The serviced residence firm The Ascott made two major investments this month aimed at solidifying its position as one of the world's largest hospitality players.
The CapitaLand-owned company said yesterday it is acquiring an 80 per cent stake in Synergy Global Housing for US$33.7 million (S$45.9 million). This will triple its United States portfolio from about 1,000 units to 3,000 and raise the global total to almost 70,000 apartments.
This move came after an A$180 million (S$194.8 million) acquisition earlier this month of a 60 per cent stake in Quest Apartment Hotels. The deal lifted its stake in the firm to 80 per cent and made The Ascott the largest serviced residence provider in Australasia.
But it is not just about size, CapitaLand president and group chief executive Lim Ming Yan said yesterday. He told reporters: "Size gives us certain economies of scale. But more importantly, it's about access to a global customer base, which will allow us to know the flow of people, the flow of business across different cities and companies and... enable us to more effectively deploy capital into real estate."
The Synergy acquisition is expected to give insights into the emerging corporate housing industry in Asia, especially in China, where rental options for workers are being studied as property ownership gets more pricey. Synergy leases apartments from partners and owners to rent to corporate clients. Ascott chief investment officer Gerald Yong added: "Ascott is not buying real estate. It is buying the hospitality platforms in key geographies like Silicon Valley and the US west coast."
Mr Yong noted that about 35 per cent of the 70,000 units in Ascott's portfolio are owned and operated by the firm, while the "remaining 65 per cent are third-party management contracts or franchises".
Ascott chief executive Lee Chee Koon said: "When we began, we liked to manage properties we owned. But we saw a huge opportunity... in managing other people's properties...
"The US is Ascott's third-largest source market for guests and... we see potential for us to expand further ... We are confident of surpassing our target of 80,000 units (worldwide) well ahead of 2020, as we look at more opportunities to grow through investments, management contracts, franchises and strategic alliances."
NOT JUST ABOUT SIZE
Size gives us certain economies of scale. But more importantly, it's about access to a global customer base, which will allow us to know the flow of people, the flow of business across different cities and companies and... enable us to more effectively deploy capital into real estate.
MR LIM MING YAN, president and group chief executive of CapitaLand, on why The Ascott is expanding its portfolio.
Ascott believes it can give Airbnb, which is said to be making a foray into corporate housing, a run for its money. Its chief operating officer, Mr Kevin Goh, noted: "We have built up our business over many years and have operating teams in many countries... running our serviced apartments...
"Acquisition of Synergy fits in our strategy to build our own channels, get closer to customers and lower our cost of customer acquisition."
The firm has also beefed up its online presence. It has been working with Alibaba's online travel service Fliggy and WeChat and various e-commerce platforms, including investing $67.7 million into Tujia, China's answer to Airbnb, so its properties are accessible on its platform. It also formed a joint venture with Tujia to launch properties in China.
CapitaLand's Mr Lim said: "There are lots of online companies that set up business and scaled very fast, but realised that online is not good enough. So they are increasingly moving offline, partnering with more established businesses, and re-engineering their businesses to grow again. It can't just be online alone because customers still need to consume a physical product."