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City & Country : Inspired by traditional Japanese inns

Combining “affordable” and “boutique” may appear to be akin to mixing water with oil. However, a group of enterprising investors saw the lack of affordable, comfortable and “fun” lodgings in the country’s central business districts (CBDs) and tourist hubs as motivation to blend the two concepts. This resulted in the group launching the Ryokan hotel and hostel chain some two years ago and it now has plans to expand its brand of boutique accommodations nationwide. The group has set up a hostel in Penang and a hotel in Damansara Uptown, Petaling Jaya, with four more to be launched by year-end.

The Ryokan Group Sdn Bhd was co-founded by distant cousins Edward Ling and Darren Ng. They then teamed up with another three investors, namely Chow Kar Shing, Djojo Hartono and Alam Terbilang Sdn Bhd. Ng is managing director of consultancy Walter Rhodes Sdn Bhd and managing director of a Cahya Mata Sarawak Bhd subsidiary while Ling is a lawyer by training.

Why the Japanese-sounding Ryokan? “Ryokans are traditional inns that originated in the Edo period. They are known to be very cosy and meant to be simple and very personalised, so we took that concept,” explains Ng, who is managing director of The Ryokan Group. Not surprisingly, Tokyo is one of his favourite destinations.

Penang heritage base
The first Ryokan hostel is a 2½-storey pre-war heritage building at Muntri Street in Penang. Opened in April 2010, it was conceptualised as a fun, chic and relaxed set-up aimed at “flashpackers” — young and trendy travellers who will not skimp on cleanliness and comfort, says Ng. The concept was also an act of reclaiming the word “boutique” from its currently overused state, he adds. “You see, the word ‘boutique’ means small. Over time, it began to mean small and classy. But [locals] don’t understand the word and every other hotel — like budget hotels — seem to be boutique to them. So foreigners [who come here will] say this is not a boutique hotel at all, this is a budget hotel. This is crap. But we actually want to deliver the experience of a boutique hotel.”

The group’s decision to market itself as “chic” also resulted in some funny misunderstandings. “A lot of people discouraged us from using the word ‘chic’ when we first started because [to them it sounded like] ‘chick’.” Ryokan Muntri Street distinguishes itself from other budget hotels through its design and prices. Budget hotels usually look plain while boutique hotels have character and style, Ng says. He describes Ryokan’s décor as modern Japanese with huge Oriental canvas paintings, Kabuki mask and samurai murals, raw brick feature walls amid a palette of white, grey and pink.

According to Ling, budget hotels typically charge for most items such as toiletries and food. In contrast, room charges at Ryokan cover breakfast, WiFi and a free-flow of coffee, tea and snacks. The Ryokan Muntri Street’s rates start from RM33 for a bunk bed to RM136 for a room, while Ryokan Damansara Utama hotel charges walk-in customers RM108 to RM168 per room. While Ng admits that there are similar boutique hotels targeted at flashpackers along Muntri Street, he stresses that they are friendly competitors.

The decision to start out in the Pearl of the Orient was rooted in their failure to secure any deals in Kuala Lumpur. “The very first shop we had our eye on was at Jalan Tunku Abdul Rahman. The next one was near Bangkok Bank, then at Jalan Pudu. We must have had over five failed negotiations. “In the end, it was probably God’s will that we were pointed all the way to Penang,” muses Ng.

While the aged property’s interior was narrow like most pre-war buildings — at 18ft wide and 200ft long — its generous 20ft-wide courtyard charmed the group. “The rest of the units come with just a five-foot walkway. The little courtyard in front makes it more inviting. People can sit outside and have coffee and relax,” says Ling.

The property was then owned by Tan Sri Tan Khoon Hai, deputy president of the Penang Chinese Town Hall and a promoter of the former straits settlement’s architectural legacy. He used the ground floor to showcase his artwork while the first floor was rented out as cheap student accommodation.

The group bought it from Tan for RM1.8 million and spent a further RM800,000 to spruce the place up, beautify its floorboards, fix cracks in the walls, add toilets, rewire the building, reinforce its structure and set up operations. This investment has paid off. International travel review site Trip Advisor awarded Ryokan Muntri Street a certificate of excellence for achieving an average rating of 4.5 stars from reviewers. Last month, the hostel recorded an average occupancy of 70%. Ng says that during weekends and holidays, it is usually fully occupied. During quiet periods, occupancies fall to 45% to 50%.

Encouraged by the response to its Penang hostel, the group then opened a hotel in Damansara Utama in April, which is in proximity to various multinational companies and the upcoming Damansara Uptown neighbourhood mall by See Hoy Chan Sdn Bhd, which will include 2,820 parking bays. The hotel is housed in the upper three floors of three shophouses and has 41 rooms. These shophouses, along with another one that currently houses a restaurant, are owned by one of Ng’s old friends, who also became a partner in the venture.

Besides taking a cut of the profits, the original owner is also paid a monthly rent of RM16,000 by the group. The group expects to generate monthly revenue of almost RM100,000, with an initial investment of RM1.5 million. “Also, because this is the CBD of Petaling Jaya, there are many multinationals around and we want to tap into that market. So we are actually building a base of clients.”  Ng cites cosmetics company L’Oreal and IT company IBM as some of their clients. The companies book rooms for their staff who are in the area for training or projects, he adds. “We want corporate clients, who will take us seriously, who will patronise our place for the long term,” he says.

“This area is strategic. There is a shortage of boutique hotels here. You either stay at the Royal Bintang or One World (at Mutiara Damansara and Bandar Utama respectively) or budget hotels in the area.” Currently, occupancy at the hotel is at around 50% to 60%. To make up for its lack of facilities such as a gymnasium and swimming pool, the hotel plans to have a map of Damansara Utama highlighting places of interest. “We’re also going to have a notice board for people who want to meet other guests for activities or to hitch a ride together downtown. Guests can share a cab, go places — we encourage that,” says Ling. Meanwhile, the group’s hostels will have more social activities such as guided tours, bar crawls, board games and small-scale performances. “[The hostel] should have an environment where people talk to each other as a lot of people travel alone, so we want to encourage that in a chic hostel,” says Ng.

Expansion plan
The Ryokan Group is planning to open two more outlets in three new locations by year-end, including a hotel in Petaling Jaya Commercial Centre (PJCC) near Bandar Sunway and a hotel in Ipoh, Perak. The PJCC hotel will be housed in four adjoining blocks of 3-storey shophouses, which was purchased for RM6 million, with about 40 rooms, says Ng. “PJCC is one of the locations that are closer to Sunway and its entertainment places. Access is pretty bad now as it’ll take a year or two before they open up the road [from the New Pantai Expressway] directly to PJCC.

“Right now you have to go through Kampung Medan. It’s a bit like Bangsar South [which was previously] Kampung Kerinchi. But because of the location and our shareholder giving us good terms to do up the place, we decided to go there,” he explains. Over in Ipoh, the group has already acquired a heritage building with a built-up of 12,000 sq ft for RM1.5 million.

The Ryokan Group is also in talks with a property developer in Kampar to run 120 hostel rooms and 40 hotel rooms in five buildings near the Universiti Tunku Abdul Rahman (Utar) campus there. While rates have not been firmed up, he says students will be charged “very affordable rates” for the hostels. The estimated investment in this project is RM4.5 million to RM5 million.

Ng says these five locations will pave the way for their ultimate goal — franchising. “We want to have locations all over Malaysia offering comfortable and chic accommodations at a reasonable price, with emphasis on ambience and design.”“After we [operate these] very well, we would have built a reputation. Currently, we usually take equity in a place, but with the franchise model, we will cease to do so altogether.”

Under the franchising model, the group will operate the premises and take charge of recruitment, training and auditing. “If they start any dodgy business, we will retract their franchising right and they cannot use our colours nor have access to our corporate clients anymore,” Ng explains. In the longer term, The Ryokan Group plans to list although it has not decided where it will list.  For now, the group plans to bring its brand of whimsy and comfort to more CBDs and “fun places”. “We want people to come, have fun and enjoy a very different experience,” says Ng.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 921, July 30-Aug 5, 2012

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