Wed, Aug 31, 2016 page12

• INTERVIEW: Yuh Tong determined to hang tough

  Yuh Tong Hotel, part of the Yuh Tong Construction Group, has fallen afoul of cooling cross-strait relations. The Chiayi hotel incurred losses in June and last month and has a conservative view about business for the rest of the year due to a sharp decline in the number of Chinese visitors. Yuh Tong hotel and group chairman Huang Kuo-fang talked to ‘Taipei Times’ reporter Crystal Hsu in Chiayi about his plans to weather the downturn

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  Taipei Times: How did Yuh Tong Hotel (鈺通大飯店) fare in the first half of the year and do you expect the situation to improve or deteriorate?

  Huang Kuo-fang (黃國芳): Our occupancy rates stood above 60 percent during the January-to-May period, but dropped below 40 percent in June and July, as exchanges between Taiwan and China chilled significantly.

  Chinese travelers used to account for 38 percent of our clientele, mostly tour groups from Chinese companies, schools, civic organizations and government agencies. We lost about 50 percent of business to the estrangement in cross-strait ties, the economic slowdown and growing competition.

  Things have changed little this month as Ghost Month in the lunar calendar spans almost all of August. Summer vacation is not a high sales season for hotel operators focused on Chinese tourists as the Chinese prefer long-distance travel to the US, Europe and Australia [in summer].

  Occupancy rates usually improve from September onward due to the end of the Ghost Month and revived interest for travel to Taiwan. However, I am conservative about the landscape, even though the second half of the year is the peak season for the hospitality industry.

  Reservations by travel agencies account for approximately 50 percent of our capacity, but they may end up being just a booking strategy and fail to deliver in the end. Not only hoteliers, but also transportation, food and gift suppliers are feeling the pinch.

  TT: How does Yuh Tong plan to cope with the softening in business?

  Huang: I have no intention of lowering room rates to attract customers, as competitors would do the same, thereby neutralizing the effect. Instead, I plan to cut costs and strengthen our promotional campaigns. We are reaching out to travelers from other Asian countries and Muslim tourists by applying for the Muslim-friendly certification.

  It will take three to five years for the adjustments to bear fruit, if they work at all, as tourists from ASEAN nations are modest [spenders] compared with Chinese travelers. The number of Chinese travelers totaled 2.1 million in the first six months of this year, while tourists from Southeast Asian nations stood at 737,000. We do not yet have employees who can speak Southeast Asian languages.

  Chiayi is at a disadvantage when it comes to attracting conferences or motivational tours. Unless tourists plan to visit Alishan (阿里山), they tend to skip Chiayi. The National Palace Museum’s southern branch is increasing tourist numbers, but it is also intensifying competition among hoteliers. Evergreen International Corp (長榮國際), the hotel operating arm of Evergreen Group (長榮集團), is to open a new hotel in Chiayi and Cosmos Hotel & Resorts Group (天成飯店集團) has already done so.

  TT: Food and beverage operations are less affected by economic cycles. Will you shift your business focus there?

  Huang: We have two restaurants: one provides Chinese cuisine and the other serves Western food and beverage (F&B). Together, they generate between 50 percent and 60 percent of overall revenue. However, dependence on F&B is not practical or sustainable due to the relatively thin profit margin. Food costs alone constitute 37 percent of F&B sales, while personnel costs take up another 30 percent.

  In comparison, a hotel makes profits when occupancy rates are more than 40 percent with different costs — the “daily necessity” items and breakfasts — accounting for 30 percent of operating income. Therefore, we will continue to focus on hotel operations and shut down the restaurants, if a choice has to be made.

  We will not sell the hotel, though there have been rumors for years and some approached us on the issue. We own the land and the building and do not have any cash strain.

  Few entrants these days build hotels from the scratch. Some competitors, such as Cathay Financial Holding Co (國泰金控) and Fubon Financial Holding Coy (富邦金控), turned their idle assets into hotels while waiting for the property market to recover, but we are committed to promoting prosperity and job opportunities for Chiayi.

  Occupancy rates may pick up 10 percent, while restaurant operations may increase 20 percent for the rest of this year, supported by wedding demand and year-end banquets.

  While independent travelers have proven resilient after the change in administrations, they are not strong enough to replace corporate customers as a growth driver.

  TT: Will you consider a partnership with local or international hotel brands to boost business?

  Huang: We did before, but not anymore. We considered asking FIH Regent Group (晶華國際酒店集團) to operate Yuh Tong under its Just Sleep (捷絲旅) or Silks Place (捷絲旅) brands. We called off the cooperation plans because FIH Regent required a 20-year contract while we favored an eight-year partnership.

  Cooperation with international brands is unlikely since we have only 120 rooms, which is not enough to attract internationally renowned hotel chains, although the government provides subsidy for such ventures.

  Yuh Tong has no intention of being a landlord and leasing the property to other hotel operators. We aim to keep the property in the family.
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