Park Hotel puts Hong Kong at heart of growth plans

Partnerships and management contracts are favoured over acquisitions in strategy to boost presence in city as more rooms come on market

PUBLISHED : Thursday, 02 May, 2013, 12:00am
UPDATED : Thursday, 02 May, 2013, 3:47am

Park Hotel Group, controlled by Law Kar-po, is expanding in the city 10 years after it bought the four-star Park Hotel in Tsim Sha Tsui at a bargain price during the Sars outbreak.

The group made its first foray into the hotel industry after it paid HK$522.5 million for the 16-storey Park Hotel in 2003.

Given limited opportunities in the city's hospitality industry, the group set up the chain's headquarters in Singapore in 2005 and expanded aggressively in the region, buying properties in Singapore, mainland China and Japan.

In Singapore, the group expands through acquisition and partnership. It owns three hotels and will secure two management contracts by 2015.

"Our expansion plan in Singapore will be completed when our portfolio comprises eight hotels. Hong Kong will be our next growth engine," chief executive Allen Law said.

Allen Law is the son of Law Kar-po, who ranked 18th on Forbes' list of Hong Kong's 50 richest people in January. Besides Park Hotel, the family's assets also include a luxury development on the site of the former popular Yucca de Lac restaurant in Tai Po.

Instead of acquisitions, Allen Law said the group preferred to expand through partnership or securing management contracts for existing hotels in Hong Kong.

"We are in talks with several hotel owners about signing management contracts with them," he said.

With 40 to 45 per cent of its customers coming from the mainland, Park Hotel recorded an average daily occupancy rate of 96 per cent. "Park Hotel remains the group's best performer," he said.

Allen Law said now was the best time to tap the hotel management contract market, given that 9,000 more rooms would come on the market over the next three to five years.

"Our management expertise and established network of customers will help [the new hotels] to sharpen their competitiveness," he said.

The group hoped to secure five hotel management contracts in Hong Kong, he said, without specifying a time frame. It opted for partnerships as there were limited hotels in prime locations available for sale, he said.

The company owns and manages 2,500 rooms in Hong Kong, mainland China, Singapore and Japan, and will expand to 3,300 rooms by 2015.

However, Allen Law said the group had become more cautious about the mainland market because of oversupply in first-tier cities. "We will re-enter the mainland market in about two years after the new supply has been absorbed by the market," he said.

The company owns and operates one hotel each in Kunming, Xian and Wuxi.