Full Steam Ahead With Hotels
Sydney Morning Herald
Friday September 13, 1996
OW CHIO KIAT has never been one to stop and smell the roses. The Singaporean shipping and hotel magnate, who at 16 inherited his father's modest tug and barge operation and expanded it into a listed diversified group with net assets of $S360 million ($406 million), has quietly become a force in the Australian hotel industry within two short years.
Over that time his Hai Sun Hup group has spent more than $250 million to buy mainly hotel properties in Australia and New Zealand.
But there are more surprises to come for his competitors, including an imminent take-over of an Asian hotel management group and a possible Australian listing if he needs more cash to fuel his Australian ambitions.
"My vision is to have the management chain grow into not just a local force but into a formidable force within Asia and in the Pacific and I have got a very short-term time frame for doing this," says Mr Ow, who now owns just under 30 per cent of the ordinary shares in Hai Sun Hup and is the group's executive chairman.
When his father died in the early '60s, it was C. K. (as he is known), as the eldest child, who was thrust into running an operation with nine boats and four staff along the banks of the Singapore River.
Mr Ow was still completing his studies.
He admits he "knew nothing" about business, but by the age of 19 he was independently directing the day-to-day operation of the operation.
He bought his first ship, a 4,500-ton tanker, in 1972.
Hai Sun Hup has built the shipping business to more than 35 liners and tramps.
Many of Mr Ow's peers, both in Singapore and Australia, have seen his move into hotels as a substantial change of tack from the company's traditional business in ship-owning, management, and chartering.
The name Hai Sun Hup is, in fact, Chinese for the harmonious co-existence of ocean and mountain and was named to reflect its founder's aspirations for the company's activities to span both the sea and the land.
The hotels, which he has branded under the Stamford chain, now produce 40 per cent of Hai Sun Hup's operating profits as the shipping business has stagnated in Singapore in recent years.
Analysts are predicting that hotel profits will provide the majority of the group's profits in years to come.
"Even though I have only been in hotels for the last two years, this is something I have aspired to do since many years ago," Mr Ow says.
"People may have thought I just woke up one morning and decided to go into the business but nothing could be further from the truth."
Mr Ow says there are parallels between shipping management and hotel management.
"When I bought my first ship it was so difficult to find a manager to take on my ship," he says. "I had thought it was difficult to manage your own ship and it was and yet within a year we could find so many things the manager was not doing right."
Hai Sun Hup was able to take on the management of ships in its own right for European and Japanese owners, despite their 200-year management histories.
"We expanded so rapidly we are not only owning ships, we are able to manage more ships than we own," he says.
The hotel expansion has proved successful so far.
Hai Sun Hup's annual report for 1995-96 shows a 40.3 per cent increase in turnover to $S343 million and a 51 per cent rise in net profits to $S30.4 million. (The Singapore dollar trades close to parity with the Australian dollar.)
Mr Ow says he decided to invest in Australia because he felt the hotel cycle was right and the cost of acquiring rooms was cheaper relative to other countries, especially Singapore.
The yields are also far more attractive than the going rate of 2.5 per cent in Singapore.
Mr Ow says Hai Sun Hup is only 60 per cent through its hotel acquisition trail in Australia.
While Hai Sun Hup bought Caltex House for $40.5 million with a view to building a hotel, Mr Ow says he still needs convincing that a hotel is more viable than apartments for the prime development site.
Were Hai Sun Hup to convert Caltex House into a hotel, the company would be thrust into the top 10 hotel operators in Australia by number of rooms, according to the hotel brokers JLW Transact.
"I would need a lot of convincing why I should put up hotel rooms there," Mr Ow says.
"At the end of the day, the viability of the project is important as I am not out there to build a monument for myself."
A float of the Australasian assets is on the agenda, but only when Hai Sun Hup runs out of money.
The 1996 accounts show more than $150 million in cash on the group's books.
"I don't need the money so I don't need to float just yet," Mr Ow says.
He has raised some of the cash through a $106 million rights issue in Singapore in the past year and the company is geared up to a level of about 30 per cent.
Hai Sun Hup wants to open a hotel in every major city in Australia and is aiming for a stable of 12 hotels within five years across the Asia-Pacific and becoming an independent management group as well.
At the same time, the Australian hotel market is on the march up, with average occupancies in 1995 of 72.5 per cent and average room rate growth of 6.5 per cent in 1995.
But Mr Ow is not focused solely on spending his way into a prominent position in the Australian hotel industry.
"Of course we want to buy properties, but this is a business that can be further developed and grow into a successful business like I have done in my shipping business."
C.K. OW's AUSTRALIAN SPENDING SPREE Office at 7 Alfred Place, Melbourne $2m St George Terrace site, Perth (to become Stamford Plaza Perth) $18.5m Stamford North Ryde $39m Stamford Plaza, Melbourne $63m Stamford Grand, Adelaide $48m Stamford Plaza, Adelaide $39m Loftus St, Sydney $9m Caltex House, Sydney $40.5m TOTAL $259m
© 1996 Sydney Morning Herald