How many of us can say “well, my dad bought a hotel and asked me if I would run it”. Not many, I guess, but that’s how Allen Law, CEO of Park Hotel Group, got his start in hospitality.
He was 24, studying mathematics in London, when his father, Law Kar Po, called him, announcing the family had bought the Park Hotel in Hong Kong and could he return to run it? “He said something like our generation is too old to learn a new business and the next generation has to step up,” recalled Law of the moment 14 years ago. “I had planned to get a job in London in actuarial sciences but I couldn’t say no to Dad.”
So like a good son, he returned. “Whatever I had learnt in university had no application to what I was returning to. Luckily, at 24, I didn’t have a lot to unlearn, and so I told myself, this is a blank sheet, I have had no hotel experience other than as a customer and I had to learn as much as possible as fast as possible.”
He was put through a fast track management training programme at Park Hotel in Hong Kong, and given exposure to different departments. “I was constantly asking why, why does it have to be done this way, why can’t it be done another way? By asking the right question, the answers and solutions are always out there.”
He counts this time as a critical foundation for his current job as CEO of the hotel company which has grown to 16 hotels and is regarded as one of the most innovative groups in Singapore when it comes to embracing technology, with its flagship Grand Park Hotel Singapore blazing the trail.
A need to invest in tech and test new ideas
The recent upgrading of the hotel came with a mobile app, that was developed with funding support from the Singapore Tourism Board’s (STB) Business Improvement Fund. In an interview at the time of the app launch, Law said the funding, in which enterprises can receive support of up to 70pc of qualifying costs, and non-SMEs can receive support for up to half of qualifying costs, “made the decision-making a lot easier”.
After all, the app “did not set out to drive revenue; it’s more of a customer experience enhancement app”, he said.
He told WiT that the biggest challenge facing small hotel groups like his is “how do we reinvent ourselves”?
“On the one hand, we have the ability to change faster, move faster. On the flip side, we have limited resources to invest in tech. It’s a balancing act – we need to think where to put our investments in. But if anyone thinks it’s business as usual and continue the same way, we will fail.”
As such, the group is investing in technology and testing new ideas. “Our biggest investment so far is the mobile app which is highly integrated from booking to checking-in to accessing room and lift, controlling in-room and accessing services. Guests just have to download our app.”
He declined to give specific numbers but said the numbers of guests using it were rising. “Our team is encouraging customers to try it and numbers are increasing month on month.” In time, the idea is to roll out the app across all its hotels.
Among new tech that he’s watching AI and machine learning which he believes will be very important to how a hotel operates. “I see a lot of opportunities there especially automating manual tasks that are repetitive and not value adding. How do we transform the operations and use this as a tool?”
Hospitality is a good business because it adds value to the real estate
Distribution is another area Law has a personal interest in. He works with OTAs and brands such as Luxury Escapes but is aware that priority must be given to “making sure the customer wants to book with us first”.
“Distribution is so dynamic, there’s plenty of research out there that shows any traveller will look at multiple sites and they always land at the hotel site at some point. At that point, how do we get them to convert and we must make sure our platform has value added proposition to persuade them to do so?”
He recognizes it’s a game of scale and tech but believes hotel with differentiated offering will always find a place in the dynamic landscape. His confidence in the industry was forged from the beginning of his career.
“When I took over, my first goal was to ensure I delivered good results because my family had entrusted me to take care of it. We bought the hotel in 2003 during the SARS crisis and it was the worst ever situation,” said Law.
Until now, I asked, given the current political protests that have rocked Hong Kong in the last three months?
“No, SARS was worse. We had single digit occupancies. It was life-threatening. At the moment, we are dealing with uncertainty and inconvenience – you just have to look out where to go to, otherwise it’s business as usual. Definitely tourism is being affected but the situation is not as bad as SARS.”
That the hotel managed to do well despite SARS gave Law confidence in the hospitality business. He also saw the macro-economics and knew tourism could only grow on the back of the Asian economy, the rise of the middle income and the growth of low cost airlines. “I wondered how we could participate in this,” he said.
On the micro level, it complemented the family’s real estate business. “In real estate, when you have two buildings sitting next to each other, the rental is more or less the same. But if you make one into a hotel, it has a different rent, different valuation based on the software – how you position the hotel, the marketing, the service delivery, your revenues. All those affect both rental income and valuation.
“So by running a hotel, you create value for your real estate.”
Focus is key, so is profitability – “we don’t want to be distracted by buzzwords”
With the blank sheet he had, Law decided to create “a new type of hotel company” – one that had a flat organizational structure and hierarchy. “That allowed us to create productivity gains, and we removed some middle layers. That flatter structure allowed us to move faster and bring teams around a common goal.”
That goal is now to establish a platform that can grow to 50 hotels by 2023. Of its 16 hotels, six are owned, the rest managed. It has three brands – Grand Park, Park Hotel and Destination, with each brand capturing a different segment of customers.
Law said the family did evaluate options to bring in a third party brand and just be an asset owner “but we found a lot of disparity in goals – they weren’t aligned between owners and brand – so when there is disparity, it can be detrimental to the property”.
Being both asset owner and operator offers the best synergy and this is its biggest selling point when looking for hotels to manage. “We know how to align our goals with the owner because we know both perspectives.”
Law also wants to remain focused on the core hospitality business without being distracted by the noise in the market over alternative accommodation or co-working and co-living, a space that’s disrupting real estate play.
“Staying true to our path is our competitive advantage. New brands like OYO fill a void in the market. They take on properties that traditional management companies wouldn’t. These independent properties need to find economies of scale, so that’s a slightly different play.”
On the difference in valuations being seen between asset-light companies versus more traditional models such as Park Hotel Group, Law said, “Tech companies are currently valued not by profit but by revenues if they are generating some. Traditional companies like ours are valued by profit. It’s a totally different valuation model. You have to ask, if you can’t make profit as a business, can you survive?
“We believe a business model has to make profit. If it doesn’t make profit, it’s only a matter of when you burn. For such companies, they have to reach market dominance – it’s high risk, high return.
“For us, we have a much lower risk, cash generating model. At no point in time do we run into negative cash flow and we have solid assets.”
As such, the company will focus on growing its resorts business, encouraged by the success of its first resort in the Maldives, as well as look at how it can create more unique experiences around its hotels. “It cannot just be sand and sea,” he said.
It is also exploring entry into the service apartments sector but will stay away from alternative accommodation. “This sector is not clear cut and we don’t ever want to do anything illegal,” he laughed. “For us, longterm reputation is more important than short term business gain. You lose your reputation, that’s it.”
This is why it’s also staying away from “buzzwords” such as co-living. “It’s not quite defined yet, some are essentially hostels, some are apartments. Until clearer rules are in place, we will not participate.”
What it will participate in is the swing towards the digital economy. At 39, Law knows he represents the next generation of Asian hoteliers that want to cater to a new generation of consumers. “Tech has enabled consumer-driven decisions, consumers are in the driving seat and it will happen on a faster and larger scale from now on. We have to get better at all things digital.”
Like the good son that he is, Law is also mindful of the belief that haunts family businesses – that the first generation makes it, the second spends it, and the third loses it. “We are supposed to be a third generation business but I constantly tell myself I must not lose money and for the hotel business, it is first generation,” he laughed.