CapitaLand-backed The Ascott Ltd is deepening and expanding its footprint in gateway cities throughout the mature markets of Europe and in ASEAN’s emerging markets. The Ascott has been aggressively growing through acquisitions during the course of 2017.
Kevin Goh Soon Keat, the chief operating officer of CapitaLand-backed The Ascott Limited and soon to be its chief executive from 2018, talks to DEALSTREETASIA about its growth strategy for Europe and Asia.
The Ascott Limited (Ascott) has been engaged in very aggressive acquisitions. Going forward, can we expect more REIT listings of the various acquired assets?
Ascott has made two strategic moves as we gear up to transform our business to become an even more active and dominant player in the hospitality ecosystem. In July 2017, we acquired an 80% stake in Synergy Global Housing, a leading accommodation provider in the U.S., which would triple Ascott’s portfolio from over 1,000 units to about 3,000 units in the U.S.
This was followed by Ascott’s acquisition of an additional 60% stake in Quest Apartment Hotels in the same month, which increased its stake in Quest to 80% and leapfrogged Ascott to become the largest serviced residence provider in Australasia.
We are confident of surpassing our target of 80,000 units well ahead of 2020, as we look at more opportunities to grow through investments, management contracts, franchises and strategic alliances.
As we expand, we constantly review Ascott’s portfolio to divest properties to Ascott Residence Trust or other third parties to recycle capital and redeploy proceeds in higher-yielding assets.
As a sponsor with a 44% stake in Ascott Residence Trust, we will look at injecting our quality properties into Ascott Reit when the properties achieve stable performance, which should help to enhance the quality of its portfolio and provide unit holders with stable returns.
Which are the markets that represent the best growth prospects for The Ascott, particularly in Southeast Asia and Europe?
We focus on key gateway cities in markets such as Singapore, China, Australia, capital cities in Southeast Asia like Seoul, Tokyo, Paris, London, key cities in Germany and the U.S.
There are several Southeast Asian markets that present strong growth potential for serviced residences, with the region’s young population, rising middle-income group, growing export figures and various economic policies in place to attract foreign capital. The ASEAN Economic Community (AEC) is expected to boost its competitiveness and connectivity, driving demand for serviced residences.
In Singapore, demand for our serviced residences remains strong as our properties are in prime locations. Within a span of two months, Ascott has added about 1,000 units across four properties in Singapore.
Vietnam hit a record high foreign direct investment of $15.8 billion in 2016 and it is where Ascott’s biggest Southeast Asian portfolio is located. We have 23 properties with close to 5,000 units in Vietnam.
Emerging markets such as Myanmar, Cambodia and Laos are also presenting opportunities for serviced residences. As the government in these markets push for more economic reforms and attract more foreign companies to set up offices in their country, the number of corporate travellers are expected to increase, generating demand for our serviced residences.
We have one operating serviced residence in Vientiane, Laos; three properties to open progressively in Phnom Penh, Cambodia between this year and 2019, as well as two in Yangon, Myanmar that is slated to open in 2018.
Can you discuss the developments involving The Ascott in Europe?
In Europe, Ascott is one of the largest international serviced residence owner-operators with over 5,500 units in 46 properties. Our properties are located in 20 key cities in Belgium, France, Georgia, Germany, Ireland, Spain and the United Kingdom (UK). Europe is a key market for Ascott’s global expansion.
Last year, we boosted Ascott’s over EUR1.2 billion asset size in Europe with the acquisition of Citadines Islington London which is scheduled to open in 2019. Next year, we will be opening La Clef Champs- Élysées Paris, our third property in Europe under The Crest Collection.
In 2016, both inbound and outbound travel figures have grown at a steady average rate of 3.7% and 3.5% year-on-year in recent years. The positive trends in the tourism sector spell opportunities for the hospitality sector.
We will continue to deepen our presence in gateway cities and explore new markets to achieve Ascott’s target of 10,000 apartment units in Europe by 2020. We plan to expand through acquisitions of turnkey developments or existing buildings which Ascott can convert into serviced residences, management contracts and franchises.
What’s the position on the rise of the various digital property ventures in Singapore such as Greyloft, PropertyGuru and 99.co? Are they seen as potential investment targets for The Ascott or CapitaLand, given the extended reach they offer in terms of their property listings and the potential synergy with its current holdings?
We are constantly exploring strategic alliances with like-minded market leaders or partners which will give us a competitive advantage or an edge over the others.
We have formed strategic alliances with some of the biggest property developers and construction firms in China such as Vanke, Yuexiu and Dongfu. To participate in the sharing economy, Ascott collaborated with China’s new economy leaders such as Tujia, China’s largest online apartment sharing platform, and Fliggy, Alibaba’s online travel service platform.
Ascott’s investment in Tujia in 2015 has spurred our growth in China and expanded our reach to more customers through online and offline channels. Our bookings in China have increased through Tujia’s website and we have also listed our properties worldwide on the website to cater to the rapidly growing outbound Chinese travellers.
We also formed a joint venture with Tujia to operate serviced residences under the Tujia Somerset brand of serviced residences to cater to the booming segment of middle-class travellers in China. There are now 12 Tujia Somerset properties in 10 cities throughout China.
Ascott was also the first serviced residence company to partner Fliggy to further deepen our access to over 200 million Chinese travellers. To date, Ascott has listed about 15,000 serviced apartments on Fliggy, covering our properties in more than 20 destinations most popular amongst Chinese travellers, such as Singapore, Bangkok, Tokyo, Paris and London.
The Synergy Global Housing deal in the US gives us direct access to its corporate customers that include many Fortune 500 companies and major Silicon Valley technology firms.