savills hotels-vietnam · pdf filesavills hotels-vietnam workshop ... the beachside area he...

July 2015

Prepared by Savills (Singapore) Limited

Savills Hotels-Vietnam Workshop

Hotels Development – Strategic Moves

© Copyright Savills 2015

Agenda

1. Who are we?

2. Development Process

3. Maintaining a good

relationship-

Owners & Operators

Nathalia Wilson

Senior Director

Savills Hotels,

Asia Pacific

+65 6415 7589

[email protected]

http://www.savills.com.sg/services/hotels.aspx

mailto:[email protected]

mailto:[email protected]


© Copyright Savills 2015 3

Vietnam Workshop I July 2015

Savills Fast Facts

From our Asian headquarters in Singapore, we liase with other Hotel team offices in Tokyo, Sydney,

Melbourne, Shanghai and Beijing as well as local Savills offices around the world.

14 13 hotel experts

6

Savills Hotels, Asia Pacific

Raymond Clement

Managing Director

Singapore

4

Australia & New Zealand Singapore China Japan

Zoe Zhou

Senior Manager

Nathalia Wilson

Senior Director

Hotels Team

Natasha Bell

Research Manager

Michael Simpson

Managing Director

(Sydney)

Nick Simarro

Associate Director

(Sydney)

Julien Naouri

Associate Director

Annie Wang

Director

(Beijing)

Angel Chen

Associate Director

(Shanghai)

Tomotsugu Ichikawa

Senior Manager

Tokyo

Jie Zhang

Senior Manager

Tokyo

Shinya Tawata

Associate

Tokyo Victor Lew

Business Development Manager

Melbourne



Our clients

http://www.fortressinv.com/Default.aspx



Our Industry Network


Services offered by Savills Hotels

Asset Management

Market and Feasibility Study

Development Consultancy

Investment Sales

Operator Selection

Management Contract Negotiation

Valuation

Due Diligence




We are working together with…

Project Management Industrial Services Investment Services Office Services

Valuation & Professional Services

Research & Consultancy Retail & Lifestyle Services

Residential Services



9

Development Process

Savills can assist in making a viable hotel business platform to create, advise and provide specific solutions to

increase market penetration. Setting strong FOUNDATIONS.

4

1

2

3

5

6 Hotel Positioning and

Master planning

Operator Selection/

Creating the hotel

operation platform

Management Contract

Negotiation

Design &

Development

Hotel Construction

/ Preopening

Asset management/

Revenue

Maximisation/ ROI



10

Development Process

1. Hotel Positioning and Master planning

Determine what is the vision and concept for the hotel/resort that owner wants

Positioning and category of hotel

Feasibility to identify whether a hotel/resort or mix-use development is suitable for the site

Supply and demand of hotels in the market - currently that exist in the market and future

pipelines.

Who will be the guests staying?

Prepare Financial projections for the hotel - development cost to build and what will be the

financial performance that the hotel is expected to achieve each year when it opens for

operations

Savills Support:

Provide advice on the hospitality asset concept based on the feasibility study



11

Development Process

3. Management Contract Negotiation

It is a long term relationship, generally over 10years between owner and operator so it is

important to outline the commercial terms that is agreed by both owner and hotel operator

Hotel operator agreements are more complex than office or residential lease agreements

Owner needs to consider not only the unfront capital investment to build the hotel/resort but also

the ongoing minimum working capital that is required to keep the hotel operating.

Fees that needs to be negotiated with the operator includes - base management fee and

incentive fee that is linked to the operator's actual performance vs budgets. Also what happens

when hotel operator does not meet its performance levels? How can the owner protects their

interests?

There are also other fees and terms which also needs to be considered including technical

service fees and annual marketing fees, loyalty for use of the brand, reserve fund for FFE etc

Savills Support:

To negotiate management contract terms & conditions that favors Owner’s interests

Technical service, Marketing agreements etc



12

Development Process

4. Design & Development

Appointing the right architect and interior designer with good track record of hotels/resort developments similar to

the owner's development site. They must be briefed properly about the development and a request for proposal

(RFP) is tendered out so that owners can select the most suitable consultants and obtain comparable fees and

terms.

Importance of the dynamics that owner has with architect and interior designer, and also the relationship and

dynamics between the architects and designers to make sure that they can creatively and efficiently put together

the owner's vision of the hotel/development

What is the differentiation factors about your hotel that will make it unique to its competitors in the market today

and in the future?

If you choose to brand your hotel, does the interior designer selected understand the brand positioning? Operator

normally has a selection of preferred architects and interior designers they have worked with in the past.

Masterplan and design layouts and elements suggested by the architects and interior designers need to meet

local regulations and also be efficient for work flow of the operational team and functional for the hotel guests.

Savills Support:

Provide advice for proper integration of design and operation based on the feasibility study

Review guest & service circulation



13

Development Process

2. Operator Selection/ Creating the hotel operation platform

Should the site be operated by a third party management operator or independently operated by the

owner?

What are the advantages and disadvantages of independently managed hotel vs management

company operated?

If owner chooses to have a third party management company to operate the hotel/resort, the proper

evaluation process is required to choose the right operating partner for the property

Selection of also the most suitable brand for the development site must be considered.

There are many third party operators to choose from - the large international hotel chains, regional

hotel operators or local hotel operators.

Success is largely dependent on the skill and ability of the on-site management team. The General

Manager has a critical role to play and lead the team.

Savills Support:

Provide recommendation of operators

Leveraging network and operators to provide diverse and cost-effective selections



14

Development Process

5. Hotel Construction / Preopening

Project manager - must be appointed to coordinate and communicate with all the different

consultants (lighting, mechanical, audio visuals etc)

Monitoring of construction progress to make sure delays are minimised is very important for

any development projects. Likewise for hotels/resort developments delays are very costly to

owners.

Creating mock-up rooms that is fully functional to test all aspects about the guestrooms.

Reviewing value engineering options for the development - evaluating the cost per key to

build the guestrooms.

Working together with the technical service team of the hotel management company

selected.

Savills Support:

Review the key milestone are achieved during construction and budgets are kept in line

Approve operator’s pre-opening budget, marketing launch plan, key appointments



15

Development Process

6. Asset management/ Revenue Maximisation/ ROI

How to maximise the hotel asset during holding period?

What is the exit strategy on this hotel investment once the hotel is built and operating ? Keep it

for long term or sell it to realise the capital gain?

Hotels in general needs to be renovated after approximately 7years. What are the capital

expenditure planning and requirements?

- Annual budget reviews must be conducted between owner and operator

Savills Support:

Provide asset management service and oversee operator performance

Capex planning

Annual budget review and approval

Formulate multiple exit strategies


1. NO FEASIBILITY STUDY

Mr. Lee made his fortune in mining. He signed a management agreement with an

operator to build a beach resort. The operator thought Mr. Lee should do a

feasibility study to find out more about the piece of land and the market.

Mr. Lee didn’t want to do a feasibility study and built an expensive but beautiful hotel.

But nobody realised the wind would be very strong for half of the year. The guests

were covered in sand.

The beachside area he built was unusable as the tide was very high for half of the

year, submerging the walkways.

This decreased the desirability of the property and led to negative TripAdvisor

comments.

SOLUTION: FEASIBILITY STUDY at an early stage

16

Maintaining a Good Relationship Owners and Operators

Case studies



2. NO OPERATOR SELECTION STUDY

Mrs. Smith wanted a Luxury hotel. She did not know the best way to select a brand .

She started building her hotel anyway, she thought she could decide on a brand later.

She talked to all the luxury brands but the building lay out did not match the brand

standards (number of rooms, size, type of each room, back of house equipment

space, laundry, kitchen space etc.)

It was impossible to find a luxury operator to operate a hotel in her building.

SOLUTION: OPERATOR SELECTION STUDY

17


Case studies




3. PERFORMANCE CLAUSE

Mr. Tan signed a management contract with an operator.

He did not know he could negotiate the performance clause. He did not know what could

be mutually agreed in advance.

Several years on, the hotel is underperforming. As the operator set the performance

clause requirements very low, it is hard for Mr. Tan to hold the operator accountable for

operational losses.

SOLUTION: MANAGEMENT CONTRACT NEGOTIATION at an early stage of

development.

Mutually agree on financial projections before the hotel opens.

Know what kind of rates, ADR, RevPAR, you can expect in the particular market. Is

visitor arrival affected by seasonality?

18


Case studies



4. HOTEL IS SOLD AFTER A MANGEMENT AGREEMENT IS SIGNED

An operator signed a contract with an owner.

After some time, the owner wanted to sell the hotel en bloc.

There was no clause in the management contract on what happens when the

hotel is for sale.

SOLUTION: MANAGEMENT CONTRACT NEGOTIATION at an early stage

19


Case studies



5. OWNER TOO INVOLVED

Mrs. Nguyen started building a hotel in Phu Quoc.

The Operator found a perfect GM who spoke Vietnamese and graduated from a famous

hotel school. Mrs. Nguyen thought her cousin would be much better.

Mrs. Nguyen also found the perfect architect! She had no hotel experience but she

was a good family friend.

In choosing a restaurant, the operator believed there were too many Western

restaurants in the area. Mrs. Nguyen disagreed, she loved French cuisine and picked

her own chef from Paris.

Mrs. Nguyen was involved in all aspects of the pre-opening even though hotel

management skills were not her strong point.

SOLUTION: Engage a neutral third party opinion, presenting the facts to optimize

operations. Appoint a hotel consultant who has the expertise.

20


Case studies



6. FEASIBILITY STUDY- CONSTRUCTION COSTS

Mr. Tran was a very wealthy man building a mix use development with a hotel component.

After the shopping mall was built, he realised he did not have enough money to build the

hotel!

He didn’t know how much the construction costs or management fees would be. He didn’t

realise the operator would ask for initial working capital.

Due to project funds running low, Mr. Tran thought the operators were very cheeky to ask

for this and the relationship soured.

SOLUTION: A consultant could have advised Mr. Tran on the exact break down of

management fees and help with the financial projections of the development.

21


Case studies



7. PROJECT MANAGEMENT

Mr. Zhou in China wanted to build a hotel but the project kept experiencing

construction delays.

His head was full of demands and recommendations from the interior designers, light

consultants, the third party restaurant chef, the government licensing body, and his

accountant, he didn’t have one person to manage the project on his behalf.

He did not know how to deal with the construction workers.

SOLUTION: Engage a neutral third party who is experienced in hotel specific

project management.

22


Case studies



8. DUE DILIGENCE

Mrs. Lam wanted to buy a piece of greenfield land for a hotel in Danang.

She went to many meetings with a charming man who said he owned the land.

When she finally decided she wanted to buy the land, it turned out the man did not

have rights to all of the land.

Even if he did, as Mrs. Lam’s company was a Europe listed company, she could not

deal with the seller as he was on the blacklisted by creditors due to historical bad

debt .

SOLUTION: A due diligence report can look into the property owner’s

background, research market trends, past transactions in the area, local

regulations and avoid risks.

23


Case studies



9. JV PARTNERS

A family owns economy hotel assets in various cities of Vietnam which has been

established for over 20 years. However, in the recent years, there is an increase in

supply and new international hotel chains competing for the same markets. Now the

family owned local hotels are facing challenges of low occupancy rate and ADR.

Super Inn is the third largest economy hotel chain in UK, the company has a target

to expend its portfolio in South East Asia in the next five years. However, Super Inn

has limited contacts outside of UK. They are looking to expand their hotel portfolio

outside of UK. They are seeking local partners.

SOLUTION: A JV partnership between the two parties – local hotel owners and

experienced hotel operator can be potentially be introduced by hotel consultants/

brokers like Savills to make it a win-win situation for both parties.

24


Case studies



10. NEW MARKET EXPOSURE

Hotel Z is a new French hotel brand with a concept of hotel and serviced

residences. It is positioned as a limited service and offering a new concept of

smaller rooms but large public area space which is the current trend in the

market amongst generation Z. It has operated successfully in Paris since the

concept has been highly recognized by Generation Z in Europe.

Owners of Hotel Z is wondering if this concept will also be applicable in Asia

countries but they don’t have enough resources who understand about the

Asian market and consumer’s demand.

SOLUTION: Engage an experienced hotel/real estate consultant to provide

a market report analyzing the trends of this concept to assist Hotel Z in

making its long term strategic decision whether to enter into Asia market.

25


Case studies



Location: Nanjing, China

Description: the project is located in the primary attraction area of Nanjing,

including a luxury hotel and branded residence, high end retail.

Role: Hotel Market Feasibility Study and Financial Projections, Hotel and

Branded Residence Operator Selection, Residence Product Positioning and

Sales and Marketing Strategies.

Project Status: Completed

Nanjing Zhonglanli Mix Use

Development

Tanjung Aru Eco Development

Location: Kota Kinabalu, Malaysia

Description: Resort Consultancy Service including residential, hotel, resort, Marina,

Retail and Golf.

Role: Development Consultancy, Project Management, Market Research and

Feasibility, Hotel Operator Selection, Project Marketing and Residential Sales.


Savills Hotels Track Records and Case Studies


HCMC Serviced Apartment

Location: Phuket

Description: Savills hotels provided

Role: Feasibility Study and Financial Projections

-market Study -positioning Analysis

-financial projection -development consultancy


Luxury Resort and

Branded Residence

Location: HCMC, Vietnam

Description: Savills hotels provided management negotiation services .

Role: Management Agreement Negotiation

− term sheet review - legal interpretation,

− negotiation strategy formation - management contract intelligence.





Location: Yangon, Myanmar

Description: Savills hotels provided hotel Operator Selection service for the

mix used development in Yangon.

Role: Operator Selection, Management Agreement Negotiation and Hotel

Development Advisory

Project Status: Ongoing

Mix Used Development in Yangon

Resort Development in Myanmar

Location: Ngwe Saung, Myanmar

Description: Resort operator selection and development consultancy services

including residential, resort and golf club.

Role: Resort Operator Selection, Villa/Residential Sales, Resort Development

Advisory





Location: Victoria Harbour, Melbourne, Australia

Description: Savills hotels provide consultancy service for hotel /

branded residences in a mix use development

Role: Market Research and Operator Selection on branded

residences


Victoria Harbour Mix Use

Development Project

Westin Perth

Location: Perth, Australia

Description: Savills hotels provided hotel consultancy service for the

300 room Perth hotel.

Role: Development consultancy, Operator Selection, Management

Agreement Negotiation and Hotel Development Advisory.





Aloft Perth Rivervale

Location: Brisbane, Australia

Description: Savills hotels provide Hotel operator selection for significant

mixed use hotel, residential, office and retail development in Brisbane.

Role: Hotel operator selection


Supreme and District

Courts Site

Location: Perth, Australia

Description: Savills hotels provided hotel consultancy service for the Aloft

Perth Rivervale

Role: Operator Selection, Development Consultancy, Management Agreement

Negotiation and Hotel Development Advisory.




BEIJING

3 South West Ring


XIAN

Grand Park Hotel

Asset Management

SINGAPORE

Quality Hotel

Franchise Asset Management

NANJING

Luxury Hotel and Residence

Feasibility Study and Financial Forecast

JIUZHAIGOU

Resort Development

Feasibility Study and Financial Forecast

JAPAN

Hotel Portfolio

Asset Management

PERTH

Upper Upscale International Hotel

Consultancy & Advisory Service


ULAANBAATAR

Luxury Hotel Development


INDONESIA

Ritz Carlton Portfolio

Due Diligence

SINGAPORE

Hotel and Serviced Apartment

Independent Hotel Market Research for IPO purpose

HAINAN

Hotel and Serviced Apartment

Feasibility Study and Operator Selection

WUYISHAN

Integrated Resort

Feasibility Study and Operator Selection


http://www.google.com.sg/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=LJNrpNOk6Sx8vM&tbnid=nFv1v5f8WQmmEM:&ved=0CAUQjRw&url=http://www.stayfareast.com/en/loyalty.aspx&ei=UQVEUo_wCMaErAeKooDwCg&psig=AFQjCNG0BPn5mBtXOGiXkEEjsA1NNpLrhw&ust=1380275913629619

Comfort Portfolio, Japan

No. of Rooms: 432

Price: US$23million

Sofitel Darling Harbour

No. of Rooms: 600

Price: US$337million

Mantra Resort, Samui

Number of Rooms: 88

Price: US$15 million

Park Inn Brussels

Number of Rooms: 142

Price: US$17million

Mystay Hotel Portfolio

No. of Rooms:254

Price: US$58million

Movenpick Saigon, Vietnam No. of Rooms: 268

Price: 30 million

33


Transactions Track Record

Transaction Track Record

Savills Hotels Transaction Volume Exceed

US$ 1.5 billion in the past 24 months

E Hotel Shinjuku, Japan

No. of Rooms: 253

Price: US$67.1 million

Butterfly Hotel, Hong Kong

No. of Rooms: 88


Hilton Hotel, Melbourne Australia

No. of Rooms:419


Japan Hotel REITS

No. of Rooms:202

Price： US$65 million

Four Seasons Sydney

No. of Rooms:531

Price: US$ 220 million

Novotel Oasis Cairns, Australia

No. of Rooms:314

Price: US$37.5 million

Westin Melbourne, Australia

No. of Rooms:253


34


savills.com

Savills (Singapore)

30 Cecil Street , #20-03, Prudential Tower, Singapore

049712

savills.com.hk

Nathalia Wilson

Senior Director

Savills Hotels, Asia Pacific

+65 6415 7589

[email protected]


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