Malmaison Hotel du Vin purchase not a one-off by Frasers Hospitality: CEO

On Jun 17, hotel chain Frasers Hospitality bought a British boutique hotel operator – the Malmaison Hotel du Vin group – for S$760 million.

Its Chief Executive Choe Peng Sum said this purchase will not be a one-off affair. Channel NewsAsia sat down with Mr Choe to find out more.

Q: The acquisition of the Malmaison Hotel du Vin group of boutique hotels is your company’s largest to date. What sort of returns are you expecting from this investment?

Mr Choe: What this means to us in returns – it is very yield-accretive, which is what we are really interested in looking at, as well as a 51 per cent increase in our asset under management. That gives us about S$2.2 billion in assets that we are moving. So it is something that we are excited about.

Q: How are you so confident that boutique hotels, as a segment, will generate considerable growth for Frasers Hospitality, even over mainstream hotels?

Mr Choe: There is a rising number of young executive travellers, and they are shying away from standard hotels. When I say standard hotels, I mean really good hotels. But the millennials are looking for something different. In fact I think they are very, I would say, loosely, anti-establishment. Anything that is cookie-cutter, they are not interested.

Q: Some of your competitors still operate more rooms, or keys, than you do. Is there a critical mass of keys that your company is looking to hold?

Mr Choe: In a way, it is scalable, (as we are) international. Someone who is staying in the States, moving to China or moving to Singapore or Hong Kong, if they have stayed in a Fraser, they will be open to staying in a Fraser (property) in Europe. We will not move, really, into rental housing. There is a particular reason why. Rental housing is the first to get overcrowded. In other words, every time the property market is sluggish, there will be a lot of oversupply. The only way to compete is by pricing.

Q: Which region would you say promises the biggest potential for Frasers’ growth in the future?

Mr Choe: Europe, US, Japan. Now, I wouldn’t write China off. If you look at the first-tier cities, they can fetch about RMB50,000 per square metre. In second, third-tier cities you still can get values of about, maybe RMB12,000 to RMB17,000 per square metre, but the rental rates are still very high. And in time to come, second and third-tier cities in China would actually catch up to first-tier cities.

Source : Channel NewsAsia – 25 Jun 2015

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