Hong Kong-based Dorsett Hospitality International has been busy during the last 18 months.
Its parent company, Far East Consortium, recently sold the 267-room Dorsett City London hotel for 115 million pounds sterling ($158.2 million) to a partnership consisting of real estate owners Cerberus Capital Management and Highgate Capital Management.
In an interview with Hotel News Now, Winnie Chiu, Dorsett’s president and executive director, said the sale is the largest single-asset hotel sale to have taken place in London during 2021.
Dorsett has 22 hotels in operation in its global portfolio.
In a far-ranging interview, Chiu spoke about openings, company culture, investment opportunities and even plant-based food initiatives.
How did the deal for the Dorsett City London come about? What does it mean for your company and the rest of the industry?
We have always been very data-driven with a strong focus on returns. It is essential to always be up to speed on what is happening in the market to be successful in the real estate business. Knowing when to buy, how to add value and when to sell. The sale of Dorsett City London will provide us with additional capital to invest globally.
We still see great potential in the United Kingdom and European market. The U.K. recorded over 80.9 million passengers traveling through London in 2019, and European cities such as Paris and Amsterdam welcomed 108.1 million and 71.7 million passengers, respectively, pre-COVID. There is also a growing demand from domestic travelers.
Given the current climate, the prices in some markets have come down, making it a good opportunity for investment. By recycling our capital, we will continue to expand our hotel portfolio via greenfield, renovation and conversion opportunities, which normally enjoy higher returns as we take construction and development risk and are able to add greater value thanks to our global hospitality-operation expertise.
Dorsett is opening a flagship hotel in Hong Kong. Is that a challenge in this particular moment in Hong Kong's history, with the idea that some business might have decided to move to Singapore or other places?
We feel very fortunate and proud that our business overall has remained stable despite the pandemic. In our home market of Hong Kong, we have managed to outperform our peers by being the first hotel group to come out and officially welcome Hong Kong residents and students returning from overseas who did not want to potentially expose their friends and family with potential COVID infection by quarantining at home. This early action has [also] given us … revenue, and our gross operating profit this financial year [April 2020-March 2021] remained on similar levels compared to our last financial year.
We remain positive about Hong Kong’s long-term prospects as a world-class business and leisure-travel destination, especially with the meetings, incentives, conventions and expositions and Greater Bay area initiatives, as well as new infrastructure that continues to enable expansion of intercity travel. Our Dorsett Kai Tak development will be an exciting addition to our portfolio, right next to the new Kai Tak Sports Park and its 50,000-seat stadium.
In other regions where COVID-19 has had a bigger impact, our performance and financial standing has also remained strong when compared with our competitors due to internal cost controls and our strong relationships with customers, partners, shareholders and suppliers. We are still looking for good investment opportunities in the locations where we already have our own team and offices, as well as continuing to strengthen and develop our brands for more third-party management-contract opportunities.
How do you see business travel unfolding?
Business will come back, and we are still very much confident in the hotel industry. The key is having the flexibility to survive short-term market volatility and coming up with a strategy that allows us to bring down our defensive line and maintain sufficient cash flow for our operations.
This cannot be done without a good team sharing the same core values. I feel very humbled that my team needed little to no convincing when it came to offering our hotel services to the government in supporting front-liners or for quarantine guests, because our team has always been extremely committed to doing our part for our guests and community.
Do the largest operational challenges remain creating a better guest experience and attracting staff to provide that?
In times like these, it really highlights how important it is for businesses to help and support each other. Aligning ourselves with the right partners who also provide synergies with our hotel business has always been a key part of our strategy. We do this both through partnerships and investments.
Over the last two years, we have partnered with [online food and grocery delivery platform] Foodpanda to create curated menus in our Hong Kong hotels, smart fitness brand Move It to provide [artificial intelligence] dumbbells and gym sets for our guests to rent, and F45 to host Zoom fitness classes for our guests in quarantine and much more.
On the investment side, last year we invested in a plant-based company which has helped us to improve our own plant-based offerings across our hotels, as well as in a medical technology company that has played a pivotal role in controlling the pandemic situation in Hong Kong and other countries around the world.
In light of the pandemic and as a mother, I feel an even stronger responsibility to lead the way for sustainability in the real estate and hotel industry … and will be moving towards using more modular construction when developing new properties, integrating solar panels and reducing water consumption, single-use plastic and food waste, alongside our community work.
You are busy with several different types of development, and you have a new aparthotel concept, Dao by Dorsett, and beach-style resort concept, Dorsett Gold Coast. What are your next development milestones?
We have always prided ourselves in hiring local teams in the countries where we operate as they have the local expertise and relationships to find the right partners when it comes to deal sourcing, obtaining building approval and business licenses. This is of course backed with our strong international network of resources.
Over the years, our hotel portfolio has grown organically with the help of our local teams, most of whom have been with us for over 10 years, from 18 hotels with 3,600 rooms in three geographies to 64 hotels with a total of over 14,000 rooms across Hong Kong, mainland China, Malaysia, Singapore, Japan, Australia, the U.K. and continental Europe.
We are very excited about the opening of Dao by Dorsett in London and Dorsett Gold Coast in Australia and have every confidence in the rest of our developments in the pipeline.
Are you seeing distress in the market, or perhaps competition from a huge wall of capital that might have exited hotels in 2017 or 2018 and now is looking to be reassigned?
We have not seen too many distressed hotel properties globally, perhaps due to things such as government subsidies, quarantine business and financiers not chasing hard on debt repayment. Many industry specialists have pushed back the forecast of a full recovery to pre-COVID levels to 2023-2024.
It would be difficult at this time to predict when and how much capital would come back to the sector as compared to other real estate classes. We have our own development and investment arms, as well as strong experience of working with good partners in co-investment deals, so we are confident that we can take advantage of opportunities as they arise at different points in the cycle.