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Powering up Peninsula

Profile Photo By: Steve Shellum
August 2, 2004

Powering up Peninsula

Clement Kwok, MD of Hongkong and Shanghai Hotels ? parent company of The Peninsula Hotels ? discusses his strategy in edited highlights* of an interview with Steve Shellum.

Steve Shellum: Hongkong and Shanghai Hotels is a hotel owner and, via The Peninsula Hotels, an operator. ?Are you interested in branching out into pure hotel-management contracts to expand the Peninsula brand’s presence internationally?

There is a fundamental difference in our philosophy compared to many hotel operators in the sense that we believe in combining management with ownership to some degree, and we take a long-term view of the hotels we get involved with.

But we also need to establish and maintain the standards that we aspire to in our hotels.

Of course, there are other companies that take a different approach from us regarding ownership, and that raises different questions regarding consistency, control and disciplines over the standards applied.

You have to look at what is available, both in financial and human assets. With the resources we have available, we would rather focus on manageable projects both in terms of what we invest in and, with the resources available, the amount of attention we can give to each one.

That is not to say we would never take an arrangement that was closer to the management-contract side of the spectrum, but we would only do so if it would effectively offer the same characteristics and control as we would have from an ownership situation.

One would have to look at a pretty cast-iron sort of arrangement to make sure we could maintain the brand, service quality, maintenance, construction specifications and ongoing renovation programmes.

If all of those things could be assured, we would still have to carefully consider the human resources aspect.

But, rather than thinking that we should expand by more than a few hotels over the next few years, we would prefer, let’s say, between 11 and 15 jewels in the crown rather than having a larger number of hotels that are not of that level.

So quality, not quantity, is the essence. But what if a management opportunity arose in, say, London, which is essential for any hotel company with aspirations of becoming a global brand?

We’ve actually turned away many opportunities in London because we simply felt that not enough of the ingredients we were looking for were there. We’ve shown that we are not afraid of walking away, and will not be lured into situations that don’t suit us.

We have a lot of fine existing assets which offer great potential for adding value – perhaps we have not put as much attention and investment into squeezing existing assets as we might have done.
Any resources for new developments would have to compete with our existing assets, and I do not want a situation where we spend a lot of time chasing after new things and find that we haven’t done as much as we might with our existing assets.

At the moment, we have a balance between investment and time-investment, between existing and new development.

Steve Shellum:?Can you tell me about the new Tokyo hotel [scheduled to open in 2007] and your negotiations in Shanghai?

We are very excited about the Tokyo project for two reasons.

One is that the location is truly superb, right on the site of the Imperial Gardens and close to Ginza.

The other is that the hotel is being designed and built specifically as a hotel from the ground up, rather than as part of a complex or office building.

It is exciting to design and build a Peninsula in its entirety.

Peninsula has always enjoyed a good deal of patronage from Japanese customers, so we will have the advantage of brand recognition right from the start.

In Shanghai, again, the site we are negotiating is a great location, on the Bund next to the British Consulate.

The thing about Tokyo and Shanghai is that these are not cheap entry-price projects.

If you go into major financial cities like these and design the sort of quality projects that we want then you know you are not going to get some bargain price.

But our belief is that there is sufficient long-term potential in both projects, which have the right environments to allow top-class hotels like ours to be supported and sustained.

Every major hotel company is already in Tokyo and Shanghai – or desperately seeking to go in. Are you concerned about the increasing competition?

Steve Shellum:?You are never going to find a place where no one else wants to go prospecting? You are never going to find somewhere that is wonderful for business that no one else wants to be in?

Rather than trying to keep out other prospectors, it is better to make the whole goldmine more attractive and more valuable. If you have a number of good hotels, it raises the bar.

I would imagine that the sheer weight of the Peninsula brand gives you an advantage over some of these other brands that are competing for these same sites.

One has to work very hard indeed.

It’s funny, everyone associates Peninsula with a long history, but actually the international expansion has really only taken place over the past 10 to 15 years. Particularly with the additions of Bangkok and Chicago, the brand image has been further reinforced.

On the one hand, we have the 75-year reputation and longevity of the Hong Kong flagship and, on the other, we have some very good new products in the market – and that is one reason why the brand is well regarded.

Steve Shellum:?A few years ago, the brand was perceived, perhaps, as a little conservative or stuffy. How would you describe the profile of today’s Peninsula guests?

People’s perception of the brand varies from place to place.

In Hong Kong, people probably think of the brand as being old because their grandparents celebrated their anniversary in the Peninsula, but to people in America it is just a high-quality brand personified by our hotels in Beverly Hills, Chicago and New York.

I suspect that they are less aware of the history of the brand, and that we are being judged by our current offerings. We are very keen to appeal to all types. Our advertising campaign last year was called Room For All Of You, and that was intended to make the point that we are able to service and please all types for all occasions.

One trend among our hotels is that we do tend to get more leisure and independent travellers than is the norm, partly because we offer the sort of experience that people would like to have with their families as well as when travelling on business.

Copyright:?Steve Shellum:

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