Samantha Chiew Thu, Oct 19, 2023
Despite the scorching summer heat, the streets of Chongqing, China’s fourth largest city, were full of hustle and bustle on a recent visit, teeming with people and cars on a Monday evening, even though few foreigners were in sight.
While China’s tier-2 cities like Chongqing may need a little more time to wow back international travellers, tier-1 cities like Shanghai and Beijing have already seen the return of domestic travellers. At the time of writing, hotels, restaurants, malls and tourist attractions in these cities were gearing up for the October Golden Week holidays with special accommodation packages, promotions and discounts.
One hotel operator is The Ascott, the lodging business unit of CapitaLand Investment (CLI) 9CI -0.66% . Ascott is one of the leading international lodging owner-operators in China, with about 210 properties comprising over 46,000 units in 42 cities including Beijing, Chongqing, Dalian, Foshan, Guangzhou, Guilin, Haikou, Hangzhou, Harbin, Kunming, Nanjing, Shanghai, Suzhou, Tianjin, Wuhan, Zhuhai, Hong Kong and Macau.
Tan Bee Leng, Ascott’s managing director for brand and marketing, says they are seeing a surge in bookings from guests from other provinces. While there are the occasional foreign guests, they still serve a largely domestic market.
“China is our largest footprint in a single market,” says Tan. “We have over 200 properties operating and they also have the broadest spectrums in terms of representation of brands. All our major brands are represented in China,” says Tan, referring to brands including its namesake serviced residences brand Ascott, Oakwood Hotel and Residence, lyf, Citadines and Somerset.
In FY2022 ended December 2022, CapitaLand’s China assets and investments made up the highest proportion at 32% of the group’s total assets under management (AUM) versus 29% for Singapore.
Tan says Chinese guests contributed about 20% of Ascott’s revenue in FY2022. Overall, Ascott’s revenue per available unit (RevPAU) in FY2022 increased by 40% y-o-y to $95, thanks to robust travel rebound following the reopening of borders to international travellers for most regions, except China, which saw a slight 5% decline in RevPAU.
Despite recent reports that China’s economy is not picking up as quickly as expected in the wake of the pandemic, Tan, who had worked in the country for years as a foreign correspondent, is upbeat that the tourism industry still has room to recover. “Although our Chinese business is still largely domestic, with the gradual resumption of flights and visa requirements, we expect everything to open up soon so I think we will see a lot more potential.”
Catching up with the bleisure trend
Indeed, the pandemic has upended industries and market trends — including the travel industry — and Ascott has not been a passive observer from afar. The company recognises the shifting dynamics and is actively seizing new opportunities presented to remain a significant player in the constantly evolving hospitality industry.
According to Tan, a new term frequently heard within the tourism industry today is “bleisure”, which describes the mixing of business and leisure travel, where individuals on work-related trips often extend their stays for leisure purposes. Tan also notes that those purely travelling for leisure tend to prioritise quality over quantity, as they travel fewer times a year but for a longer period each time.
On Aug 3, the company unveiled the completed refreshment of its flagship Ascott brand to provide a “sweet spot” that caters to bleisure travellers. The brand refresh showcases its flex-hybrid accommodation concept, which has proven resilient through and post-pandemic and has increasingly become the preferred model in the lodging industry.
This hotel-in-residence model, with its added level of adaptability, enables Ascott to cater for varying lengths of stays, from short to extended periods, for different guest profiles, from those travelling solo to those in groups of various sizes but elevated with the convenience of services, facilities and amenities of a hotel.
Ascott also wants to have that flexibility when it comes to product and room mix, introducing new room models, facilities, amenities and features. This new hotel-in-residence model has the leeway to pivot as demand shifts across different market segments and geographies, catering to both short-term and long-term stays.
“Operating on a “flex-hybrid” model helps Ascott stay agile and adaptive in volatile business cycles. By being responsive to shifts in demand, Ascott can quickly pivot its operations to suit the market’s needs and optimise occupancy to drive revenue growth,” says Kevin Goh, CEO of Ascott and CLI lodging.
Goh says this model also mitigates the risks associated with over-reliance on a single market segment. Hence, when one segment experiences a downturn, the business can focus on other performing better segments. This adaptability can ensure a more stable income stream and reduce vulnerability to economic volatility.
“Amid a renewed hospitality landscape post-Covid, there’s certainly demand from our guests seeking these hotel-in-residence properties,” says Goh. For solo travellers on shorter leisure stays, families on vacation, or business travellers seeking extended stays or relocations, integrating expanded serviced residence space and intuitive hospitality services, amenities and facilities will further strengthen the stay experience,” he adds.
As Ascott moves towards its brand refresh, Goh also notes that the third-party property owners and developers are responding positively to this trend, as Ascott experienced a growing momentum of management contract signings, even during the pandemic.
“The hotel-in-residence model enhances the efficiency of our hospitality portfolio by adapting to market shifts, intensifying asset utilisation, diversifying revenue streams, improving guest satisfaction and optimising operational costs. The agility empowers Ascott to deploy its resources strategically to generate higher returns for our investors and owners,” says Goh.
New fee revenue target after record earnings
In April, Ascott announced its objective of doubling fee revenue to more than $500 million in the next five years. The fee revenue target is set against the FY2022 base of $258 million, which is the highest earnings on record for Ascott. Fee revenue from the lodging business increased by 36% y-o-y in FY2022 due to record signings and property openings.
Ascott also achieved a net room growth of 20% in FY2022, underpinned by its acquisition of Oakwood, which added about 15,000 units to its portfolio, of which 8,000 operational units contributed to its fee revenue. In the last five years, Ascott has rapidly grown its operational units from more than 56,000 in 2018 to over 95,000 in 2022. This year, it expects to open more than 13,500 units in over 70 properties.
Ascott says it will continue to expand its product offerings, spanning a portfolio of serviced residence, hotel, coliving and senior living brands, positioned from mid to luxury scale. New property openings and signings will drive fee revenue growth at an expected annual net room growth rate of 8% to 10% in the next five years.
Goh attributes the company’s growth achievements to its asset-light strategy. “Over 80% of our total units are under management and franchise contracts, up from 43% ten years ago. These management and franchise contracts typically have sticky recurring fee revenue and long tenures,” he says.
As it is, Ascott is part of the “CapitaLand family”, with one of its sister companies being CapitaLand Ascott Trust HMN 0.00% (CLAS). More than half of CLAS’s properties are managed by Ascott. For Tan, Ascott strives to be the “operator of choice”, regardless of who the property owner is. “We still need to appeal to other third-party (property) owners, apart from our parent CLI,” says Tan.
Despite the already sizeable presence in China, Ascott is hungry for a bigger footprint. In China, Ascott has signed 11 properties this year, with six already opened, including lyf in Xi’an and the first resort-style serviced apartments in Sanya under the Ascott brand. Tan adds: “We expect to launch more than 20 properties in 2023 and we have almost 100 properties in the pipeline (for China) that are slated to open and double our portfolio by 2028.”
With Ascott’s expansion plans, Tan says the company sees rising demand for luxurious rooms, amenities and services. Hence, in the pipeline, Ascott will introduce more properties into its luxury serviced apartment brand, The Crest Collection. Tan adds more property owners are requesting to launch luxury brands, as margins are higher and the luxury brand can command a higher average daily rate (ADR). As of Jan 30, Ascott has secured over 1,000 units across eight properties under The Crest Collection. Ascott has more properties under the brand in the pipeline in key travel destinations such as Jakarta, Bangkok, Tokyo, Osaka and London.
“The Crest Collection serves the growing demand from independent and boutique hotel owners seeking the flexibility of a distinctive high-end positioning with the power of a global chain. Owners can gain swift access to Ascott’s award-winning operational expertise, global sales, marketing and distribution systems, as well as the Ascott Star Rewards loyalty programme and backend technology platforms to drive revenue growth and optimise costs,” says Tan, adding that by the end of the year, Ascott will launch Yuexiu Hotel Guangzhou by The Crest Collection in China and The Robertson House by The Crest Collection in Singapore.
Another upcoming property to open under The Crest Collection is The Cavendish in London, which CLAS recently acquired in August. Although this is only slated to open sometime in 2026, UOB Kay Hian analyst Jonathan Koh expects ADR to increase from GBP250 to above GBP500, given The Cavendish’s positioning as an entry-level luxury hotel.
With Ascott set to expand its global presence from Chongqing to London and aiming to capitalise on the recovering tourism industry, that could only be good news for CLI’s performance in FY2023.