located nearby, along Victoria Street and Jalan Sultan. It was awarded in October to Forward Land, which submitted the highest bid of S$331.34 million or S$994 psf ppr. The site can be developed into a mixed-use commercial project with a hotel component.

Meanwhile, the white site located in the Novena area at the corner of Thomson Road and Irrawaddy Road, where a minimum of 40% has to be designated for hotel development, achieved a record price of S$1,632 psf ppr early this month. The site was recently awarded to a joint venture between Hoi Hup Realty and Sunway Development, which submitted the top bid of S$492.5 million.

"The value of hotel sites has gotten higher over the last few years," concedes Simon Barlow, Asia Pacific president for Carlson's hospitality arm, Carlson Redizor Group. More than 90% of the new rooms that opened in Singapore last year are now managed by developers-cum-hotel owners themselves as opposed to international brands, he observes.

There are also opportunities beyond Singapore's downtown area where the government is releasing more land parcels for the development of mid-tier hotels, points out Barlow. "If you look at the demographics of the tourism arrival numbers, a lot of it now is on the back of low-cost airlines and this segment of people are not going to stay in Orchard Road or Marina Bay," he adds.

For instance, the government released a hotel site in Jurong East that was hotly contested, with a total of 11 bids received at the close of the tender on Nov 20. Genting Singapore emerged the winner with a top bid of S$238.2 million (S$1,167 psf ppr). It announced that it will be building a 500-room mass-market hotel on the site to complement its six hotel properties with a total of 1,500 rooms at Resorts World Sentosa.

Last year, 1,900 hotel rooms were added to the supply. Another 30 new hotels with 7,229 hotel rooms are expected to enter the market by end-2014, according to Raymond Clement, Savills' managing director of hotels for Asia Pacific. He expects occupancy rates to dip next year.

However, visitor arrival figures have continued to increase, and are projected to hit 14.2 million, which is 8% higher than the 13.2 million achieved last year, says Clement.

In the region
Apart from Singapore, Mövenpick, Langham and Carlson are also looking at expanding into China and elsewhere in the region.

Mövenpick will be opening hotels in Hainan Island, Inner Mongolia and Jiading. It is also looking to enter Myanmar. "The country opened up this year and everyone says you need to wait a while to see whether the political situation stabilises," says Mattmüller. "Right now, it is difficult to find flights and accommodation in Myanmar because it is all full. The room rates are also very high. The only problem I foresee is everyone thinks Myanmar is in demand and people may start becoming too greedy."

Langham has recently announced the managing of a new luxury hotel in Shanxi, China. Manning also expects to see strong growth continuing in China. "In the coming years, we are opening 10 more hotels in China, mainly in second-tier cities where the return on investment is relatively higher than those in first-tier cities," he says.

Meanwhile, also in China, Carlson Redizor Group has opened a Radisson Blu in Chongqing and another in Wuxi. It also launched the Radisson Blu Hotel Nagpur in India recently. The hotel is its 53rd hotel property in India. The hotel group has been operating in India for 14 years, according to Barlow. By 2015, it will have 100 hotels operating in the country, and is already the largest international hotel chain there.

Carlson Redizor Group plans to enter the Philippines and Indonesia. However, it is very cautious when it comes to site selection. "It's one of the most important things because if you're not in the right location, you don't get the demand and the returns for your owner," says Carlson's Rautio.

This story first appeared in
The Edge Singapore weekly edition of Dec 24-31, 2012.

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