Hotelier of the week: Brett Butcher

Brett Butcher is CEO of Langham Hotels International which has properties under the Langham and Eaton brands.

It sounds as though 2010 will be a busy one for you with more properties opening after the two in 2009.

This is the second phase of our growth. The first phase was a five-year plan which started in 2004 to build the Langham brand and we finished that last year. It involved taking the hotels that were owned by our parent company Great Eagle and rebranding them as Langham Hotels, then taking Langham to the market place and make it mean something to our customers, while building the management and sales and marketing and distribution to support it and the management company.

We entered into the second phase last year when we opened our first management contract hotels in Shanghai and Koh Samui and it's from that base we will see more momentum, particularly on the management side, so this year we will open three hotels, next year five, and the year after it's hard to say, but maybe double that.

This expansion is two-pronged for us, since we are also acquiring properties. In the first instance we are going to be building mixed use developments, following on from the success of the Langham Place property in Mongkok, Hong Kong, which is retail, offices and a hotel. Secondly we are also looking to expand in North America, and there it would be New York as the number one target, obviously, but then Chicago, San Francisco.

We need to get some critical mass to build our management business in North America, so the idea is we are happy to acquire our own hotel or come in as a joint venture with other equity to acquire assets to become Langham Hotels.

Langham also has the midscale Eaton Hotel brand and it's there that the expansion seems to be this year after the two Langham properties last year

Eaton is a brand that traverses from mid scale to lower upscale and so we have tiered the brand to reflect that. To give you one example, we are opening a hotel in a suburb of Shanghai called Nanqiao at the southern end of Pudong. If it was in the centre of Shanghai it would almost be a Langham Hotel. It's got 45m squared rooms, full fixture bathrooms, a great lobby, a big ballroom, but it's an hour out of Shanghai and it will never get a rate commensurate with the Langham product.

Our initial Eaton product was midscale, but this is not a mid scale hotel, but an upscale hotel in a mid scale location. So this is the opportunity to call the thing the right thing, so customers won't know what they're getting, so we ended up tiering and this is an Eaton Luxe.

We've announced another Eaton Luxe in Xinqiao, Shanghai half an hour from the city and then there's Eaton Smart which is a midscale brand, which is more like 35 sqm rooms and there's one of those in Honggutan, Nanchang in Jiangxi Province. Then there's Eaton House the residence brand, we have three of those in Hong Kong.

As far as Eaton, it's a China and India play for us so we've just signed a MOU in India and we have announced these properties in China

So will the same guests stay in Langham and Eaton properties?

I think they are different people, even within Langham with the Langham Place itself. The psychographic is different, even if the demographic might be the same. There's some cross over potentially and we do have joint sales and marketing, the loyalty programme goes across the three and it works operationally the same. If someone is staying in China then the Eaton may be the best hotel and their factory might be next door.

Is this a good time to expand in this way?

It's a great time to expand. People will look back in 20 years time and say, that juncture was the time. The hospitality industry won't see this opportunity again. This is it. China and India are expanding so rapidly. This is the last time I can see such a mammoth time of expansion.

But there is so much room stock opening at the moment - surely there's a case of oversupply?

It's cyclical. Cities get over-built and then it stops and then demand comes back and you can't get a room in that city. You can't base your development strategy on the situation now. Shanghai and Beijing are going to be world cities. At the moment they only have 20 per cent of the rooms that New York has, but eventually they will be bigger than New York. If you're in this industry then you need to be there. Right now the numbers aren't great, but that makes it a good time to go in and start developing.

A lot of people who aren't close to China don't get how quickly things are changing. They look at the Beijing statistics and see the city is only running at 50 per cent [occupancy], but I bet you in two years it will be back at 80 percent. We had stats on inbound traffic to China, and whenever there's been a downturn, when it came back it caught the trend line. And if that is going to happen again, then that means that in 2011 we will see a 45 per cent increase of traffic into China. That's what people don't get.

Won't those inbound tourists be looking for a western brand?

When we look at China we don't look at China in the medium term being filled with international customers, we think 80 per cent will be filled with Chinese. And strategically for us that's very good, because when Chinese travellers come back the other way they will know about Langham and so if they go to London they will stay at the Langham property. We are creating marketing programmes which create our brand in China for those properties.

From a company strategy we are a little different from most. We have western brands, and we were very clear when we started this in 2003. When we were developing the brand it would have been very easy for us to create an "east meets west" brand like Mandarin Oriental or Shangri-la, but we were very clear that we were about European elegance and a Western style, yet we are a Chinese company.

It's a strength when you are growing in the Asian region because people want a western brand. You see them lining up outside Louis Vuitton on Canton Road in Hong Kong or the cars they drive. The Chinese and the Indians are craving a touch of the west and it's part of the kudos of gaining money and prestige. So when they stay in a Langham, they are staying in a western brand at the cutting edge of hospitality.

But when it comes to communicating in a business sense we are a Chinese company, so talking about the deal or knowing someone or having a relationship we are so much more connected and can talk in the same language and with the same ideas. Which other companies can do that? There's not one. We are unique. In America we have a western brand for the western market, so we can communicate in the west as well.

The geographical dispersion of properties still seems a little random - what do you say to corporate clients who say I love the Hong Kong Langham, but I'm not going to Auckland

We don't have the distribution that maybe some of our customers need and we need to fix that with the expansion. The random geographical positioning of our assets is a little difficult for us and actually more expensive for us to do business, having operational and sales and marketing across four continents, but then we'd be the only hotel company ever who in their first year have four continents covered, which was purely a legacy that we owned those assets. There's weakness of that, but there's strength, because we now have a fabulous hub and spoke for development.

We do have a hotel in Melbourne so we are getting leads in Australia and we are talking about deals in most of the cities there. The same in Auckland, and we are looking at some potential deals in Wellington. And the same in London where we might get deals in the UK because we have a hotel in London. So we can't satiate all the needs of all our customers immediately but we can create a beachhead in each location and that will help us.

So what's different about Langham?

It has a sense of European elegance. Walk along Canton Road among the hustle and bustle of Hong Kong and then walk into the Langham hotel and it's got a beautiful aura to it, a sense of enchantment. There aren't many hotels in Hong Kong like that. Langham stands for 140 years of that service and elegance. A lot of our competition have come out of north America - Four Seasons and Ritz-Carlton, for instance. We've made our signature a Europeanness, so for instance we have tried to own the idea of afternoon tea in the cities in which we operate and we've taken it to other places where it wasn't that much of a deal and filled our lobbies with people having afternoon tea.

Langham Place on the other hand comes from the idea that if Langham started now, not 140 years ago, and built the most innovative hotel in the world, then it would be something like Langham Place, so a more clean line and a very western experience but with great service. Some of these hotel brands that are created can be on the cutting edge of design, but lose a little on the service side - so we try and deliver a modern sense of hospitality but with the full service offering.

That's why Langham Place in Hong Kong has been so effective and it's why our Koh Samui Langham Place resort has done so well, and we've done some very effective communication there with a photo competition on the website. We opened on the 1 December 2009, admittedly high season, but it's the only hotel that I've ever been involved with that made a bottom line in its first month.

And interestingly enough it's the age of internet booking. We got 85 per cent of our business from the web, and in the first month 80 per cent of that was from our own website. We have some great partners doing both wholesale and retail business who are now helping and giving us distribution as well. And as a result we are in more discussions with potential resorts and there's the opportunity for us to invest in new resorts as well.