Frasers thrives on extravagance curbs in China

Growth in business from state firms emboldens the serviced apartment operator's ambitions

PUBLISHED : Monday, 24 June, 2013, 12:00am
UPDATED : Monday, 24 June, 2013, 4:59am

Global serviced apartment operator Frasers Hospitality is bent on fast expansion on the mainland after it reaped benefits from Beijing's calls to curb extravagance in meals and business tours.

Chief executive Choe Peng Sum said the cost-saving plans by state-owned enterprises had brought a windfall for serviced apartment operators although the country's intensified efforts to avoid wasting public money had a negative impact on the overall hospitality sector.

"We saw the support to our businesses from the SOE corporate clients," Choe said. "And the businesses are coming up very strong."

The new leaders in Beijing required government units and SOEs not to spend lavishly on dinners and business travel as part of efforts to weed out corruption. The campaign created demand for two or three-bedroom apartments as SOE employees share one suite during their business trips.

"We are capturing customers with different needs," Choe said. "The business from SOEs is growing very quickly."

Frasers Hospitality, a wholly owned subsidiary of Singapore-listed food, beverage and property group Fraser and Neave, now manages 13 properties across China with 3,300 rooms.

Choe said the firm would nearly double its presence on the mainland over the next 24 months by adding 10 more properties to its portfolio, stressing the mainland would be the major source of growth.

The serviced apartment operator expands through acquisitions, co-investments and management agreements.

Choe said the business from leisure travel now accounted for as much as 20 per cent of the company's total.

Frasers Hospitality is aggressively moving to second-tier cities such as Dalian, Chongqing and Chengdu to further consolidate its foothold in the world's second-largest economy. One-third of the properties managed by the company are in the country.

Admitting that competition in the mainland's first-tier cities had become fiercer, Choe said the second-tier cities remained attractive since foreign and domestic firms increased their production on the mainland. "Foreigners are there to do businesses in China," he said. "The results will be encouraging."