Taipei Times: What drove you to quickly expand Gloria Hotel Group (華泰大飯店集團) from one to five hotels, in addition to its banquet and outlet businesses since 2008?
John Chen (陳炯福): Hotels in Taiwan saw explosive growth between 2008 and last year because the former administration actively promoted cross-strait tourism and encouraged the establishment of lodging facilities. The trend also had to do with the boom in real-estate. Some developers wanted to build something that can last and enable them to own their own business and better manage cash flows when the property market declines.
However, the focus on cross-strait tourism is short-sighted and policymakers should never encourage people to put all their eggs in one basket. This spells doom for facilities that are heavily dependent on Chinese tourists. Some are seeking to survive by staging a price war and others will have no choice but to follow. The pressure will intensify after Chinese tourist numbers started to decline in the second half of last year.
Photo courtesy of Gloria Hotel Group
TT: Does the oversupply of hotels affect your business? How do you plan to overcome this challenge?
Chen: The trend has had little impact on our group, which owns five hotels: Gloria Prince Hotel Taipei (華泰王子飯店), Gloria Residence (華泰瑞舍), Hotel Quote Taipei (闊旅店), Gloria Manor (華泰瑞苑) and Hotel Proverbs Taipei (賦樂旅居).
Gloria Prince has an average occupancy rate of more than 80 percent, with Japanese travelers composing the largest clientele group. Gloria Residence and Hotel Quote have achieved similar records. Occupancy rates stood at 65 percent for Gloria Manor and 60 percent at Hotel Proverbs, leaving ample room for improvement due to their relatively recent establishment and need for exposure.
The latter two will supply the revenue growth driver this year, as we aim for a 10 percent increase from last year’s NT$5.6 billion [US$182.85 million]. With the opening of the second-phase facility last year, Gloria Outlets (華泰名品城), will also contribute.
Unlike hotels seeking to accommodate tour groups, we find a niche market in “mature and seasoned” travelers, who account for 10 percent of all tourists and are drawn to small, independent boutique hotels. They grow tired of not knowing in which cities they are staying after waking up in international, branded hotels that all look the same.
Seasoned travelers like to explore the cities they visit and gain better knowledge of the people, lifestyle, art, culture and food there.
We aim to keep room rates steady amid growing pressure for adjustments. Talks of rate increases are lies.
TT: What can the tourism industry do to attract more visitors?
Chen: The lack of “identity” is the biggest challenge facing tourist attractions in Taiwan. Identity is the only thing that can be sold to people at the lowest cost and is the only reason people will come back, because they cannot find it elsewhere.
For instance, New Taipei City’s Jiufen (九份) used to have its own identity reminiscent of the early 20th century, but it is increasingly losing its appeal. The night market in Pingtung County’s Kenting (墾丁) is losing visitors, because it fails to offer food or other products special to the area.
It takes local people who understand and appreciate who they are to sell to visitors with confidence. Japan is quite good at building and reserving its identity in communities.
TT: What can the government do to help?
Chen: The policy to increase Southeast Asian travelers is good, as long as there are more visitors. However, I believe the most urgent thing is to stop the persistent decline in business travelers — from 1 million in 2008 to 500,000 last year. Today, leisure travelers make up more than 50 percent of the total, a foreboding sign for the industry and the overall economy, as it suggests a continuing decrease in foreign investment.
While leisure travelers boost hotel and restaurant sales, business travelers increase investment, bring orders and create employment, benefiting more sectors. A healthy mix is to have business and leisure guests each accounting for half of all visitors.
Business travelers usually come on weekdays and leisure travelers on weekends, creating a balance. Today, hotel operators have to struggle to fill their lodging and dining facilities between Monday and Thursday. The biggest problem with leisure travelers is that most do not come back, but try to visit different places around the world. That is why I am disappointed in the policy focus from the past 10 years on boosting cross-strait tourism. Chinese tourists would have come after the lifting of travel bans. The government spent way too much on promotions and failed to make Taiwan a better destination for foreign investment.
TT: Will the group go ahead with expansion plans in Taipei’s Nangang District (南港) and Taoyuan, even though some hotels have called off development projects?
Chen: The group is part of an urban renewal team that is developing a large plot owned by the Taiwan Railways Administration in Nangang. The project requires the establishment of new hotel, retail, office and residential spaces. We will follow the contract terms, but it is too early to tell when construction on the hotel will begin, likely years from now.
The location is good due to transportation convenience, but the problem is the dimming popularity of trade shows in Taiwan. The bike show to be held from Wednesday to Saturday is not bringing as many customers as before and neither will Computex scheduled for June. The trend is dangerous for the hospitality industry. The administration needs to address this issue.
As for Taoyuan, we remain in talks with Cathay Life Insurance Co (國泰人壽) to resolve differences over rent rates. The location is good, with access to the High-Speed Rail, the Taiwan Taoyuan International Airport MRT line and highways, and its proximity to Taiwan Taoyuan International Airport and Gloria Outlets. There will be aquariums and movie theaters.
A new hotel with 300 rooms must start operations in 2019 as required by the development contract with the government. Cathay Life might open their own hotel if we fail to see eye to eye on rents, as price differences have widened to 50 percent between hotel operators and property developers.
In the long term, we aim to expand into the hotel management business and build the group into a serious player in Asia. I do not have a timetable for this ambition, because I only take on projects I can do well.
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