Frasers' Serviced Apartments Goal: Grow To 8,500 By 2010

Source : The Business Times, July 4, 2008

DRIVEN by rising corporate demand, Frasers Hospitality (Frasers) expects to grow its brand of serviced apartments to 8,500 by 2010. This will involve adding 5,000 apartments under the Frasers brand in the next two years.

China, India and Vietnam are three key areas of expansion for the hospitality arm of Frasers Centrepoint, a wholly owned subsidiary of Fraser & Neave. At least 80 per cent of the 5,000 serviced apartments will come under fee-based management, said its CEO Choe Peng Sum. Frasers will acquire the remainder with balance sheet funding.

'We have been very careful about over-leveraging and over-borrowing,' said Mr Choe. Frasers currently has a 50:50 debt-equity structure, but hopes to reduce the debt component to reach 40:60 or lower going forward.

Frasers is also looking at more collaborations with private equity funds to acquire serviced apartments.

'For serviced residences, we've seen a lot of pent-up demand,' said Mr Choe. According to him, multinational corporations have been sending teams overseas to set up new operations, and serviced apartments are aptly positioned to meet expatriates' extended-accommodation needs.

Yet, the number of serviced residences in major cities such as London and Tokyo add up to barely 10 per cent of total hotel inventory, he noted. On room rates, Mr Choe said: 'Singapore itself, we have seen year-on-year growth rates of about 26 per cent.'

Occupancy rates are also crossing 90 per cent.

With the large growth potential, Mr Choe shared that Frasers is looking at creating a separate brand of serviced residences to cater to a more dynamic group of corporate guests, or 'road warriors'.

Hiccups in some economies may create more chances for expansion.

The property market in North America has softened, said Mr Choe, and Frasers is sourcing for deals in New York. In Vietnam, falling property prices also generate investment opportunities. As to whether Frasers will set up a Reit for its properties, Mr Choe said that 'we are waiting for the right time'.

The US$135 million Fraser Suites CBD in Beijing has opened for operations.