Frasers Hospitality's Expansion Strategy
Frasers Hospitality, the hospitality arm of Singapore-listed conglomerate Fraser & Neave, is embarking on an aggressive expansion strategy in several key markets, including China, India, and Vietnam. This ambitious undertaking comes despite concerns about the uncertain state of the global economic outlook. The company aims to add approximately 5,000 serviced apartments to its portfolio over the next two years. Chief Executive Choe Peng Sum described Frasers Hospitality as a ‘contrarian’ player in the market, capitalizing on opportunities while others exercise caution.
High Occupancy and Pent-up Demand
Mr. Choe noted significant ‘pent-up demand’ in major cities like Singapore, London, and Sydney, where existing Frasers residences have consistently maintained occupancy rates exceeding 90%. This demand reinforces the company's confidence in its expansion plans. He also highlighted the favorable conditions for entering the Chinese market and the ongoing growth prospects in both Vietnam and India.
Singapore Expansion and Rising Room Rates
In Singapore, where Frasers Hospitality currently operates two high-end serviced residences, the company plans to launch a third property. Specific details about this new venture will be unveiled at a later date. Mr. Choe also mentioned a considerable increase in average room rates for specific units in Singapore, observing a robust 26% rise to about $400 per night. This price adjustment reflects the strong demand for premium serviced accommodation in the region.
Global Footprint Expansion
Frasers Hospitality is extending its reach beyond Asia, targeting new markets such as Edinburgh, Bahrain, and Perth. Recognizing the growing demand for extended-stay accommodations in Asia and Europe, the company anticipates expanding its portfolio to a total of 8,478 units by 2010. This expansion strategy will prioritize China, India, and Vietnam due to their strong long-term growth potential.
Targeting Key Growth Markets
The company is concentrating its efforts in cities with high demand for serviced apartments, primarily driven by expatriates working for multinational corporations establishing operations in these locations. In China, where Frasers Hospitality already operates 12 properties in major cities like Beijing and Shanghai, the company is looking to expand into other significant urban centers, including Chengdu, Nanjing, and Tianjin.
Vietnam and India Expansion
Vietnam presents both challenges and opportunities for the hospitality industry. While navigating the complexities of skyrocketing inflation, Frasers Hospitality recognizes that land prices are becoming ‘more reasonable’ as land owners adopt more realistic pricing strategies. This development creates opportunities for Frasers Hospitality to strategically expand their presence in the Vietnamese market.
India is another important growth market for the company, with plans to launch seven new properties over the next three years. Beyond property development, Frasers Hospitality is also engaging in discussions to establish private equity funds specifically focused on investments within China, India, and Southeast Asia.
"Growth in Asia and Europe (for extended-stay accommodation) is just starting to take off", Mr. Choe explained.