Tourism–bullish Minor Hotels expanding footprint globally

By Charumini de Silva

Minor Hotels Group, which is part of its own massive conglomerate in Bangkok-based Minor International (MINT) with popular brands Anantara and Avani, has been making headlines for some time, quietly building itself up into one of the largest hotel company in the world by number of rooms. It currently has a portfolio of over 160 hotels and resorts in 23 countries across Asia Pacific, the Middle East, Europe, South America, Africa and the Indian Ocean. The Daily FT recently spoke to Minor Hotels CEO Dillip Rajakarier, who has made his name playing a pivotal role in some major industry acquisitions within his three decade long career; to learn more about Minor’s approach to growth in the ever-competitive global hospitality market, its operations in Sri Lanka and recommendations to develop the island nation’s tourism industry. Below are excerpts of the interview. 

Q: They say you’re someone that ‘fell’ into the hotel industry and who always wants to win. Could you share some experiences of your early days? And how, being a Sri Lankan, you carved out a pretty big name in this global industry?

 I was in a pub joking with a couple of friends and we went on betting something not using money, but using technology. As always I took up the challenge and the reward was that I get offered a job in a hotel. I won the bet and that’s how I started off my career in hotel industry way back in 1990s. My early career was spent as a Systems Analyst in the IT industry and then I moved into finance. I was a deal maker and loved to create something which adds value. My goal has always been to win and that’s always been one of my passions as well, which made me become what I am today.  

Q: When Minor Group is looking at new investment opportunities, what are the qualities that make a proposal or property standout?

 The first is a brand fit, second is what guest experiences we can create and the Return On Investment (ROI). Each country has its own ROI, it depends on whether it is a green field or a brown field and if it’s a management contract we would look at what is our fee income we could earn from the hotel as well. For Sri Lanka it is about 16% on investor relations (IR).

Q: What are the immediate investment and expansion plans of Minor Group and particularly in Sri Lanka?

 We are set to expand our footprint to Malaysia. The first property we are managing in Sepang is under the Avani brand and the second property, which we are about to launch is the Anantara brand, is a joint venture with Khazanah Nasional Berhad, the sovereign wealth fund of the Government of Malaysia. Our investment is 60% and the balance 40% is from the Government, but we will manage the hotel. It is schedule to open in December. 

With the hotels, we are also adding residences as well, which is a new thing we do in terms of a mixed used development project. In Sri Lanka, based on the incident in April, we are looking at upgrading our hotels. We are basically investing in our capital expenditure to upgrade the hotels in terms of rooms, services, conference and banqueting as well, which we hope to execute within the next two to six months, so when tourism turns around we will be ready to receive them. At Avani Kalutara, we should be investing around at least another $3 million to renovate the rooms, creating some additional conference and banqueting space, and in Anantara Tangalle also there are some renovations planned.

However, we are always looking at opportunities in Sri Lanka. I believe there’s a lot of opportunities for us to be in the hill country as well as in the east coast, but it’s a little too early to comment because the structure is not yet developed and it’s not matured yet. Nevertheless, that’s something we would look at in the future. We’d also like to explore opportunities in the wellness sector because it’s growing demand and is also driving tourism. 

Q: Last year Minor invested in NH Hotel Group in Spain. What have they brought you and what have you all done over the past one year since the acquisition?

 The whole NH investment was a strategic fit for us. Minor, as a hotel group is very strong in Australia, Middle East, Africa and Asia. NH is very strong in Europe and South America. The reason we acquired NH is to create a global platform and we didn’t lapse even on one country. It also made us a global company with a strong sales, marketing distribution and PR. We are now able to drive Asians into Europe and they are able to drive Europeans to Asia and other places as well — that is the immediate impact we had. 

From a Government’s perspective they also need to invest in talent. The biggest challenge is talent. We are talking about tourism numbers going from two million tourists to five million, but I don’t think we have that talent to cater to them readily available here today, because most of the good talent have actually left Sri Lanka. We need to think of a system to bring them back and also to invest in training new talent and developing their skills so they can be ready to serve and give that guest experience as well.

Introducing tax incentives and initiatives to create an investment friendly environment to attract more investors to Sri Lanka. There are lot of initiatives that the Government can do to help drive tourism if they believe tourism is one of the key drivers of our GDP growth, which it is.

We are also planning to introduce a loyalty program which will expand between the two hotel groups as well.  As a result of this investment, we are now able to go to some of the corporate RFP programs. In the past we were not able to do it because we didn’t have the presence in all the countries, but today we have presence in over 54 countries. There is a lot of benefits and synergies that has come through this investment. They have strong systems and skilled people where we have brought some of their strong employees to Asia to learn from and sent some of our employees there to be trained. Since the acquisition, we have launched Anantara in Marbella in Spain, which will be managed by NH. 

We will convert two of the NH Hotels into Anantara in the coming months. We are also looking at bringing in more Anantaras to Europe and acquiring hotels. Today, we are able to attract investors as a global company rather than an Asian company. That put us in a total different playing field and among the 20 hotel groups in the world. With eight brands we have leveraged into different locations and create synergies, while also ensuring not to cannibalise the customers. We always think like an owner and what will he get as return.

Q: How would you rate Sri Lanka’s recovery after the Easter bombings?

 It has been slow, especially in the high-end segment. From an overall tourism perspective what the tourists are looking for is that confidence, in terms of how the country portrays after the incident to say that we’ve got things under control, everything is back to normal and it is a safe place to come back. So right now they are just waiting for that assurance and that’s something we as hoteliers have to create as well. 

Q: Given the negative impact we saw in the industry post Easter Sunday tragedy, how are Avani and Anantara fairing in Sri Lanka? 

 The Easter Sunday attacks impacted Sri Lanka’s tourism industry, but this type of incidents happen all over the world. From our perspective, it’s about what we can do to be proactive and also try to resume again because we believe in Sri Lanka. We came into Sri Lanka in 2006 during the war and we were one of the first to invest in Sri Lanka because we had a lot of confidence in the market. We believed in the tourism sector in Sri Lanka, and coming from Thailand we felt from a guest experience perspective, whatever Thailand can offer Sri Lanka could match as well. We will bounce back.

Q: Do you think the Government and stakeholders of the industry can do more of to lure the tourists back?

 Yes, what we have to do is to build a sustainable tourism platform for the future. It is a twofold approach. One is to create investor confidence, so that the investors can come and invest in hotels in Sri Lanka and develop the product which is quite attractive for guests. The second one is from the tourism perspective and we really need to target some of our key markets. Within these markets we need to target some of the market segments like weddings, MICE tourism, which I believe we need to bring into Sri Lanka.  

From the recommendation point of view, in Sri Lanka we talk a lot but there is much less action. I would like to see some of these thoughts being converted into measurable actions with a sustainable, robust tourism plan where people can drive, create value and bring tourists in. Whichever the Government that comes into power, tourism is becoming an important sector today and you need to have someone who has the mindset in terms of looking at the best ways to drive sustainable tourism industry, while adding to the GDP growth of the country. 

From a Government’s perspective they also need to invest in talent. The biggest challenge is talent. We are talking about tourism numbers going from two million tourists to five million, but I don’t think we have that talent to cater to them readily available here today, because most of the good talent have actually left Sri Lanka. We need to think of a system to bring them back and also to invest in training new talent and developing their skills so they can be ready to serve and give that guest experience as well.

Introducing tax incentives and initiatives to create an investment friendly environment to attract more investors to Sri Lanka. There are lot of initiatives that the Government can do to help drive tourism if they believe tourism is one of the key drivers of our GDP growth, which it is. 

From an investor perspective, I’d like to see a much more of a robust tourism plan for the next three to five years. We have been talking for years, but nothing has happened in reality. For years we have said we want to create the best destination and attract high-end tourists without having the right facilities in place. For example, the Maldives has been very successful in driving the high-end tourism. Although they are a set of small islands, they have thought through the process and created those infrastructure and logistic facilities to cater to that market segment. During the high season, the Maldives airport is full of private jets from the high-end tourists. 

Unfortunately in Sri Lanka, we still haven’t developed that facility yet. This has been something we’ve been rallying the Government for the last five years and it would be nice to see them take some action to really drive the tourism landscape in Sri Lanka. It is high time that the Government comes up with a solid infrastructure plan to make things happen and also a marketing plan to spend the marketing dollars and to see the outcome as well.

Q: From a management and investment point of view, what’s your analysis on Sri Lanka’s positioning at the moment?

 The issue we have from an investment perspective it that Sri Lanka is still not seen as a high-end destination yet, it is more seen as an attractive value destination. We shouldn’t be focusing on the tourist volumes, but more on the sustainable tourism. Instead of having two million or five million tourists and earn $10 billion, if you can bring three million tourists and generate $25 billion, it is much more lucrative to the country. It will drive the different segments such as employment, local businesses and investment. 

When we initially invested in Sri Lanka, our first property in Tangalle, people thought we were crazy because we were expecting a high rate. We underwrote our investment thesis based on an average daily rate (ADR) of $200 and many said there was no way we would achieve that kind of rate because Sri Lanka at that time was running at about $50 to $60. I said, if we were to invest and don’t get the $200 rate, we won’t be able to invest. We had the foresight and we knew how to pitch it as a strong brand. We invested and created a one of the best hotel products in Sri Lanka. 

Prior to Easter Sunday attacks, we were running at around $400 to $500. It’s been hard work trying to drive that high end tourists. It is not easy, when you arrive at the airport and sit in a car for another four hours to go to Tangalle. However, provided the right experience and exceed guest expectation, the travellers will still go that extra mile and that’s what we are doing in Tangalle.

Q: What are the key ingredients in building a compelling brand and why do you think it is essential?

 For us the key is people because brands don’t build people, but people build brands. As long as you have the right talent and the right people who are passionate, happy to drive the brand, your brand gets built up — that’s where we come from a key ingredients perspective. The guests connect to the brand.

For example, if you come to Anantara in Thailand and when we open an Anantara in Sri Lanka, the guest immediately connects how Anantara operates, the service standards and they know the brand. Therefore, from a guest expectation perspective, that solves their problems because they know what to expect and that’s why brands are important. Brands are also important in driving sales, marketing and distribution and public relations (PR) compared to a standalone brand. If it is a standalone brand you can’t afford to have the additional resources, which a chain of brands can have to deploy in your key markets. 

Q:  You mentioned that plans are underway to reduce reliance on the online travel agency (OTAs), could you elaborate?

 Yes. Our direct bookings come through two channels; one is through telephone reservations and second one is through brands which we call the retail channel and this differs country to country. In the Middle East, our brand drives about 45% business and it is very strong. In Sri Lanka, our brand is driving only about 15%, while our direct channels are driving about 45% to 50% — so in total it is about 65% compared to the OTAs which is about 12%. When you have a luxury hotel company, the guests want to speak to a voice because they have different requirements and to cater that within our brand we have also got a live chat box as well. Today, we want to make that guest experience a seamless and tailor made stay.

Q: How do you see the tourist growth potential this year? Any recommendation for Sri Lanka?

 For this year, whether we like it or not the growth is going to be soft and next year our Q1 will be soft because 2019 Q1 was fantastic particularly for us. Because of what took place in April, running into an election and the aftermath, it is going to take time to create that confidence. Therefore it will have an impact on the Q1 next year, but in Q2 we will see an upturn and Q3 and Q4 will be good. Next year I would be fairly cautious, I am not going to be optimistic. If we see a growth next year I will be happy, but next year I think will be something in between 2018 and 2019. 

From the recommendation point of view, in Sri Lanka we talk a lot but there is much less action. I would like to see some of these thoughts being converted into measurable actions with a sustainable, robust tourism plan where people can drive, create value and bring tourists in. Whichever the Government that comes into power, tourism is becoming an important sector today and you need to have someone who has the mindset in terms of looking at the best ways to drive sustainable tourism industry, while adding to the GDP growth of the country. 

Q: Part of the development plan includes finding the right talent to work within the industry. What would be your advice to the youngsters considering a career in the hospitality industry?

 The hospitality industry is not an easy industry to work in because we deal with people. I always tell our team that if they don’t have the passion and don’t love what they do, then hospitality is not the industry for them. In the past, hospitality has been seen as a downgraded profession from Sri Lankan perspective, but it is not true. The hospitality profession has some fantastic outcomes and career prospects. We would like to see how we could build up the talent pool and give them the facilities so they can also have the education and training as well. 

I believe that Sri Lanka is lacking is an internationally reputed hotel school to develop that talent pool. Once you establish and train people through, they can be placed not only within Sri Lanka but in different countries as well. There’s a huge career prospects for the hotel sector all over the world because tourism is a growing sector and in most countries which is also thriving in their GDP growth as well and therefore the jobs in the tourism sector becomes much more important or as good as some of the other sectors.

Q: Sustainable tourism is the way forward. What is Minor Group’s take on it?

 It is a core part of our business. We are one of the only hotel companies to be part of the Dow Jones Sustainability Index, we are part of FTSE4 Good Index and in Thailand we are part of the MSC, the main index as well. We talk about people planet and there are different initiatives in different countries, which supports sustainability projects. We were one of the first to say no to plastic straws and now we are converting to no plastic water bottles at Anantara, and instead provide guests with a flask which can be refilled. 

From a corporate social responsibility (CSR) and people’s perspective we have education scholarship programs which we offer training. We also have elephant and turtle foundations. We touch different segments of the value chain from a CSR perspective. Many talk about the CSR, but it’s a handful that actually practice it — but we measure and it is even a part of our key performance indicator (KPIs) as well from top to bottom in driving sustainability in reducing energy cost, wastage and plastic. Once you do that, people take responsibility and do it. Sometimes, the guests want to come to your hotel because of your CSR activities, and more than guests, some of our employees, particularly young people want to join our group because of our sustainability policies. 

Pix by Lasantha Kumara