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Austin Frost, Vice President International Sales Shangri-La : "We wish to be an international hotel company”

The leading upscale brand in Asia is now developing fast in other parts of the world, mostly Europe and North America.Thus, the company is still very keen to appear as an international Asian company, insisting on the quality of service associated with its image.Austin Frost explains the reasons and the paths of the development strategy.

HTR: Two years ago, Shangri-La announced the goal to double its size by 2008. Two years from the deadline, have you kept the pace to reach your objective?A.F.: We still own the majority of our hotels in Asia and China. This is mostly because our shareholders are based in Hong Kong. When we come into Europe and North America, these are areas where our owners do not have business interests. It makes far more sense for us to enter into a management contract. But if a financial opportunity arises that is advantageous to the group, then we will be very interested in looking at it. Paris is a very good example as we bought the property. In North America we have only management contracts. Our proprietors are the key drivers behind developing the brand even further. They are tremendously supportive. As a hotel company we are very lucky to have the owners we have.Austin Frost: The past two years have been tremendously successful for us. We have 49 hotels in operation today and we should be somewhere around 100 hotels in 2010. But we don't want to be a global company. We wish to be an international hotel company. Shangri-La is fundamentally an Asian brand. Our home is in Hong Kong. The core values of what makes Shangri- La different from other hotel companies comes from Asian hospitality. What we wish to do is pick some strategic cities where Shangri-La would be present to satisfy its “national customers”, so to speak, because it is one of their usual destinations. While continuing to grow in Asia and China, we will have key flagship hotels in Europe - perhaps not more than five or six hotels - and in North America with nine to ten hotels. Paris and London have already been announced. We are looking at other places as well such as Frankfurt, because it is a key hub in Central Europe, possibly Vienna in Austria and we have to consider Moscow as well.HTR: What is key for Shangri-La to succeed outside Southeast Asia?A.F.: We believe that Shangri-La hospitality will bring something different. One of our key cornerstones is our philosophy: Shangri- La attention. It is the caring aspect that is so important. We have many internal training modules to ensure that no matter where we open a Shangri-La, the staff goes a bit further in terms of service. It will be more than a challenge in Europe and North America, but we believe that we can deliver that Shangri-La touch.HTR: Shangri-La will open a new hotel in Paris in 2008. Do you think that you can enter the elite circle of “palaces"?A.F.: We have the potential for a very special hotel in Paris and we will succeed. We are fortunate because the building will be unique. I don't think that any other hotel in Paris has the facilities that we will have. And we stand a good chance of having a nice mix of clientele. 18% from our business comes from Europe, especially from the UK and Germany and, to a lesser extent, France. We believe that, when the Brits or Germans will stay in Paris, they will experiment with the Shangri-La. I also think that we will attract key French nationals as well. As you know the new palace that recently opened on the Champs-Elysées had a great deal of publicity. We hope the same will happen for Shangri-La. And the French will probably ask, “Who is Shangri-La?" If we do what we are good at, they will come back again.HTR: Is the context the same in London?A.F.: Not really. In London, Shangri-La is well known. Like in Paris, we have a very unique building but very different. Located on the edge of the Thames by London Bridge, it will add a new dimension to London’s skyline. It is a very striking structure: the tallest building in Europe with a complete glass structure. We will have a lot of people come because they know Shangri-La, but we will also have a lot of people come because it is such a unique building.HTR: Shangri-La also announced very strong development in North America. What is the potential of your brand in this market?A.F.: 12% of our business comes from the US. We have more than a challenge here. But we feel that by announcing so many hotel openings over a short period of time – two to three years - the Shangri-La name will begin to get known quite quickly. In the coming months we hope to announce some more properties. We are looking for locations in New York and Toronto. But that is yet to be confirmed. And once we have our first hotel in Chicago, we hope that the reputation of the brand will spread quickly. We will then open in Vancouver, Miami and Las Vegas in 2010.HTR: Is the resort segment a new step for the development of your group, which is more traditionally focused on business hotels?A.F.: We wish to have within our portfolio some very high profile resorts. It is not completely new because we have eight resorts at the moment in Asia Pacific. And we opened a wonderful resort in Muscat in January this year, and it is doing very well. We see opportunities in the Maldives and in the Seychelles where we can develop a very special type of product. In achieving those particular resorts it helps the brand to develop accordingly. It links back to our core values of service. The people will recognize Shangri-La as a very deluxe five-star hotel company. Having a wonderful resort in the Maldives or Seychelles will enhance the value of the brand around the world. Particularly with European clients who travel a great deal to the Maldives and Seychelles.HTR: Shangri-La is the market leader in China in the top-end segment. What is the critical mass for your group in this country?A.F.: Currently, with 21 hotels, we are the largest luxury brand in China and throughout Southeast Asia. We are not a “Chinese” brand, but an Asian brand. It is our home and we will continue to grow in China. For the moment we are primarily developing our brands Shangri-La and Traders in secondary cities. There is huge potential there. They have populations of 4 to 7 million people. It is totally different from Manchester, Bordeaux or Toulouse. 58% of our guests staying in our China hotels are actually Chinese residents. Being the largest 5-star hotel company in China, the Chinese recognize Shangri-La very much as a brand from that region, as opposed to American or European hotel companies.HTR: How do you expect outbound Chinese tourism to contribute to your success?A.F.: Everyone talks about the moment when China will become a full-fledged mature society. India is another market that is very similar. Every year more and more Chinese and more and more Indians are traveling. In 2010-2015 it will just continue to grow. In many ways we do what Hilton did in the Seventies. When the Americans went abroad, they always knew where Hilton was. Hopefully in the future, when the Chinese come to Paris, London or Chicago, they will look for a Shangri-La. So they will be a contributing factor. But obviously we hope to balance or complement the Asian clientele with some good European and North American guests as well.HTR: Your growth strategy is now partly focused on thirdparty management agreements. Why this shift from ownership and equity-based projects to management contracts?A.F.: We still own the majority of our hotels in Asia and China. This is mostly because our shareholders are based in Hong Kong. When we come into Europe and North America, these are areas where our owners do not have business interests. It makes far more sense for us to enter into a management contract. But if a financial opportunity arises that is advantageous to the group, then we will be very interested in looking at it. Paris is a very good example as we bought the property. In North America we have only management contracts. Our proprietors are the key drivers behind developing the brand even further. They are tremendously supportive. As a hotel company we are very lucky to have the owners we have.

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