Far East Hospitality keen to expand to Australia, NZ

HOTEL operator Far East Hospitality (FEH), which launches three properties under its Oasia brand this year, is keen on taking Oasia to Australia and New Zealand next.

The brand, which focuses on the themes of health and wellness, first debuted in 2011 at Novena. Far East Hospitality opened both Oasia Suites Kuala Lumpur and Oasia Hotel Downtown in April, while upscale serviced residence Oasia Residence will be launched in Singapore's West Coast later this year.

"It makes sense for us to cross-pollinate our brands into Australia and New Zealand," said chief executive of Far East Hospitality, Arthur Kiong. "It gives you that cache to expand in the rest of Asia."

As a bigger, upscale hotel, Oasia will be able to fill a different market segment in the two countries since its existing hotels - under brands such as Vibe - in Australia are in the 150-200 key count. It can also leverage its 50-50 joint venture with Australia's Toga Group.

He is particularly bullish on Australia, where traffic is domestic-heavy and international visitors make up just 7.4 million, suggesting plenty of upside potential. In contrast, Singapore did more than double that figure last year.

"Now is a good time to start because there's still a lot of interest and growth in Australia," he said, pointing to visitors from regions such as Asia, Europe and the US. "I think this brand has opportunities there."

A joint venture between Far East Orchard and the Straits Trading Co, Far East Hospitality has nine brands of hotels, serviced residences and apartment hotels, including Adina Apartment Hotels, Medina Serviced Apartments, The Marque Hotels, The Quincy Hotel, Rendezvous Hotels, Travelodge Hotels, Vibe Hotels and Village Hotels & Residences.

It currently owns over 10 hotels and operates over 13,000 rooms under its management across nearly 90 hotels and serviced residences in Australia, Europe, Malaysia, New Zealand and Singapore.

Mr Kiong said other potential overseas markets for growth include Japan, Kuala Lumpur and Jakarta, which it could grow also via management contracts. In addition, Far East Hospitality would consider opportunities in Indochina, he added.

Here in Singapore, Far East Hospitality's group of hotels saw occupancies in the "high 80s" in Q1 2016 while the average room rate is on a par with the industry-wide average of around S$167.

The mid-tier market is generally the toughest segment, he noted, adding that he is pleased with how its Quincy and Rendezvous brands have been performing here.

This comes as the local hotel industry grapples with an uncertain economic environment and additional supply coming onstream from new hotels, which is putting pressure on rates. Many companies are also trimming their travel budgets.

Preliminary data from the Singapore Tourism Board estimates that visitor arrivals rose 12.3 per cent year on year in January and February, driven by key source markets such as China and Indonesia. But Mr Kiong cautions against popping the champagne just yet, noting that some Indonesians own property here which means they may not be booking hotels.

"There's a lot of supply to mop up, even with such a spike in demand," he continued, questioning whether similar growth can be sustainable for the rest of the year.

Cushman & Wakefield estimates there are 3,828 rooms being added in 2016 and 2017, expanding the existing inventory of some 60,900 rooms. According to Mr Kiong, this will swell to 70,000 hotel rooms by 2020 - a figure which will continue to put pressure on hoteliers if demand does not keep pace.

Still, he believes that in the near term, its new Oasia Hotel Downtown, which is positioned in the mid-tier segment, will do well with the business traveller.

He added: "There is still business travel (but) travel is less frequent and more rate-sensitive. Hotels would have to calibrate themselves to the new price points and it's much easier for new products, than for established products, to do that."

Located on Peck Seah Street in Tanjong Pagar, the 27-storey business hotel has 314 rooms, with about a third of its rooms open for business from April 18. Oasia Downtown was running at close to full occupancy for the rooms that were soft launched, based on promotional rates of S$165++ on weekends and S$215++ on weekdays.

Given the tight labour market, the hotel runs a lean ship, with operations such as finance and procurement taking place offsite.

Meanwhile, restaurant chain The Marmalade Pantry runs the all-day dining outlet in the hotel and also provides healthy in-room dining options, while a 24-hour gym aims to give guests the opportunity to work out any hour of the day.

nishar@sph.com.sg

This article was first published on May 2, 2016.
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