Peter Henley, Onyx Hospitality Group: Interview Transcript

Interview subject: Peter Henley, president and CEO, Onyx Hospitality Group
Interviewer: Stacey Mieyal Higgins, managing editor, HotelNewsNow.com
Interview site: 10th annual Australia, New Zealand & Pacific Hotel Industry Conference at the Hilton Sydney
Interview date: 8 July 2010

Stacey Mieyal Higgins: Hi I’m Stacey Higgins, managing news editor of HotelNewsNow.com. I’m in Sydney for the ANZPHIC conference at the Hilton Sydney. I’m here with Peter Henley, who is the president and CEO of Onyx Hospitality Group. Thanks for joining me today.

Peter Henley: Hi Stacey. My pleasure.

Stacey: Let’s talk about some of the more recent news for Onyx. Onyx itself is a relatively new idea. Can you explain that to our viewers?

-Peter: Though it’s a new name, we’ve been around for 36, 37 years now. We’re a privately owned, Thai-based company. We’re very successful. We have 17 properties in Thailand, 11 of which are Amari branded. We were known historically as an Amari Hotels and Resorts. But in the last year or so we’ve tried to figure out how we can get the company to the next level. In order to do that, the first step in this was rebranding, revitalizing the brand Amari, which is our core brand. And then the next step really was trying to grow this brand internationally. We’ve pretty much got Thailand covered. So we’re going to try to grow the brand internationally. We saw opportunities not only in that Amari brand, which is very much 4, 4.5-star mid-segment, but we saw opportunities certainly in that limited-service, select-service, 3-star, whatever you want to call it, segment as well. Plus, to a lesser extent, there’s still opportunities in the luxury segment as well. So we created two new brands: One was Saffron Hotels and Resorts to focus on the luxury segment; and one called ‘Ozo: Sleep. Dream.’ to focus on that select-service segment, which is what we call it, to complement, if you’d like, that mid-market, upper-midscale, full-service hotel, which Amaris have traditionally been, and now we’re reenergizing that. So we have these three brands, and we launched them at ITB in Berlin in March. But of course it created a slight problem for us because historically we’ve been Amari Hotels and Resorts running Amari properties. But now we had Amari Hotels and Resorts and Saffrons and Ozos, and we thought it might confuse the market, the consumers, the press, so we created this new brand, this new name for the management company. We’re Onyx Hospitality Company, which is the management company, which has in its portfolio these three brands, which are Saffron, Amari and Ozo. When we launched Saffron and Ozo, we also took the opportunity to launch Onyx Hospitality Group. 

Stacey: Great. How are things going so far with the new brands as far as development interest, projects that are looking to be likely?

Peter: We’ve been very encouraged. We’ve always been within Thailand, and we thought, ‘Well how are people going to react stepping out of Thailand for the first time?’ We’ve been very encouraged, both in relation to Amari and these new brands, even though effectively the brands are still kind of evolving, we find that people are still very interested in that and keen on developing hotels with our brands. To help that process, in both cases, the new brand’s cases, both Saffron and Ozo, we are developing with our own money on our own sites to try to put our money where our mouth is, but also we want to say, ‘This is what an Ozo should look like in a resort location or urban location, if that’s the case.’ And for Saffron, we’re building one in Bangkok that’s set to open next year, again to show the world, ‘you want to build a Saffron?’ For a developer in China, in India, in Australia, they can come to Thailand …

Stacey: … and you have a product they can take a look at?

Peter: Exactly. And that’s been well-received. I must say we’re very encouraged by it.

Stacey: This might be a good segway for the India joint venture that you’re also taking part in.

Peter: The background to the India joint venture was that when we decided to take this company to the next level, in numerical terms, we said, we have 11 properties, branded properties in Thailand, and 16 in total—now 17—we wanted to grow from that number to 51 more properties throughout the Asia/Pacific. We chose very specific areas that we wanted to expand in, and the reasons for choosing those areas were many fold. They were the areas where we had the highest number of inbound guests to our hotels in Thailand. It’s areas where there is actually growth in those markets, where demand is actually exceeding supply, and they’re areas where my management team, my new management team, had expertise. And also they’re all kind of within a six-, seven-hour flight from Bangkok, so we can manage them all closely. India was the No. 1 market for us to start with. Now India is unique, very unique. I mean, all markets are unique. But what we decided is that in order to accelerate our presence in India, we really needed that presence on the ground right now. Now, you either go out and recruit that presence, or we saw this opportunity with this small management company called Ten (Hotels), headed up by Mandeep Lamba, who has fantastic experience right in the mid-market in India, good reputation, good network, so we persuaded him to join up with us. So we effectively set up a new company, he has an interest in that new company, but we’re the principle shareholder in it. It’s a joint venture to try and accelerate the growth of our presence in India. And that’s been in place now since February, we’re very enthusiastic about it. We’re hoping to sign our first deal within the next couple of months for an Amari property in India. But having that network, having the presence immediately on the ground has really helped a lot in terms of our growth plan on a region-wide basis.

Stacey: You know, I’ve heard that from some of the larger companies as well, that particularly in China and India, it just works a lot better to have people already on the ground who are already part of that network, and it sounds like that’s what you’re doing as well.

Peter: We tried to establish it very quickly. You cannot do development growth even though Delhi’s only a three- or four-hour flight away from Bangkok. You just can’t do it by flying in for two days and then going away again and then coming back in again. You’ve got to be on the ground. So that’s what we did. We went out and formed this joint venture, and it’s paying immediate dividends.

Stacey: What other growth opportunities are there for Onyx? You addressed what you’ve done to stimulate some growth in India. What other markets are some targets for these new brands? What are your initial targets, if we could put it that way?

Peter: When we announced this overall plan of 51 properties throughout Asia, we recruited a whole development team, and we very specifically went through what are the locations and what do they mean. So for us, we want to grow to 51 properties by 2018. It’s about five properties a year to sign up and open. And for us it’s very focused. We have the Middle East—for us we call it the Middle East and the Asia/Pacific for these purposes. There’s Middle East, India, Southern China, which is basically Shanghai and down, Vietnam, Cambodia, Indonesia, principally Bali really, and this country, Australia. So it’s really an inverse U shape around Bangkok—all countries that we can get to relatively easy and therefore manage properties that are there straightforward. On top of that, my management team has experience in those areas in one form or another. So we know how to operate in those areas. We know what we’re doing. And I think that comes through very clearly when we talk to owners, potential owners. So that’s our growth areas, and it would apply to all the brands. I think of the 51, only 10 percent or so will be Saffrons. We’re opportunistic in terms of how we grow that. The opportunities will come to us, and we’ll have the ability to meet it. The really opportunity will be with Amari and Ozo, and we’re already seeing interest in those brands.

Stacey: Where would you say are the strongest areas of opportunity for you right now within that inverse U-shaped region.

Peter: Right now India’s a big focus because of the joint venture. And really it’s the usual suspects there. You would say of course it’s the top six cities we’re looking at, but it’s very difficult to get into those. We’re also looking at secondary cities like Pune, Bangalore, those sort of areas. So that’s a focus for us. India’s a focus for us through the joint venture. And the other principle focus for us is that Southern China component. We’re looking at a number of opportunities in Southern China. Australia here as well, but Southern China is a big area of focus for us.

Stacey: What do you make of some of the performance figures we just saw in Shanghai? Obviously, they just had the Expo, so that’s something that helped with the occupancy short term. We just saw some numbers from STR Global that indicate that the supply is good there, but performance is not. Is that the answer to the question?

Peter: Yes I think that’s the answer, because as occupancy is great in Shanghai, the rate is surprisingly low. I was surprised with that number myself, I must say, considering it was the Expo. But Expos are almost like the Olympics or the World Cup. There’s tremendous four-week period, or in this case longer, but afterwards there will be challenges because of over (supply). But the encouraging thing is about those numbers is that Asia/Pacific in general is looking fairly positive. Even the economic data we heard earlier also looked very interesting and encouraging for us—encouraging for us that we’re in the right area, and we saw it in dear old Bangkok, which you saw at the bottom of all those charts there. For the first three months of this year, we were looking very encouraging, way above budget, way about my expectations. But of course due to our own particular political issues, we are suffering again now, hence the bad performance in those numbers.

Stacey: But year to date, Bangkok—I was looking at it earlier myself—it’s not too bad, even comparing it to year over year. You had a month and a half, of obviously the poor occupancies, but in a longer view it’s not as bad as you might expect.

Peter: If you look at four branded properties in Bangkok, year to date end of April, we were above last year and above in budget. End of May we’re now below in both cases. If you look at the next three months going forward, we’re about where we were last year, which is much better than what I had feared in the middle of May. And the bookings are looking very positive for the end of the year. I’m hopeful that the good, strong end of the year and the strong beginning will offset that kind of damage we got in the middle of the year so that we end up kind of where we hoped to be in 2010, which if you would have asked me this in the middle of May, I would have cut a much more haggard figure. Bangkok and Thailand are remarkably resilient, and the resorts in the southern part of the country are doing very well despite what’s happening in Bangkok, and they’re the ones that have sustained us through these difficult times.

Stacey: What other challenges are you seeing, either in your home base of Thailand or within the Asia/Pacific region?

Peter: Challenges, I mean, for the company, is growth. But that’s one of the challenges that Thailand itself and Bangkok, it’s historically been kind of somewhat on the one hand uncertain, but on the other very resilient. It keeps on bouncing back. You know in ’97 we had the financial crisis, and 9/11, and 2003 SARS, coups in 2005, ’06, we have the financial crisis now, political crisis—but in the end, it keeps on bouncing back. It’s very resilient, which is great for us, but it does also emphasize to us that we need to generate a presence and an income offshore, which is one of the challenges outlined by us in our strategic plan. But that brings into sharp relief for us some of the challenges of the industry that all my colleagues are facing. We all talk about it at all of these conferences: people. Right? Everyone’s growing. You’re here listening to it at this conference. They’re all growing and opening hotels at a vast rate, and even at our little rate of four or five hotels a year, that’s a lot of people to get in: chambermaids, food and beverage professionals, front office professionals. Where are they coming? Therefore, we’re very much focusing on training and recruitment at a very early age and keeping them within the company and developing them within the company. And for that, you have to have a growth story to gain interest. So that’s one thing. The other thing that everyone faces is technology. We all say, ‘Technology is the future,’ but how do you harness that for your particular company? We talk about in this conference the power of Facebook and the power of social media. We all understand the potential power of that, but how do you both integrate that into your communication voice and your marketing strategy in general, and how do you take the most advantage of that, and how do you integrate that into your systems? As soon as you put new technology in, it’s out of date. So that’s really a big challenge for us as an industry. They’re the two principle ones that we’re facing.

Stacey: OK. Can you address specifically how you’re hoping to face the challenge of the staffing issue? Is it just a matter of, within each country, picking the right recruitment tool online? Is it not online if it’s a market that doesn’t—is it better to be in the local papers?

Peter: Both. I think you have to use different channels and labels, and you have to recognize it’s no longer good enough just to put up an ad in the local paper and hope to recruit the right people. You obviously have to use LinkedIn, the Internet, all of the various, and Facebook—all that sort of stuff, as well as the more traditional means of doing it. But I think the other part of it is recruitment and training is an ongoing process. You can’t just say, ‘Oh now I’ve got a hotel opening,’ and you need a general manager. You need to constantly be on the lookout for good talent, bring them into your company so that they can go to the hotels as you open them. And that’s about creating a story for individuals about this the company you want to be in, there’s career opportunities for you, and that you’re encouraged to develop. So we’re very focused on recruiting them young, and retaining them and training them. But do to that, you have to have the right HR systems, you have to have the right training program, you have to have the right comp and benefits, you have to have the right recruitment strategy, secession strategy, and to do all that, you need good people in your HR strategy to go do it. So we’ve tried very hard to make HR—you know we see it as an incredibly important part of our business. Our brands are an asset. Our revenues and properties are an asset. But people—HR’s function—is central to who we are, really.

Stacey: Well Peter, it’s been great talking to you today. I appreciate you taking some time, and we appreciate learning more about Onyx Hospitality Group and the growth it will have for the future. Thank you.

Peter: Thank you very much, Stacey. It was a pleasure meeting you.

Stacey: Thank you.