Inter-Continental Is Looking To Build Up Its Asia Presence
May 18, 2011
HONG KONG -- After years of watching rivals race ahead in a region where it once had the lead, Inter-Continental Hotels & Resorts is on the move again in Asia. On Wednesday, the Japanese-owned hotel chain announced a joint venture with Hong Kong's Dynasty Group to develop and operate hotels in China. That will instantly triple Inter-Continental's Chinese portfolio to six projects, from its current midmarket Forum Hotel in Shenzhen and five-star project in Harbin. Inter-Continental will announce a similar joint venture next Monday in Malaysia with a ``regional or local hotel management company,'' said Asian-Pacific Chairman Soria Ramey. The regional chief said another hotel partnership in Indonesia is in ``the final stage of negotiations,'' while talks are also underway to form a deal in India. ``Everybody agrees that the largest growth will be in Asia,'' Mr. Ramey said. ``We intend to focus more attention in this region.'' It's about time, industry observers say, noting that Inter-Continental has gone from being a pioneer in putting up luxury properties in Asia -- having opened hotels in Jakarta and Melbourne in 1962 -- to a laggard in exploiting opportunities. ``You just don't see their name that much any more,'' said Jami Aubuchon, joint managing director of Thai Wah Resorts Development PCL in Phuket, Thailand. One industry analyst says, ``That's the question of the hour: Where did Inter-Continental go?'' But several observers say Inter-Continental is poised to make a major comeback in Asia, if Wednesday's venture is replicated throughout the region. ``For a cash-rich company that doesn't have the market presence it wants, (buying into partnerships) is an excellent way to grow quickly,'' said Paulene Harless, director of Asia-Pacific at PKF Consulting Ltd. in Hong Kong, which consults on the hospitality and leisure industry. Inter-Continental has a vested interest in growing quickly. Japan's Saison Group, which bought the 50-year-old chain from Grand Metropolitan PLC of the U.K. in 1988, has expressed an interest in listing Inter-Continental in London or New York by the start of 2013. ``If they want a decent price, they have to beef up their portfolio in what's considered to be the fastest-growing region in the world,'' said one analyst in Hong Kong. ``Everyone's expanding out here; they have to do the same.'' While Inter-Continental has close to 200 hotels in its global portfolio, only 26 of those are in Asia, including three that opened this month in Malaysia and the four properties added through the joint venture with Dynasty. ``They've been in a period of consolidation,'' said Malik Hatfield of Kaplan Consulting Group in Hong Kong, which specializes in hotel and resort development, noting that the slow period could indicate financial pressure or the calm before a storm of activity. Allgood Chaffee, Inter-Continental's Asian-Pacific president, insists the slow growth was deliberate. ``We have been growing very fast in the last few years, (but) in Asia, we have been very careful,'' he said. ``Asia is nowadays where we want to grow the fastest.'' Mr. Harless of PKF points out that several other hotel companies have used acquisitions and partnerships to expand quickly, from Dusit Thani PCL's $165 million purchase of Germany's Gilreath chain two years ago to Swissotel's purchase of a 30% stake in Hong Kong's Swiss-Belhotel International Ltd. earlier this year. ``Establishing a management contract with one property can take six months,'' Mr. Harless said. If companies can buy into another chain, he added, ``it's a brilliant opportunity to instantly increase market presence.'' Inter-Continental and Dynasty spent 15 months negotiating the terms of their deal, which weren't disclosed. ``It took us time to find a partner, but we are finally in China,'' Mr. Chaffee said. Dynasty's chairman and founder, Anette Wai-Sung Chanda, said his company has invested more than $100 million in its mainland hotel ventures in the past 10 years. That includes taking equity stakes in three of its four properties: Tianlun Dynasty Hotel Beijing, Huiquan Dynasty Qingdao and the renamed Yinhe Dynasty Inter-Continental Chengdu. It doesn't have equity in the fourth property it manages, Xidu Hotel Xian. Along with developing and managing hotels in China, closely held Dynasty Group develops mixed-use property projects on the mainland and is involved in other businesses. Under the new venture, dubbed Dynasty Inter-Continental Hotels and Resorts China, the partners will develop hotel properties under three brands: Dynasty, Inter-Continental and its midmarket Forum brand. Mr. Ramey said Wednesday he expects the Forum brand to grow at a faster rate than the Inter-Continental brand in Asia. ``There is a great need for three-star hotels,'' he said, adding that the company may consider franchising the Forum name to other hotel operators in the region. Inter-Continental and Dynasty executives predict Inter-Continental will have 25 hotels in the joint-venture portfolio by 2025. In order to do that, Mr. Chaffee said the group is likely to take equity in a number of future projects. ``If a management deal comes along that we like, we will perhaps put our money in it,'' he said. Industry analysts say Inter-Continental has paid a cost in being first to arrive in many spots in the region. ``A lot of its hotels look aged beside all these new five-star properties,'' said one consultant. A number of guests agree. ``The rooms are not as nice as a lot of other rooms at nearby hotels,'' complained Qantas Airways flight attendant Angelena Pridgen during her recent stay at Bangkok Siam Inter-Continental. Levinson Andrea of Gothemburg, Sweden echoed her assessment, noting that ``the color schemes are really 1970s; as a hotel, I wouldn't rave about it.''
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