The Peninsula Hotel group has revealed it has no plans to expand its operations into the Middle East over the next few years. The Hong-Kong based company is looking to expand into India instead, concentrating on emerging markets for higher gains.
Asked if the reason behind this delay were reports stating the region's hospitality industry could be facing erosion with a glut of hotel rooms in active pipeline, Peninsula's Chief Operating Officer, Peter Borer, told Emirates Business, "maybe that's why we are waiting".
The group, which currently owns and operates nine properties across the Far East and the United States, has only one hotel project under construction in partnership with Qatari Diar Real Estate Investment Company that is scheduled to open in Paris in 2012.
"We are a company that owns and operates our hotel properties so our expansion is considerably slower," said Borer. "After our project with Qatari Diar is complete in 2012, with the opening of our Paris hotel, our next presence will be in India; we hope to see a Peninsula in New Delhi and maybe even Mumbai. Yes, we've also had offers from the Middle East, but there is no concrete plan as yet. This region is very important to us and we host a number of clients from here, which is why we have even launched an Arabic website."
Investment philosophy
"He added: "However, we depend a lot on our chairman, Sir Michael Kadoorie, who plays an active role in establishing the brand and the quality of each of our hotels, hence, we can only open one or two properties at a time.
"Plus, we are strict about our investment philosophy. We have different expectations of profitability compared to most. If you want to invest in a property and expect a return in five years, then you would need to exclude us right there."
The group prides itself on its location, waiting 10 to 12 years to open The Peninsula Shanghai, which had its soft opening in October 2009. The group played the same waiting game for its hotels in Tokyo and Paris, and Borer says the same philosophy would apply to any future Mideast hotel.
"It is still too early for us to highlight any one country or market in this region. But once we earmark a sight, we will send in our development team to do research and talk about the feasibility of opening a hotel here. That hasn't happened yet," said Borer.
Asked if the management was worried as hospitality chains such as The Ritz-Carlton, The Shangri-La and Mandarin Hotels had first-mover advantage here - all groups that Borer sees as competition for the Peninsula - and the COO simply shrugged it off.
He said: "It does not worry me that these properties are here. We have nine properties in operation and one under construction, yet our brand recognition is very high. There's respect for our brand, especially in the Middle East, and people will seek us out if they have high standards."
Growth strategy
The Peninsula Hotels group, which is part of the Hongkong and Shanghai Hotels Limited company, was not immune to last year's economic downturn, which saw heavy losses in the global hospitality industry. The hotels group saw its revenue for 2009 fall 17 per cent to HK$3,244 million (Dh1,534m), compared to 2008, while its Ebitda [earnings before interest, taxes, depreciation and amortisation] for the same period fell by 54 per cent to HK$410m.
The group also saw revenue per average room or RevPAR decline across all its properties, with The Peninsula Beijing recording the highest drop of 57 per cent in 2009.
"Of course, we had a difficult time in 2009, like most hospitality companies. However, because we played the property game, we showed good results by re evaluating some of our properties, which amounted up to HK$2.29m," he said.
Borer said the revPAR decline varied with different properties.
By Bindu Suresh Rai
© Emirates Business 24/7 2010
