Increased hotel conversions predicted

Increased hotel conversions predicted

Mr Langdon says international hotel operators are looking at conversion strategies as a supplement to the slowdown in new hotels.
Mr Langdon says international hotel operators are looking at conversion strategies as a supplement to the slowdown in new hotels.

The hospitality industry expects more hotel conversions following the pandemic as they offer better performance with fewer new hotels in the pipeline, attributed to stricter lending guidelines from financial institutions, says international chain Accor.

"The supply of new hotels is slow and concentrated among a few major groups across every country in Asia," said Andrew Langdon, chief development officer for Asia at Accor.

Mr Langdon said small family companies, which comprise the majority of hotel developers, lack financing from banks.

It has become more difficult for them to access loans during the past 2-3 years, compared with prior to the pandemic.

Only large conglomerates with a strong cash flow and relationships with banks are likely eligible to receive financing, he said.

Therefore, international hotel operators are looking at conversion strategies as a supplement to the slowdown in new hotel construction, said Mr Langdon.

This year Accor received the most inquiries on record from independent Thai hotel owners, discussing franchising, rebranding or conversion, he said.

One reason is guests are opting for branded hotels where they are assured of quality, compared with non-branded or independent hotels, following the pandemic, said Mr Langdon.

In Thailand, branded properties have been outperforming non-branded properties, with a substantial increase in revenue per available room (RevPar), he said.

"This is unusual. It's never been like this before in the Thai market, at least not to this extent," Mr Langdon said.

High interest rates have not had an effect on hotel development in Asia, he said.

Mr Langdon said the vast majority of hotel owners and developers in Asia are high net worth groups or family groups that are not influenced by interest rates, unlike in the West, where owners are often more sensitive to rates, such as institutional investors.

In expanding its Asia portfolio, Accor's strategies include rolling out franchising in Thailand with premium, mid-scale and economy brands such as Novotel, Mercure, Ibis and the Handwritten Collection, a newly debuted soft brand in Asia.

The franchising model gives owners the ability to operate hotels themselves while benefiting from Accor's brands, distribution and marketing power, he said.

In Asia, Accor debuted two hotels under the Handwritten Collection, comprising the Andaman Beach Hotel Phuket in November, and Hotel Faber Park Singapore, which is set for the fourth quarter.

Mr Langdon said with more demand for boutique hotels than large hotels, the Handwritten Collection is suitable for this market, especially via conversion opportunities. The model will typically increase revenue by at least 20% for independent hotel owners, while the room rate can vary from 2,500 baht up to 4,500 baht, he said.

Accor recently signed another Handwritten Collection property in Bali and aims to grow the brand to 250 properties globally by 2030, said Mr Langdon.

Accor operates 396 hotels with 89,000 rooms across 14 countries in Asia, excluding China. They are under 13 premium, mid-scale and economy brands, including 73 hotels with 17,000 rooms in Thailand.

The company's RevPar this year exceeded the level it posted in 2019, mainly driven by higher room rates, despite occupancy rates being lower than in 2019, he said. The chain has 168 hotels with more than 42,000 rooms in the pipeline in Asia.

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