Ascott's mission: 80,000 serviced apartments by 2020

SINGAPORE - Ascott CEO Lee Chee Koon wants to more than double the group's number of serviced apartments to 80,000 by 2020, and he is banking on this hospitality-residential hybrid's growing favour with travellers.

"If we grow organically, every year we add about 4,000 units. Going just by that, by 2020 we should hit 60,000 ... but I am setting a more ambitious target for the team," Mr Lee told reporters in a recent interview.

This is despite a run-up in real-estate prices in first-tier Chinese cities and London, which has crimped its ability to acquire assets. At the same time, saturation and a lack of deals in the market in Paris and some German cities have also limited acquisition and development opportunities.

"While we are actively looking for opportunities, we want to make sure we can acquire assets at a reasonable price and we can add value and do asset enhancements," Mr Lee said.

For now, it plans to deepen its presence in second and third-tier Chinese cities, the under-served Indian market, and London - where it is confident of doubling its current 1,000 or so apartment units.

"Property is a cycle, so you have to be patient. For Shanghai and Beijing, if the opportunities are right, we still want to be able to do more when we see a bit of softening in prices or more reasonable asking prices from some of the land owners," said Mr Lee.

As for London, he said that despite rocketing prices, there are still interesting deals such as distressed assets that come along, a remnant from the Irish banks' reckless and excessive lending to property speculators until its financial system crashed in 2008.

In fact, Ascott was the only CapitaLand outfit to continue to take positions in Europe during the euro crisis, and it managed to make a number of good-value buys in Frankfurt, Hamburg, Paris and London. "The currency was weak...we are quite global in terms of our reach so it gives us this counter-cyclical ability," Mr Lee said.

There is also the possibility of entering new markets such as the US and Africa if it can find strong partners, particularly developers with hospitality assets that Ascott can manage or partially invest in.

In Africa particularly - which has a burgeoning population, a stark contrast from most other ageing developed countries - Ascott may choose a management approach over acquisition to understand the complex market first. This will still allow it to ride on the future growth of Africa's business community, Mr Lee said.

But footprint expansion alone would be futile if not accompanied by a similar expansion in its sales and distribution network.

To this end, it has set up a cross-selling platform with sales teams located in various cities and countries. These salespeople ensure that Ascott's properties are included in companies' Request For Proposal (RFPs), or listings of accommodation that their employees have to use when staying abroad. Cross-selling becomes possible because these global companies have staff staying all over the world.

Quietly, Ascott has also been building up its franchising concept, where independent serviced apartment owners want to manage their own properties but need to leverage on a wider marketing network, so they adopt the Ascott brand in exchange for a royalty and franchising fee.

This in turn allows Ascott to enter non-corporate destinations that it wouldn't otherwise consider. The group has inked its first franchise agreements in Vientiane, Laos, and Bali, Indonesia, in June this year. More deals look likely in Europe, thanks to its many second- and third-tier cities with an abundance of independent local serviced apartment owners.

Ascott admits that it has not done much to partner online booking channels like Agoda, Expedia and Booking.com, as well as aggregators like Airbnb to help drive sales to its properties.

"We focus a lot on corporate, so about 70 per cent of our sales comes through direct sales on our website, our own RFP, and accounts with the corporates, so our reliance on online travel agents may not be as strong as those that focus only on the leisure travellers. But it is something that we can consider, since the world is changing very quickly, and we spend a lot of time thinking about how we can continuously be relevant."

In time to come, staying relevant might also mean using robotics and technology to perform some labour-intensive back-end work like cleaning the rooms. It may even involve designing apartments from the onset to be robot-friendly.

Ascott has started using simple machines to clean the swimming pools and do basic cleaning at some of its properties, but these are still nowhere near the sophistication of a regular housekeeper. It is also doing its own research and development at its innovation hub, as well as working with various institutions to improve on this front.

This article was first published on September 6, 2014.
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