“These are exciting times with great opportunities for the hotel industry” - Outlines OZO Colomb...
Outlines OZO Colombo plans to provide a 4-star product at a 3-star price
Q: As a veteran and experienced hotelier as well as a prominent personality in the tourism sector, what are your thoughts on the hotel industry in Sri Lanka and what needs to be done?
A: These are exciting times with great opportunities for the hotel industry. This is also the time when the entire industry needs to make wise decisions and implement the right policies to ensure that our hotel and tourism industry develops in the right direction and to its fullest potential.
One area that concerns me is in terms of branding and positioning of the destination. The perception of Sri Lanka in our target markets due to the 30-year conflict and current issues in international media is still that of a troubled place and a cheap destination.
If one were to survey potential clients from traditional generating markets about what Sri Lanka has to offer, or ask the question what are the top three choices of destinations in the Indian Ocean region, it is likely that Sri Lanka will not be on the list. We need a strong branding and marketing campaign in order to reposition Sri Lanka and change that old perception in potential markets.
Marketing and branding of a destination takes time to gain traction and that is why we need to start now. Any concern about lack of capacity is misplaced as the benefit of such a campaign will come into effect two to three years down the road once new inventory comes into the market.
Q: What about hotel development and infrastructure?
A: In terms of development, I feel that more thought needs to go into the type of developments that come up in the bigger resort areas and also the valuation policy of land. A good example of such a well-planned integrated resort development is Nusa dua in Bali, where all the luxury branded hotels are located in an enclave that is exclusive.
Another example is the Maldives, where the Government specifies the level or type of development they need in a certain region or islands and then call for bids accordingly. We would do well to follow a similar, more deliberate approach to integrated resort development.
An example of a questionable policy is the proposed Kuchchaveli Resort in Trincomalee. It has been over two years since bids were originally called for Kuchchaveli and several reputed industry players including one of my companies were originally allocated lands. However, due to subsequent change in policy in relation to the valuation of the land, so far only two companies have taken up a site and intend to develop there. Overpriced Government valuations can be an impediment to development.
Kalpitiya has also not turned out to be the bonanza that was expected and after calling for bids twice, very few of the well-known players participated and the development there does not look like it will proceed as envisaged.
Tourism in Sri Lanka has always been a private sector-driven industry and to take advantage of the opportunity that we now have, the private sector needs to be included more in the formulation of policies and planning for the betterment of all stakeholders. In so far as promotion, I believe the private sector should be in the driving seat.
Q: The Government has set an ambitious target for 2.5 million tourist arrivals by 2016. Is the target realistic and do we have the capacity to achieve these targets?
A: It will be a challenge of capacity in all areas of the industry. Currently our room capacity is approximately 15,000 graded rooms. One must also remember that a large proportion of the existing capacity is outdated and needs huge investment in renovation and refurbishing. If hotel development is fast-tracked and also other infrastructure is developed simultaneously like the airport expansion program, highways, transport fleet, internal air access, human resources, etc., then the target is achievable.
Having said that, in my opinion, it is always preferable to have supply trailing demand. This helps maintain healthy yields and also creates a sought-after image for the destination.
Q: Could you tell us about the Sino joint venture projects and the total investment?
A: Sino Lanka Hotels Holdings is a special purpose joint venture company of which I am a promoter and shareholder with the objective of developing new hotel properties in Sri Lanka. The joint venture currently owns six sites – Colombo, Galle, Kandy, Seenimodera, Chilaw and an island off the Beruwela resort.
The company has so far committed to building three OZO Hotels and Resorts comprising the OZO Colombo 150 rooms property, OZO Galle 140 rooms and OZO Kandy 120 rooms hotels respectively. The total investment for these three properties will be Rs. 4.5 billion. We have chosen OZO, which is a brand of the ONYX Hospitality Group of Thailand, to manage the three OZO hotels.
Once the construction of all three OZO properties commences, we will then be looking at finalising the development of the balance three properties. We estimate that the total investment for all six properties, once completed, will be in the range of US$ 100 million.
Q: Does the Sino Joint Venture plan to develop hotels with other management companies?
A: The answer is yes. In fact, we have had several discussions and meetings with leading hotel management companies like Starwood. Marriot, Centara, IHG, Hilton, Banyan Tree etc. We are open to working with other management companies if the brand and related conditions are right for us.
We are also looking at the upscale 4-star sector and are currently talking to operators about our property in Chilaw for this market segment and we are also looking at the luxury sector for properties in the south.
Q: Why have you chosen not to manage the new developments given your management experience in the industry?
A: There were a few considerations, but the main motivation is the fact that we are a joint venture company with different partners. We considered it better as owners to avoid any conflict of interest by having an independent third party management company operating the hotels so that none of the owners are wearing two hats.
Q: Having operated several resort hotels and now a city one, what will be the difference?
A: Earlier in my career I have worked in city hotels in Melbourne, Australia and was also involved with the setting up of a boutique city hotel some 13 years ago in Dhaka, Bangladesh. I guess the key difference between the city and a resort hotel is the sourcing of the clients and their expectations.
Resort hotels are currently primarily driven by the tour wholesaler market and to a lesser extent the independent traveller and group markets. Therefore, the emphasis on the marketing and distribution channels between the two types of hotels is somewhat different.
In terms of client expectations, city hotel guests are generally on business and are staying short-term and are looking for more efficient, clean and comfortable environment and tend to spend very little time in the hotel itself. To them facilities like a good business centre, Wi-Fi, meeting facilities and fast turnaround in food and beverage is important, whereas in resorts, clients are on holiday and tend to stay in the resort and therefore expected to be entertained and pampered. To resort clients, location, entertainment facilities like spas and dining options are of more importance.
Q: What specifically prompted you to invest in a ‘mid-priced’ hotel? What potential do you see for that segment of the market?
A: A lot of the buzz words in the industry at the moment are ‘boutique,’ ‘eco’ and ‘up-market’. Many of the new developments are aimed at the 5-star luxury or boutique-end of the market and many of the refurbishments that are taking place are aimed at the 4-star market.
We chose for our first three developments to position ourselves in the mid-scale sector for both business and leisure travellers. Our analysis is that many of the hotel products in Sri Lanka are out of date as there has not been much new hotel development during the last 30 years of conflict.
Due to the current demand, prices of existing hotels are very high and the mid-scale market which still has the highest volume and demand is seriously under serviced in the locations we have chosen. The existing product in these locations in the mid-scale is very limited and very dated. Our assessment is that modern, contemporary, cutting edge, mid-scale properties, at value for money price points, will have a great demand. With OZO, we will offer a 4-star style property at a 3-star value.
Q: Please explain OZO Colombo. What will be the value add to Colombo’s hotel rooms and standards?
A: OZO Colombo will incorporate the core of OZO’s design philosophies, which is to bring a signature to every experience and cater to those who crave for the basics done right. At the heart of the hotel live with local colour and personality, the OZO lobby will be a multifunctional hub of activity with such features as self check-in pods and orientation touch pads for tech-savvy guests. The main dining area of the OZO Colombo will be vibrant with a relaxed air offering combined dining, lounge and bar space featuring live cooking stations.
The signature outlet will be a stylish and trendy roof top bar and dining venue overlooking the sea adjacent to the roof top swimming pool. One of the OZO brand promises is ‘Sleep Dream’ and to achieve this, we have gone to great lengths to ensure that all 160 of the guest rooms will be completely sound and light proof. A lot of work has gone in to incorporating the latest in design trends and technology that is cutting edge.
With the introduction of minimum rates and due to heavy demand, the prices of Colombo Hotels have risen significantly. At the same time, there has been very little new development in the mid-scale market segment and we feel that the OZO Colombo will add great value with a new cutting edge product at an affordable price. As I said earlier, a 4-star product at a 3-star price.
Q: With high profile brands like Shangri-La coming into the market, is this beneficial for the Sri Lankan hotel industry?
A: Absolutely! Sri Lanka is currently under-represented in terms of leading hotel brands. I welcome more international brands as they have a huge distribution system and will attract a completely new segment of clientele that currently are not visiting Sri Lanka. Their marketing and PR will add tremendous value to boost Sri Lanka’s image and brand as a destination in our target markets.
A good example is the Maldives, where the branded hotels changed the destination from being primarily a wholesaler/tour operator market to a better mix with more FIT and up-market tourists.
The emergence of reputed international brands will also have a positive effect of lifting everybody’s game in terms of quality of product, standards and service delivery.
Q: Why did the Furkhan family decide to sell the Confifi Group Hotels? Why and how did the sale come about?
A: We had been examining several options for some time, including the possibility of divesting. It became apparent to us with the end of the conflict that the entire hotel industry would have to evolve and transform in order to compete in a post war era of the industry.
As our hotels were ageing, it was evident that a huge capital investment would be needed to reposition and bring them up to comparable international standards in the new era of tourism. This would require restructuring of the companies and significant reinvestment by the existing shareholders or dilution with the introduction of new shareholders.
Whilst our family as the main controlling shareholder preferred to reinvest, not all the other key shareholders were willing to reinvest or dilute their holdings and some preferred to divest, so we also looked at selling as an option.
When the opportunity came and LOLC bought in, we finally got an offer that was too good to refuse, so we took it!
Q: What is the status of the Confifi Group now?
A: It continues to be owned by my family. We only sold our shareholdings in the hotels and related companies to LOLC, but we retained ownership of the Confifi name and other Confifi Group Companies and assets and gave LOLC the right to use the name for one year.
At the end of the one year, they re-branded the hotels LOLC Leisure and the Confifi Group Hotels brand name reverted back to our ownership.
We continued to own all the other Confifi Companies within the Group. We subsequently took a strategic decision to divest all our operating entities in the Group in addition to the hotels, such as the plantation company, engineering, hotel supplies, management and trading businesses and purely focus now as an investment and venture capital company that primarily invests in private equity, the stock exchange and property developments.
