Mon, Dec 12, 2016 page16

• Interview: Hotel Royal boss conservative on next year’s outlook

  Hotel Royal Group, a major Taiwanese hotel operator with three brands, is conservative about its business outlook for next year and beyond as the sector grows increasingly crowded while the number of tourists declines. However, the downbeat view has not prevented the company from planning to launch new outlets in coming years. The group’s chief executive officer, Winston Shen, shared the company’s development plans in an interview with ‘Taipei Times’ staff reporter Crystal Hsu in Taipei on Wednesday last week

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  Taipei Times (TT): How is Hotel Royal Group (老爺大酒店集團) faring in revenue terms this year compared with last year?

  Winston Shen (沈方正): The economy is likely to grow by about 1 percent this year, suggesting limited room for an increase in business activity. Against this backdrop, we have had a flat performance as some outlets posted modest growth, but others have seen businesses decline.

  Hotel Royal Taipei, with Japanese business travelers making up 70 percent of its clientele, is holding steady, and so is Hotel Royal Chiao Hsi and Hotel Royal Hsinchu, thanks to robust demand from independent and business travelers from home and abroad.

  Chinese tourists account for less than 10 percent of guests at all Hotel Royal outlets. They contribute about 6 percent at the Chiao Hsi outlet, where the number of independent Chinese tourists shows no signs of decline.

  Hotel Royal Chihpen in Taitung took a hit from typhoons this summer and investment in Hotel Royal Beitou has yet to pay off, as the nation’s medical tourism market needs more time to mature. Much remains to be done to boost its brand awareness and the sector as a whole.

  The Place in Tainan has made concrete improvements in line with company expectations.

  Overall, the performance is not bad given the slowdown in the number of tourists and the sharp decline in tourist groups from China, which has more than offset the increase in the number of tourists from South Korea, Japan and elsewhere.

  TT: Does the group expect business to improve next year in line with GDP figures?

  Shen: Few companies would aim for negative growth, but it would be a challenge for the hospitality industry to project an increase in profits next year.

  The economy is expected to continue to recover, but its pace would not be much better from this year.

  We expect revenue to stay flat, while operational expenses are likely to go up due to the new labor law that requires higher overtime pay and more annual leave for new workers.

  Although the legislation is to take effect next year, it has immediate effects on our personnel policy. The group has decided to pay for unrealized leave this year instead of carrying it over until March on the concern that it would entail higher compensation costs.

  It is common for hotel and restaurant workers to cancel or postpone leave this quarter, the high sales season.

  In the meantime, food costs are rising. Therefore, even if we can keep revenue flat, profitability is bound to fall. I believe our peers share a conservative view.

  TT: Is the hospitality market overcrowded?

  Shen: The industry is enduring for the time being. The imbalance between supply and demand would become more evident next year and in 2018. Caesar Park Hotels and Resorts is building a hotel with 758 rooms next to Wanhua Railway Station and a bigger hotel with 1,137 rooms in New Taipei City’s Banciao District (板橋), and more are planning to enter the market.

  If Chinese tourists continue to stay away and travelers from other nations fail to fill the gap while the number of business travelers keeps shrinking, hotels would need to find new business models to stay viable.

  Boosting domestic demand might help and the government has encouraged public servants to spend their vacations in Taiwan.

  Hotels will introduce promotional packages to attract domestic travelers, but more needs to be done.

  Against this backdrop, there is no room to raise room rates next year; we would be lucky to hold them steady given the pressure for downward revisions.

  We hope Hotel Royal Taipei can keep occupancy rates at 90 percent, the Hsinchu outlet at 80 percent and the Taitung outlet at 70 percent after emerging from weather disruptions.

  There should be a fast pickup in the Beitou outlet, as its affiliated Taipei Beitou Health Management Hospital is to obtain an operation license in the second quarter of next year and would boost lodging demand. The medical tourism market might start to bear fruit after two years of investment and promotions.

  TT: What are your views on the food and beverage business next year?

  Shen: There will be more competition among hotel operators that have been conservative about new capital spending, as more Taiwanese seek fine-dining experiences.

  It is relatively easy to satisfy such demand compared with other aspirations. That accounts for the entry of new foreign restaurant brands and the northward migration of buffet restaurants from southern Taiwan, such as Han-Lai Harbor Restaurant (漢來海港餐廳) and Da Ba Restaurant Group (大八餐飲集團).

  Independent restaurants are likely to draw guests from hotels. We will have to fight hard to keep our clients.

  TT: Can you give more details on The Place Taichung, the new hotel being developed by Da Yi Construction and Development Co (大毅建設)?

  Shen: It will be the group’s 10th outlet in Taiwan and its 14th outlet globally after it starts to operate in the fourth quarter of 2018. We expect independent travelers to contribute 60 percent of its clientele and business travelers to make up the remaining 40 percent.

  It might create more than 100 job opportunities and increase the group’s revenue by 10 percent each year. We are in talks to open two or three more outlets in the coming three years, but I had better not say more until things clarify.
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