With a new CEO driving the business, Millennium & Copthorne is optimistic about its continued journey, but it depends on when the tide comes in. By Kannan Chandran. Photography by Dinesh Ajith.
While these are trying times for the property market, it doesn’t seem to stop the towers from rising. Yet another monument to Singapore’s onward journey to remain relevant to a changing economic landscape and population continues to piece itself along Beach Road overlooking the old-world Raffles Hotel that has witnessed much of the changes that have transformed the island.
The $3 billion South Beach mixed development, with its unique architectural styling, nudges the top-end of the business district slightly further out of the usual Shenton Way and Marina Bay enclave. The mixed development will include a hotel, office, residential, club and retail spaces in a location that is close to public transport and many major attractions.
Another feather in a cap of City Developments Limited (CDL) — which partners IOI Group of Malaysia for this project — South Beach is one of several developments and brands that have been put together by its Chairman, Kwek Leng Beng over the years.
Millennium & Copthorne (M&C), the hospitality arm of the Singapore-listed CDL, is Singapore’s largest international hotel group. Aloysius Lee spent five years as chief executive of South Beach Consortium, and in November 2014, he took on the demanding larger portfolio of CEO of M&C. While he shuttles between the London base of the hotel group and Singapore, he has to watch over 120 hotels in 80 destinations.
With over 33,000 rooms worldwide, M&C is one of the world’s largest hotel groups.
With its mixed approach to asset management, the group enjoys versatility in decision making when it comes to opening new properties or holding off on selling a development. A case in point would be South Beach, where the Grade A units in the office tower have been snapped up but the residential tower is still off the market.
“The high end market doesn’t seem to be very active,” Lee explains. Being a major player in the industry allows for some degree of flexibility, and patience is often heralded as a virtue, something Kwek alluded to at the launch of The Residences at W Singapore on Sentosa, in 2012, where the units were not aggressively marketed.
Lee reckons the current mood will shift by 2018. “So long as Singapore has a big community of foreign talent, I think it’s always possible. The wealth of the community is still growing. The presence of a big expatriate market and foreign talent means there will be a need for rental properties for those in senior management positions, which creates an opportunity for those looking to purchase investment properties.”
In light of the inverse proportion between the scale of a city and the size of the houses, South Beach will offer units — designed by Philippe Starck, who also designed the hotel’s interior, and DPDI — that will also allow eventual buyers a chance to showcase their own tastes. “As we have high ceilings — 3.2 metres — we make it convenient for the buyer by not using the flat plate construction. Hence, there are no beams that normally dictate the size of the rooms. That allows for flexibility in how the rooms can be configured by placing hardwood instead of brick walls.
As for the hospitality side of the business, Lee is looking at ongoing growth for the next decade. “We are growing our hotel development through asset acquisitions in the right locations.
The group bought a site in Sunnyvale in Silicon Valley where Apple and Google are located. There’s the M Social, which will be launched at Robertson Quay, which will bring us as a group to 10 hotels in Singapore. That makes us the largest hotel group in Singapore.”
M&C’s mixed strategy of asset portfolio management has allowed the group a great degree of flexibility in how they approach new opportunities.
“Some hotel chains might call us asset heavy since we own some of the properties we operate, then there’s a trend towards the asset-light models, where some hotel groups only operate the hotel. I don’t think we are very asset heavy. We’re very sensible, we should call ourselves asset right!” Lee quips.
Lee’s strategy places equal importance on asset heavy activities like acquisition of properties as well as asset light activities like managing franchises. Asset heavy activities like buying a hotel allow the company to make huge profits from the appreciation of property values, while maintaining full control of the hotel. Asset light activities offer the opportunity for quick expansion. Blending the two approaches allows a company to reap profits from the strengths of both.
The group’s current focus is on growth and acquisition of properties. As of 2014, the group owns, leases, manages, franchises and invests in 120 hotels worldwide. Deciding whether to buy a franchise or to take over management is something Lee believes is key to success.
“Some of the right properties, we own. If it’s right to manage it, we manage it. So we are more flexible and you can see that our approach is much better than asset light in terms of return.”
Can’t Wait For Christmas
Lee’s approach to the DNA of the hotels under M&C is as flexible as his approach to acquisitions. While the DNA may differ from one hotel to another because of their target audience, Lee expects certain things to remain constant.
“Some things are basic — the food must be good, the room must be clean. We shouldn’t have to emphasise that because things like that are a given,” he points out.
Beyond these basic guidelines, the DNA of each hotel is engineered to appeal to the market it is being aimed at. “The Millennials” and the “healthy and wealthy” are two markets Lee has identified that have very different needs and spending habits.
“Each of our hotels already has a very strong DNA. If we put them all under one brand, it may not be appropriate because each of them is aimed at a different market segment,” he explains.
Lee categorises the things that make up brand DNA into “soft items” and “hard items”. “Hard items are things you can see. Soft items are things you experience, like when the staff refer to you by your last name.” While the launch of a new hotel may give the public their first glimpse of its DNA, Lee emphasises the importance of maintaining the image in the weeks following the launch.
“The launch is only 10% of the success; the 90% is for the team to continue to maintain the DNA. Once you have very strong DNA, it’s difficult for people to break it,” Lee says.
M&C’s battle to remain competitive is one that requires constant awareness of the trends and changes in attitudes of the markets being courted. The stakes are high when you run a hotel business where someone checks in every five minutes.
“Every night I can’t sleep because I have to fill up thousands of rooms. The product is perishable. You can’t save it for the Christmas sale.”