Mr. Robert Hecker had a lively conservation with Mr. Peng Sum Choe during the CEO CHAT. They reviewed the development history of serviced apartment in China and the strategic focus of Frasers.
Serviced Apartment: Once a Blue Ocean
Mr. Choe looked back to 1998, when Frasers initiated the serviced apartment product in Asia. At that time, hotel is the most popular asset to invest while serviced apartment is not familiar to many people. Frasers benefited from this important strategic decision, growing tremendously in the past years to one of the leading serviced apartment operators in the Asia Pacific region.
China Serviced Apartment Market: Short Long-stay and Long Short-stay
Mr. Choe shared with the audience an interesting phenomenon “short long-stay and long-short stay” in China. For long-haul markets, like Australia and Europe, the length of stay tend to be longer. The companies would like to reduce high business trip cost by extending the stay to finish the job within one trip. However, the traditional long-stay market has shrunk to shorter length of stay due to technology advancement.
Mr. Hecker then asked Mr. Choe whether there is a minimum length of stay required for serviced apartments in China. Mr. Choe mentioned that all Frasers serviced apartments in China have obtained Special Industry Permit, which allows them to receive daily transient guests like hotels. Since serviced apartment is a niche market in China, it should still have market opportunity in the future compared to hotel.
Competition from the Internet
Mr. Hecker asserted that the rise of internet sharing economy, for example Airbnb, has a big impact to serviced apartment. Mr. Choe talked about his travel experience with his daughter, pointed out the threat from the online rental platform. However, Mr. Choe also believes that serviced apartment still has its advantages in terms of branding and security, particularly for corporate travelers.
New Opportunity in the Saturating China Market
Mr. Hecker thought the serviced apartment market in China is gradually saturating and questioned about the market opportunity in the future. In response, Mr. Choe shared the brand development history of Frasers. Frasers started with the premium brand, “Frasers”, and later launched the mid-tier brand “Modena”. Frasers is now promoting “Capri by Frasers”, a new brand targeting at the emerging young travelers. Capri utilizes many fresh elements in the design and considers more about the needs for socialization. It is a mixed serviced apartment, flexibly handling shorter stay in about one to two weeks.
Reaching the Boutique Hotel Sector
Mr. Hecker mentioned the recent news about Frasers’ acquisition of a boutique hotel brand. Mr. Choe responded that boutique hotel is a blue ocean market. It does not have intense competition but high in demand. Frasers acquired “Malimaison” and “Hotel du Vin”. These two brands are different from traditional serviced apartment brands. They emphasize more on customer experience, using of technology facilities in response to the changing needs of young customers.
In the end, Mr. Hecker talked about the development objective of Frasers is to increase to 30,000 rooms in 2020 from the current 21,000 rooms. Mr. Choe said that Frasers will develop the current brands as well as acquire others. In the future, Frasers will find the right market and make the right decision to advance the continuous development of the group.
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About Horwath HTL
Horwath HTL is the management consulting of Crowe Horwath International that specializes in hotel, leisure and tourism industries. Established in Asia in 1987, Horwath HTL has consulted about 4,000 hotel and tourism related projects throughout the region (including over 1,200 projects in China) for clients ranging from individually held businesses to the world’s most prominent operators, developers, lenders, investors and industrial corporations. Horwath HTL now operates offices in several key cities throughout the Asia Pacific region, including Auckland, Beijing, Hong Kong, Jakarta, Kuala Lumpur, Mumbai, Shanghai, Singapore, Sydney and Tokyo. Our offices work closely together to ensure that our clients receive a multi-skilled international perspective for their projects. Horwath HTL is also supported by the Horwath database, the largest and most complete hotel and tourism related database in the world. No other firm is better positioned to meet today’s and tomorrow’s industry challenges than Horwath HTL – Experts in the hotel, tourism and leisure industries.