The monolithic Mandarin Oriental Hotel Group which comprises 41 hotels in 24 countries representing over 10,000 rooms is on a mega-expansion drive. MICHAEL HOBSON, chief marketing officer, speaks to TTN’s deputy editor, Shalu Chandran about the group’s growth strategy
WITH almost 20 hotels under construction, are you on target for 10,000 rooms?
The group currently runs 22 properties and we are expecting to increase this to 40. Yes we are on target for 10,000 rooms. Seven properties are expected to open next year - four in Asia: Beijing, our second property in Macau, a new property in Hynam Island and the re-opening of Mandarin Oriental Jakarta.
There are two in Europe – Barcelona and Marrakech – and one in Las Vegas USA.
What is the strategy behind the expansion?
Mandarin Group is already a global brand. We operate in many of the key cities and naturally we try to open in properties in places from where our customers come from, but more importantly where they travel to. There were gaps in the market in the past. We scouted the world map and said we really have to be in some of these key locations. On the resort side of things we try to operate hideaways, which we think will appeal to discretional leisure or luxury spenders.
How much is being invested in development and through management contracts?
Most of our contracts are currently management contracts like Beijing and Macau. Jakarta is wholly owned and we are spending $50 million in renovating and refurbishing that hotel. We have built our brand to a certain level so that a lot of other developers now seek management contract with us.
Management contracts are the ideal way to grow. But we also recognise that in certain markets like New York and Tokyo, that have high entry barriers, we have to invest our own cash resources to get in. So we are always prepared to consider that but ideally we like to have management contract.
Is the timing right considering the global recession?
We are a very strong group financially. We own much of what we operate or we have a stake in what we operate. Going forward we are now going to undertake management contracts. In each of those new locations just mentioned we think there is sufficient pent up demand for luxury travel whether for business or leisure visits.
Do you think then that luxury hotels will not be affected at all?
In the short term, we are already feeling some impact of the downturn; the first quarter of 2009 is going to be quite difficult. But if you are a strong brand and have a strong customer base, are well known, well marketed and work with the right partners - you are more likely to get larger share of a shrinking pie. We have budgeted for a lesser occupancy next year and therefore less revenue. But those hotels are thoroughly sustainable and the companies will be just as strong.
We are not planning for any major cut backs and from a corporate stand point we intend to continue to fully fund the machinery to really deliver these seven hotels and keep the existing hotels fully operational.
Are you in the Middle East?
Not yet. We have had many discussions and on going negotiations which will see Mandarin Oriental in the Middle East very soon.
The market can cater to both city and resort properties. It is likely we will open in the cities prior to opening in the resorts here. And you will definitely see properties in key cities in the region not before too long.
How important is the Middle East market for the brand?
It is a very important market from an outbound perspective. We have benefited from the travellers coming out of the market in places like Geneva, London, New York, also in Kuala Lumpur and Singapore. We have our own resources that markets in those places and our individual hotels have specialist Middle East sales managers and sell particularly into the royal relationships that we keep. The greatest advertisement that we can have is a property here in the Middle East.
Each customer is different and other than the particular location or facilities within these hotels, different things appeal to different travellers.
What are your criteria in selecting cities that best suit the brand?
We have always wanted to develop hotels that have a sense of place so that we can provide a truly different experience. We clearly need to work with partners and developers that share the vision because it’s a very long term game. You don’t establish yourself within a year or two. Then the obvious factors like, it has to suit the location and provide returns to the share holders. So it has to fit a number of criteria - it has to be right from the commercial, brand and quality aspect. We won’t do anything that doesn’t reflect to the brand.
What is the group’s stand on environment?
We are certainly very conscious about it and try to do whatever we can, those which make commercial sense. We are very keen on putting ion systems, be it energy or control system that will actually save money. When we are building a new hotel, we will certainly invest in the right systems that will see us not only being the environment friendly but also to secure safe returns for the investor.
What are the challenges facing you in 2009?
Apart from factors that are somewhat out of our control, like the economy slowdown and acts of terrorism, the slow down in guest arrivals can be of benefit to the industry and the consumer both to retain talent and experience tacit knowledge in these times. I think the power is certainly in the hands of the consumer. We are very confident as we operate a quality product and have experienced people running it. In 2008 up to September we were on budget. The last four months were more challenging.