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From the Top - Cameron Ong, CEO, The Ascott Group
By Raini Hamdi, Eidtor, TTG Asia
His blue ocean
He was a rising Asian hotelier with a global chain. His peers thought he was crazy when he decided to leave and move into the unproven service apartments market. Today, Cameron Ong, managing director and CEO of The Ascott Group, proves it was his the sanest move yet. Raini Hamdi talks to Ong
Has it been easy for you to build Ascott as the leading international service apartment operator today?
It has not been easy. You need to educate the investor, developer, consumer and, at the same time, your staff. A typical, traditional company can focus on its business; it does not have to spend time and resources to educate on different fronts. We on the other hand were perceived as hotels, condos, apartments – there was a lot of confusion.
It is easier now?
There was a mind shift. People did not believe the merger between Ascott and Somerset would work but we stayed focus, continued to grow and turned it around.
Today, people believe the value proposition of service apartments. As the business matures, and as more units roll out, more customers are trying service apartments and word-of-mouth, which has helped us a lot in developing our brand, will continue to help us.
We will continue training and I have to thank my peers and my hotel friends, as they are also now converting their hotel rooms into service apartments! They are helping us to speed up the awareness of service apartments.
It is also easier in a sense that when I go out and talk to people, we have a track record and it’s not all sales pitch. But the problem is expectations also grow, so we have to calibrate the expectations so people will not get disappointed. The staff, for example, expect me to lead us to the next level, so I need to find ways to ensure they can still spiral up. When that happens, morale goes up and whatever competition there is, we can overcome because staff are motivated. Everyone is more creative and smarter if they are motivated.
It has not been easy despite service apartments being such an obvious niche?
I created the niche. When I decided to leave (then) Holiday Inn Crowne Plaza in Singapore to join Liang Court, my peers told me, Cameron, you are making a wrong move. I was a young Chinese running a five star hotel, with an international chain. I went to Liang Court to set up a three star brand then we decided to change and go into service apartments (Mr Ong was Liang Court Hospitality president and director) and that was the niche, the blue ocean (the management theory on creating an uncontested market space and making the competition irrelevant).
At Ascott, we went one step further (in setting new service apartment standards). In America, service apartments are common along motorways, some are full service, most have no service. My business friends and alliances say, wow, you guys are the big boys. They acknowledge that although they have a big portfolio, what they have is nothing. We are also a global player and the largest owner and operator of service apartments with more than 15,000 units in Europe and Asia.
Do you feel the competition is closing in on you with their expansion plans? And where you do go from here?
It is good to have friends around. Today, service apartments is still a niche.
I want to build the company from good to great. I believe we are good, but we want to be great. To become great, I’m a great believer of the blue ocean strategy. Ascott today is a blue ocean company and we therefore have to look at the business model and enhance that.
To be a great company, you have to constantly innovate – look at Samsung and Nokia. Sony, on the other hand, did not innovate, did not try to create a niche within the marketplace, so today it is in difficulty.
I also want to grow to 25,000 (units). My cost is already there, any new operation is a multiplier effect and will enhance our value further. 25,000 is the right number for our potential growth in profit and brand. It is, in my view, an achievable target.
Of your three brands Ascott, Somerset and Citadines, which will grow the fastest and why?
Ascott will be in key gateway cities and there are not many left in Asia (where it is not already in), except India and Hong Kong
Somerset has potential growth where there is an expatriate cluster. Citadines therefore will be the major thrust for growth in Asia.
Citadines is positioned as a brand for entry-point executives, Somerset is when they have arrived, Ascott – that is when they have made it.
What is your strategy to take the company from good to great?
To growth the business, you need to have scale and size, then people will notice you. But there is no point in having scale and size if you do not have profitable growth. You need to create a good ROI.
Once you have good ROI, staff also feel good. They get good bonus, stock options…at the end of the day, people like to be associated with successful companies.
Then you have to have the right infrastructure – the right structure, systems and processes. There is no point having so many units if you do not have the infrastructure to support these units.
Today, we are happy and confident that we have the right infrastructure. We have come to the stage where we benchmark ourselves with the best multinational companies, not hospitality.
In terms of service standards, I look to the top airline companies. Singapore Airlines’ service recovery is simply fantastic – how do they innovate service efficiency? In terms of profits, I look to the best property developers. Of course I also look to my hospitality peers – how do they maximise room space, yield utilisation, EBITDA (earnings before interest, tax, depreciation and amortisation); hospitality companies such as Marriott are also fantastic in the way they structure their business – management and owning – and this is also where we can learn from.
We should benchmark not just with our peers but with the best in other industries.
What is your most rewarding achievement in the last five years?
Every journey I have with my team member is rewarding. We are now at an important crossroad, the next lap. It is important because that is where most companies usually digress, and fail. That is why we have to stay focus.
Latest earnings results
Ascott’s Profit After Tax & Minority Interest for the third quarter grew 404 per cent to S$17.3 million, an increase of S$13.9 million over the third quarter.
Ascott’s revenue more than doubled to S$112.2 million in the third quarter this year, compared to S$51.2 million in 3Q 2004, reinforcing its strong leadership position in the serviced residences industry.
In the first nine months, the group’s revenue also increased 112 per cent to S$331.4 million.
It attributed the strong revenue growth to its expansion and strong improvement in its serviced residence operations, particularly in Europe and China, and the consolidation of revenue from Citadines, which the group fully acquired at the end of October 2004.
The higher revenue was achieved despite the loss of contributions as a result of the divestments of The Ascott Singapore and Scotts Shopping Centre.
Ascott’s serviced residence operations in all regions achieved higher revenue per available room (REVPAR) for YTD Sep 2005 compared to YTD Sep 2004, with marked improved performances in Japan (33%) and Thailand (27%). The Philippines (12%), Australia/ New Zealand (12%) and China (10%) also achieved double digit increases in REVPAR for YTD Sep 2005. The strong growth in REVPAR was achieved through successful sales and marketing initiatives implemented across all the regions, as well as higher brand recognition enjoyed by the Group worldwide.
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