February 10, 2017 5:00 pm JST
Interview

Patience pays for Peninsula's Clement Kwok

Luxury hotel chief talks of company's pioneering roots and waiting for perfect locations

Clement Kwok, the CEO of Hong Kong-based luxury hotel chain Hongkong and Shanghai Hotels

Clement Kwok, CEO of luxury hotel chain Hongkong and Shanghai Hotels, the operator of the Peninsula hotels, recently sat down with the Nikkei Asian Review to talk about the company's adventurous history and taking the long-term approach.

Q: Can you tell us a little about your flagship hotel, the Peninsula Hong Kong?

A: Building the Peninsula, aimed at being "the best hotel East of the Suez," was a courageous decision. The site was on Kowloon and not the Hong Kong side. Unlike today, there was no Harbor Tunnel and it was an undeveloped area [in 1928]. Our predecessors spent $3 million on it, which was a big investment at the time.

These were brave pioneering people with vision, courage, conviction and commitment. We are lucky to have the legacy because you cannot bid for locations like this in Hong Kong today.

It relates to what we are trying to do now. One theme is ownership. We believe our strength comes from ownership of the hotels. Peninsula does not take management contracts where we only handle the management of a hotel. Owning is important to create value and to maintain quality.

In management contracts, the property owner has control and not the hotel operator. A lot depends on the agreement you have with the owner, but there are issues that come up that you cannot foresee. A good example is Wi-Fi. Today you absolutely need Wi-Fi in your hotels, but when you signed an agreement with your owner several years ago, it would have been impossible to predict that such an investment would be necessary.

Q: What are the reasons for keeping the number of Peninsula hotels so small?

A: Another key theme for us is focus. Even though our history is long, we do not have that many properties. We want to choose the right locations. A good example is the new hotel we are building in London. We had been looking at London for many years. We were willing to be patient until a very good location came along. The current location we are building on is exceptional, sitting just between Knightsbridge and Mayfair. There is great visibility to anybody heading west to Heathrow Airport.

We also have a commitment to quality and service. People are important and we spend money, even in bad times, to maintain brand name and quality. During the SARS crisis, we did not lay off any staff.

These are ingredients we have taken from our history and are taking into the future. It is very consistent. We are clear about what we are trying to do. We do not suddenly do this or that or jump around.

Q: How did you find the London property?

A: The building is currently an office building. It is owned by Grosvenor and the lease was held by Derwent London. I was asked by Derwent in 2008 if we would be interested in developing the property. Both Grosvenor and Derwent realized that this superb site could be more than an office building. When I was asked, I said "yes!"

When we assess a property, we first look at the city and whether that city has long-term potential. Then we look at the specific location, whether it has connection to history, culture, shopping and transportation.

We have purchased the lease -- which is valid for the next 150 years -- and we are going to rebuild the entire property to create a classical, gracious building that fits the neighborhood but also has a contemporary look. We do not want people to think that it was built 100 years ago. It will be built with a style that fits the area.

We were under negotiations when the Brexit vote happened. We had to decide whether Brexit was going to affect our plans, but we concluded that despite short term uncertainties, the inherent strength of London will remain.

Q: Were you saving up for this investment?

A: Our balance sheet has always been strong. We do not have that much gearing. The economics are always challenging for luxury projects especially if you want to own it. Super luxury hotels are expensive to build and expensive to operate. To make it work, you need to take a long-term view. Inflation helps relieve the burden down the road. The asset value will grow over time. In the meantime, you can generate revenue from related facilities such as the arcade or the adjoining apartments.

Q: Could you tell us about the new hotel you are building in Yangon?

A: The reason why we entered the Yangon deal is related to the pioneering spirit of the company. Our predecessors were adventurous, taking risks in choosing locations. The projects that we have been doing today have been mainly in established cities such as Tokyo and Shanghai. But to revisit the company's DNA, I asked a colleague to look for opportunities in developing countries.

Our Yangon location is fantastic, being right in the center of the city. It used to be the headquarters of Burma Railways. We thought we could turn this colonial building into something special. It will be a small hotel but there will be nothing like it in Myanmar.

Interviewed by Nikkei staff writer Yasuo Awai and Nikkei deputy editor Ken Moriyasu.

Get Insights on Asia In Your Inbox

To read the full story, Subscribe or Log in

Get your first month for $0.99

Redeemable only through the Subscribe button below

Once subscribed, you can…

  • Read all stories with unlimited access (5 articles per month without subscription)
  • Use our smartphone and tablet apps

To read the full story, Subscribe or Log in

3 months for $9
SUBSCRIBE TODAY

Take advantage of this limited offer.
Subscribe now to get unlimited access to all articles.

To read the full story, Update your account

We could not renew your subscription.
You need to update your payment information.

To read the full story, Subscribe or Log in

Once subscribed, you can…

  • Read all stories with unlimited access (5 articles per month without subscription)
  • Use our smartphone and tablet apps

To read the full story, Subscribe or Log in

3 months for $9
SUBSCRIBE TODAY

Take advantage of this limited offer.
Subscribe now to get unlimited access to all articles.

To read the full story, Update your account

We could not renew your subscription.
You need to update your payment information.