Peninsula Hotel Chains Seeks India, China Expansion to Tap Luxury Demand

The luxury Peninsula hotel chain plans to open properties in China and India, where expanding economies and rising consumer wealth promise demand for high-end lodging, said Clement Kwok, chief executive officer of owner Hongkong & Shanghai Hotels Ltd.

With nine locations around the world, Peninsula is also interested in a London location after making its Paris debut in 2012, Kwok said in an interview at the hotel’s Beverly Hills location. The company’s five- to 10-year plan calls for operating a maximum of 15 properties, he said.

Peninsula signatures include Rolls-Royce limousine service in a market segment where luxury hotels have been hurt by declining business and leisure travel. While the chain has had lower occupancy rates, Kwok said he generally expects the properties to pay back returns on their investment in the second decade of operation.

“We look at our hotels as long-term investments,” Kwok said in the April 8 interview. “Many investors, many of which are big institutions, appreciate the long-term strategy.”

Hongkong & Shanghai’s stock has more than doubled in the past year, compared with a 49 percent gain in the benchmark Hang Seng Index. The shares closed at HK$12 on April 9 on the Hong Kong stock exchange.

The company, based in Hong Kong, is looking to expand the Peninsula in “secondary” markets in China, where it currently has locations in Shanghai and Beijing, Kwok said. He declined to say where he would like to open the first Peninsula in India.

Economic Growth

Gross domestic product in China, the world’s third-biggest economy, may grow 9.6 percent this year, according to the median estimate of 22 economists surveyed by Bloomberg. India’s economy may expand as much as 8.75 percent in the 12 months through March, Finance Minister Pranab Mukherjee said April 2.

“The growth of China’s economy keeps supplying an increasing crop of high-end travelers,” Kwok said.

The company’s hotel in Beverly Hills, with an occupancy rate in the low 70 percent-range during the first quarter, is also among the chain’s better performing properties, Kwok said. New York, Tokyo, Bangkok and Chicago lag behind, Kwok said. He declined to provide details. In Beijing, an oversupply of rooms built for the Olympic Games is forcing Peninsula’s occupancy rate down, he said.

The company recently closed the hotel portion at its Quail Lodge Resort & Golf Club in Carmel, California, which had lost money for the past 10 years, according to Kwok. The CEO doesn’t anticipate any other closings.

“We generally look at our hotels as 30- to 50-year investments,” Kwok said. “We would never close any of them due to a particular economic downturn.”

To contact the reporter on this story: Nadja Brandt in Los Angeles at nbrandt@bloomberg.net

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