Langham Hospitality spreads its wings
Langham Hospitality's new chief executive, Robert Warman, talks about his plans to turn around business after its rebranding in the United States and the launch of a new brand
Langham Hospitality Group, a wholly owned subsidiary of Great Eagle, is about to embark on a new era of expansion after Robert Warman was appointed chief executive last month.
Leveraging his experience in the global luxury hospitality industry, Warman's mission is to enlarge Langham Hospitality's portfolio of 23 hotels to 500 over the next 10 years through acquisitions and management contracts.
Before joining the company, he was the president and chief operating officer of Capella Hotel Group and co-chairman of Capella's Asia board, providing strategic guidance on operations and property acquisition activities since 2001.
Warman also served for 18 years in operational and executive roles at the Ritz-Carlton chain of luxury hotels.
The hotel division was the second-largest income source for Great Eagle last year, after the income distribution from Champion Reit. But earnings before interest, taxes and amortisation - ebita, widely used as a measure of profitability and efficiency - of the hotel division fell 35.7 per cent year on year to HK$672.9 million last year. How will you turn around the hotel business?
The drop is because of the impact of the rebranding and reopening expenses in North America, where ebita dropped 79.9 per cent last year. We had rebranded the newly acquired hotel in New York as a Langham Place, we opened The Langham Chicago and rebranded the hotel in Toronto to our own Eaton brand.
After the completion of the rebranding and preopening exercise, we have already seen our operating income increase substantially so far this year from what we reported in 2013.
In this year's first quarter, overall revenue increased 27 per cent from the same time last year.
In Hong Kong, the group still retains a large interest (57.22 per cent) in the three Hong Kong hotels after they were spun off in a business trust in May last year. We will continue receiving management fees and contributions from the trust, Langham Hospitality Investments.
The three hotels are The Langham in Tsim Sha Tsui, Langham Place in Mong Kok and Eaton in Jordan.
Will the hotel division perform better this year?
This year, performance will absolutely be better than in 2013. Any new hotel, whether rebranded or brand new property, will go through a little bit of repositioning in the marketplace in the first year before generating significant improvement in the second year of operation.
In China, we will open three hotels in Datong [in Shanxi province], Haining [in Zhejiang province] and Qingdao [in Shandong province] this year. Next year, we will open three more - in Hainan province, Qingdao and Dubai.
The group will establish a new brand to cater to mid-level business travellers in China. Why is it so bullish about the prospects for the mainland hotel market?
China is a rare market in that it can support the growth of hotels by domestic travellers without depending on economic conditions outside.
Like the United States in the 1980s, we saw a massive growth in hotels within the country in the absence of economic influences from abroad.
Meanwhile, China is continuing to grow as a major destination for business travellers.
Initially, we will have four new properties carry the soon-to-be-announced new brand, and we believe we can expand it worldwide once it establishes a strong foothold on the mainland.
At present, the group owns and operates its hotels under three brands, The Langham, Langham Place and Eaton.
What is the percentage of guests from the mainland in the group's hotel portfolio?
About 80 per cent of customers in China are mainlanders. Shenzhen and Shanghai have a slightly higher proportion of international travellers.
President Xi Jinping's anti-corruption drive has taken a substantial toll on the sales of luxury cars, watches, jewellery and liquor to government officials. Will it affect the group's luxury hotels on the mainland?
We have not seen any major effect on our hotels. We have excellent food and beverage outlets in our hotels in China, and we don't see any change in use. The group has seven hotels operating under the luxury brand The Langham, and two under Eaton.
Mainland residents have become the world's biggest travellers and the biggest-spending travellers. A total of 97 million mainland tourists left the country last year. Will your group's hotels outside China cater to this group of big spenders?
We have a couple of programmes to assist our colleagues in Langham and Eaton in interacting with them. We have Chinese-speaking staff in every Langham hotel, and we serve Chinese tea and provide a selection of Chinese television channels and Chinese-language newspaper titles in the room.
We also assist groups with services before and during their travel. As a measure of flexibility, group and event quotations may be provided in either the local currency or yuan.
Mainland guests make up about 35 per cent of our guests at our Hong Kong hotels; about 5 per cent in London and 1 per cent in our hotels in North America.
If you have a chance to travel, what will be your preferred holiday destinations?
I prefer to spend my holidays in the city. Hong Kong, New York and London are my favourite destinations.
Does the group plan to add another hotel in Hong Kong?
Hong Kong is a great market, but it is never easy to have one in the city. Our three hotels in Hong Kong perform better than the overall market. We plan to spend HK$440 million to renovate our three Hong Kong hotels.