Taipei Times: Why did the Leefang Group (李方酒店管理集團) decide to team up with Hotel Indigo (英迪格酒店), a boutique hotel chain?
Brian Lee (李奇璋): We love the brand because it offers unique designs and standard-quality operations, so all the properties look different and reflect the culture, character and history of the surrounding area.
The one in Kaohsiung, next to the Central Park Station rapid transit system, highlights the city’s history as a trading port with images of ships and containers integrated into its design. On the world stage, Hotel Indigo competes with Starwood’s W Hotels, as well as Aloft Hotels and Le Meridien Hotels.
Photo: Crystal Hsu, Taipei Times
Originally, we planned to run the property under our own brand, Royal Seasons Hotel (皇家季節酒店), but we were concerned it might not be strong enough to differentiate it from well-established peers, such as Hi-Lai Hotel (漢來飯店) and Ambassador Hotel Kaohsiung (國賓飯店).
International travelers assign great importance to brands when they choose where to stay. They know what to expect from a hotel brand, and bonuses and discounts provide further incentives.
We spent NT$3 billion (US$92.25 million) building the hotel and more money is necessary. We aim to make returns on the investment within three to five years, although the process usually takes twice as long. We believe the right brand choice will help us achieve that goal.
TT: Why did the group choose to build in Kaohsiung rather than Taipei?
Lee: There are already more than a dozen international hotel brands in Taipei, including Grand Hyatt, Sheraton, La Meridien and W Hotel, but none of them are in Kaohsiung. We have been looking to set up a premier property in Kaohsiung where transportation is convenient with access to the airport, high-speed railway, traditional railway and Mass Rapid Transit services.
In my view, tourism must grow hand-in-hand with infrastructure, especially public transportation and business districts. Travelers cannot go where transportation is not available.
A lack of convenient transportation is why the group has yet to have a presence in Hualien or Taitung, despite their breathtaking scenery.
Hotel Indigo is in the heart of Shinkuchan Commercial District (新崛江商圈), which is filled with shops and restaurants. It is not far from the Pier-2 Art Center (駁二藝術特區), Love River (愛河) and other tourist attractions.
Our entry prompted existing hotels to start redecoration projects. This is a positive development for the market, since competition helps boost quality.
TT: Are you afraid that the industry is becoming increasingly crowded?
Lee: Many have talked about it, but I do not agree. It is true that hotel rooms have increased at a faster pace than the number of tourists, and if the trend persists, the market will definitely become overcrowded.
However, the market has seen a need for change and a transition is under way, though it is likely to take a while to bear fruit. While the number of tourists is declining, room rates have picked up due to fewer group tourists, who tend to drag the average. The quality of travelers has improved.
The worst is likely over as many Japanese tourists visit Liouhe Night Market (六和夜市) these days. Travelers from Hong Kong and Macao are also increasing rapidly.
TT: What are the group’s development plans?
Lee: Leefang aims to become the leading brand in the hospitality industry in Taiwan and abroad. Besides Hotel Indigo Kaohsiung and Royal Seasons Hotel, we also own Airline Inn (頭等艙酒店) and Space Inn (太空艙旅舍) in Taipei, Taichung and Kaohsiung. The group has inked a contract with Marriott International Inc to set up a Le Meridien Hotel (台中李方艾美酒店) in Taichung next year.
The NT$8 billion project will help lift the group’s status as a high-end player. We also plan to add an Airline Inn in Taipei’s Ximending District (西門町) in the fourth quarter of next year.
TT: How will the group position Hotel Indigo?
Lee: Indigo is aimed at affluent travelers with daily room rates averaging between NT$4,000 and NT$5,000, compared with a current range of NT$2,000 to NT$3,600 in Kaohsiung. Unlike Hi-Lai or Ambassador, which are much larger, we have only 129 guestrooms, so there is less pressure to push occupancy rates to 80 percent or 90 percent to stay profitable.
Due to our limited supply, we would have the luxury to choose guests.
The hotel is fully booked for New Year’s Eve.
The pricing strategy is not untenable. Daily room rates in Taipei used to be lower than NT$10,000, but W Hotel and Le Maridien raised the average above the benchmark. Grand Hyatt soon followed suit, redecorating its room and setting room
rates at NT$12,000 per night.
Their buffet restaurants also increased prices from NT$1,000 to NT$1,500 per person, and it is difficult to make reservations on popular holidays. The market will adjust to the upward pricing.
We aim to do the same in Kaohsiung with Hotel Indigo.
I hope occupancy rates are more than 60 percent for the first 12 months and reach 80 percent to 90 percent later.
Occupancy rates of 100 percent would suggest an underestimation of room rates.
More players are likely to join the market in Kaohsiung, but none is run by an international brand. All we need to do is outcompete other hotels.
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