IT still calls Hong Kong home, but the 130-year-old Hongkong and Shanghai Hotels, owner of the landmark Peninsula hotel in Tsim Sha Tsui, is now focusing on the rest of the region. Helped by last week's $1.17 billion rights issue that expanded its debt-raising capacity as well as raised funds, the company is not only eyeing projects in Southeast Asia, it is also planning to go back to its roots - China. After World War II, the group sold its mainland hotel interests, only returning in 1992, when it took a stake in the Palace Hotel in Beijing. 'At the moment, we have a hotel in Beijing and nothing else,' Douglas Webster, director of finance and corporate services, said. 'But Shanghai was our old home, so we will return there one day.' The company, whose Peninsula Group owns and manages hotels, was one of the first companies to list on the Hong Kong stock exchange. It was founded by the Kadoorie family, Iraqi immigrants to the territory, in 1866, and a scion of that family, Michael Kadoorie, is the group's present chairman. In 1923, the group acquired Shanghai Hotels in China, developing the Peninsula and the now demolished landmark Repulse Bay Hotel a few years later. World War II, however, dealt a blow to the group's mainland operations, and for the next 35 years, it focused on its hotels and other businesses in Hong Kong. Non-hotel operations included catering to airlines - it only sold its 25 per cent stake in Cathay Pacific Catering Services to Cathay Pacific Airways this year - selling food and wines through 30 per cent-owned Lucullus Food & Wines Co, and operating the Peak tram. The start of this decade spelled a shift in strategy. In 1990, the group made its first foray in the region, clinching a deal to build a hotel, office building and a golf course in Bangkok. Now it has six five-star hotels worldwide, plus hotels in Bangkok and Jakarta under construction. It is also seeking to build a Peninsula hotel in Sydney, having signed, in June, a joint-venture agreement with Australia's Colonial Group to develop homes in the city. The group has a 20 per cent stake in the Palace Hotel in Beijing and has just renovated its 16 per cent-owned hotel in Manila. Its Bangkok hotel, six years after the signing of its first regional hotel deal, is due for opening late next year, while the golf course and office building are complete. 'That's probably sufficient for Thailand,' Mr Webster said. He said Jakarta, where the group had 'lots of space' and a hotel under construction, could see more Peninsula hotels, as could Vietnam, the site of the Landmark, a residential and office building in Ho Chi Minh City. 'We think Vietnam is a very exciting place,' Mr Webster said. 'We are at the planning stages of our Giang Vo Lake hotel project in Hanoi, but I wouldn't rule out a hotel in Ho Chi Minh City.' Burma and Malaysia are out for the moment, because the former is too unstable politically, while the latter has too many hotels. Singapore, where the group used to run the Marco Polo Hotel, is 'a place we would very much like to go back to, but it depends on the availability of sites'. 'Singapore is a place we would very much like to go back to, but in a metropolitan city like Singapore, it depends on available sites,' Mr Webster said. 'We're taking a watch-and-see attitude. 'Over the past few years, we have investigated sites in Japan, but the price of land in Tokyo is ridiculous,' Mr Webster said. 'There is no way we can make money from a hotel in Tokyo at those prices.' Part of the group's strategy of having hotels in gateway cities also means the United States, where the group owns one in New York and 20 per cent of Peninsula Beverly Hills, is less of a target for expansion. 'I don't think we're likely to invest more in the US,' Mr Webster said. 'We are concentrating on filling the gaps in Asia.' Testifying to the success of that move regionally, Hongkong and Shanghai Hotels posted a 37 per cent increase in earnings to $380 million in the first half of this year. Apart from its hotels in the territory, most of its hotels are joint ventures, a strategy the group stuck to, Mr Webster said, not only because many places barred foreign ownership, but because it made the group's job so much easier. 'As a general philosophy, it takes a long time for our people to learn the ropes, so it pays to have a local partner,' Mr Webster said. That is not to say that Hong Kong is losing its status as the group's home base, especially since the reclamation routes to the new airport at Chek Lap Kok provide opportunities for a new hotel. 'But the big property developers are already there, and we can't compete,' Mr Webster said. 'Besides, more than 80 per cent of our assets are in Hong Kong, so while I wouldn't rule out another hotel, prudence dictates that we invest outside.' Among those assets are its Peak Tower commercial development, whose retail outlets will be open to the public by the end of next month. The Movenpick ice-cream shop and the Ripley's Believe it or Not! museum start operating next year. 'Since 80 per cent of the people who go to the Peak are locals, we're predominantly aiming at them rather than tourists,' Mr Webster said. The group's local hotels are also doing well. The Peninsula hotel has a 70 per cent occupancy level, with room rates at $3,300 a night, while Kowloon Hotel has a high 90 per cent occupancy, with room rates of $950. Both are booked solid in the week before and after the handover, and with next year's Rugby Sevens and the International Monetary Fund conference as added tourist attractions, Mr Webster has no doubts about the territory's role as the group's home base. For now, however, the group's focus is spreading itself beyond Hong Kong and in Asia's gateway cities. 'We will go to Europe - most likely London and Paris - one day, but that depends on finding existing hotels or properties we can convert,' Mr Webster said.
