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Five-star Free-for-all

Luxury Hotels Converge on Taipei

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In the 1990s, the Regent and Grand Hyatt dominated Taipei’s luxury hotel market, but times are finally changing as new five-star hotels pour into the city. The question is, why?

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Luxury Hotels Converge on Taipei

By Yueh-lin Ma
From CommonWealth Magazine (vol. 503 )

In late July, a man wearing a navy blue Polo shirt walked into the new Okura Prestige Taipei, which had its soft opening on July 17.

After taking stock of the hotel's lobby, guest rooms and health club, he headed to the Toh-Ka-Lin Cantonese restaurant on the second floor and asked to see a menu.

What he saw left him stunned. It wasn't so much the list of dishes that caught him off guard, but the name of a renowned Hong Kong chef – Chan Wai Keung – highlighted on the menu.

"I was shocked. I immediately made a call to confirm this," says the man, who in fact was Victor Chang, the general manager of the Palais de Chine Hotel. The Palais de Chine lies just a few blocks away from the new Okura in the bustling commercial district north of Taipei's main train station, and Chang was using a day off to go on a reconnaissance mission in "enemy territory."

His follicle-raising dread was because the executive chef of the Palais de Chine's Le Palais Chinese restaurant – honored in July for best restaurant, best chef and best food among the top ten hotels of China and Taiwan – is also from Hong Kong and also named "Chan Wai Keung."

"The name was exactly the same. It's hard to believe there are that many people in Hong Kong named 'Chan Wai Keung,'" Chang couldn't help muttering in disbelief. But his initial panic indicated that a major competitive battle in western Taipei's five-star hotel battle is clearly brewing.

Palais de Chine is not the only hotel in the area bracing for the new competitive environment created by the entry into the market of Japan's biggest five-star hotel chain. The Regent Taipei, the Sheraton Taipei, the Ambassador, and Hotel Royal Taipei are all going the extra mile to consolidate their Japanese customer bases.

The Regent Taipei is within five minutes walking distance of the Okura Prestige, and Amy Hsueh, the CEO of Regent Taipei parent company Formosa International Hotels Corporation, has given orders for the hotel to undertake a complete self-review in preparation for the coming storm.

"Our strategy is to deepen our relationships with loyal customers," Hsueh says.

The Okura Prestige Taipei plans to primarily target Japanese customers in its first three years of operation. The hotel hopes to achieve an occupation rate of 70 percent in its first year, with about 70 percent of that group coming from Japan. Considering that the Okura has a shining reputation as one of Japan's "Big Three" (along with the Imperial Hotel and New Otani), Japanese travelers will surely be drawn to its new property in Taiwan.

"The Okura and the Regent are absolutely in direct competition," says another competitor unequivocally.

The ‘New' vs. the ‘Old'

The Regent, which draws 40 percent of its clientele from Japan, has been preparing for the challenge. It not only set up a task force dedicated to serving the Japanese market and strengthened the cultivation of Japanese-speaking employees, but also conducted a detailed customer analysis, breaking guests into specific segments to better study their individual needs.

"We especially value customers who have long supported the Regent. We don't look at how many days they're staying but at how many times they've stayed with us," Hsueh explains, noting that the frequency of visits represents a guest's degree of loyalty and the choice of accommodation the person makes when visiting Taipei.

In an age when luxury hotels can change a city's image, Taipei has been quiet since the first wave of high-end hotels set up properties in the city years ago.

In the 1990s, international five-star hotel chains such as the Sheraton, the Regent, the Grand Hyatt, the Shangri-La (Far Eastern), and the Westin all set up footholds in Taipei. These "old" five-star hotels pretty much dominated the city's upscale accommodation market for 20 years, until about 2010, when the new wave of top properties washed in.

In May 2010, L'Hotel de Chine Group, which evolved from Chinatrust Hotels, opened the Palais de Chine. Six months later, Starwood, the world's biggest hotel group, opened two properties in rapid succession in Taipei's affluent Xinyi District – Le Meridien and the W Hotel.

The Okura had its grand opening on Aug. 3, and next year, the Mandarin Oriental will open a new property in northeastern Taipei, not far from Taipei International Airport.

This group of "new" luxury hotels is composed of both Taiwanese owners and international chains and spans from the eastern to the western end of the city. They have polished Taiwan's visibility in the international tourism market but also sparked talk of a budding war with the old guard.

On the surface, at least, these trendy newcomers represent serious challengers to the old order. In Xinyi District, for instance, Le Meridien, known for its strong food and beverage services, and the W Hotel, which stands out for its stylish design, were both expected to pose a threat to the nearby Grand Hyatt.

Yet Tourism Bureau statistics on hotel operations say otherwise. After posting food and beverage revenues of nearly NT$1 billion for all of 2011, the Grand Hyatt had revenues of NT$480 million in the category in the first half of 2012, reflecting almost no impact from the new upstarts in its neighborhood.

Its occupation rate has also remained above 70 percent the past two years. Still, the Grand Hyatt Taipei, which has 850 rooms, more than any other hotel in Taiwan, has not been rendered complacent by its apparent ability to fend off potential rivals. The hotel is closed down from Aug. 13 to 23 for major demolition work that marks the start of a major guestroom renovation project expected to be completed in May 2014.

But it may be more accurate to say that the Grand Hyatt Taipei is undertaking the renovation project to welcome a growing international tourist market to Taiwan than it is to take on its closest competitors.

Taiwan drew more than 6 million foreign visitors last year for the first time in its history. This was seen as an important milestone, but there is still plenty of room for growth considering that 13.2 million people visited Singapore and 42 million visited Hong Kong in 2011.

Though Taipei alone has added three upscale hotels with a total of 850 rooms in just the past two years, which originally sparked concerns of overcapacity, the average occupancy rate and average room price of city hotels have actually risen rather than fallen.

Average occupancy at international tourist hotels in Taipei was 77 percent in the first half of 2012, up from 75 percent for all of 2011, and the average room price was NT$4,400 during the January-June period, up from NT$4,100 in 2011.

The addition of Le Meridien and the W Taipei has also pushed the average highest room price in the city to above NT$8,000.

Taipei's Five-star Hotel Shortage

With five-star hotels charging into Taiwan to open new properties or expand their presences, isn't there the chance of going overboard and destroying the market?

"In fact, there still aren't enough five-star hotel rooms in Taipei," says W Hotel general manager Cary Gray, describing Taipei as a treasure with which many international travelers were unfamiliar in the past.

Gray, an American who lived for 10 years in both Japan and China, clearly understands the level to which Taipei has been underestimated in the international tourism market.

Taiwan's people are friendly, Taipei is a convenient, safe and fun city, and its hotel rooms are quite inexpensive, Gray insists. Compared with Hong Kong, where five-star hotel rooms have pushed above the equivalent of NT$10,000, room prices in Taipei have plenty of room to grow, Gray believes.

And that's not the only aspect of the industry with growth potential, says Sharon Hsu, the director of sales & marketing at Shangri-La's Far Eastern Plaza Hotel.

"The overall situation indicates that there is considerable upward potential for demand for five-star hotels in Taipei," Hsu says, pointing to two factors – the increased visibility Taipei is getting through the influx of international hospitality brands and the country's greater opening to outside travelers, especially those from China.

Of particularly mounting interest is the MICE market (meetings, incentives, conferences and exhibitions).

The Far Eastern Plaza Hotel, which considers the MICE market one of its strengths, invested a large sum two years ago to renovate its two major banquet halls, accurately anticipating that companies from China would want to visit Taiwan for meetings and travel.

"Beginning in 2009, we could see the MICE market's growth potential, especially demand from mainland China. But not every five-star hotel in Taiwan is in a position to get a piece of this market," Hsu says.

Luxury properties in Taipei are not the only ones in hot pursuit of MICE business. The Evergreen Resort Hotel, located in the hot spring resort town of Jiaosi in Yilan County, opened in August 2011 and has set its sights on the long dominant MICE player in the area – Hotel Royal Chiao Hsi.

"Our stone bath and oxygen milk bath are all truly special hot spring bathing features and have been effective in drawing corporate groups," says Danny Lin, the general manager of the Evergreen Resort Hotel.

Focusing on corporate clients has paid dividends, with the MICE segment accounting for 30 percent of the hotel's revenues last year. Even Winston Shen, CEO of Royal Hotels & Resorts and general manager of the Hotel Royal Chiao Hsi, admits, "Since Evergreen has opened, it has had a real impact on our MICE business."

Top-flight Services Need Top-flight Talent

Whether in Yilan County or in Taipei, the new hotels have had no problem luring customers looking for a fresh experience. But they will still need to rely on outstanding service if they hope those same customers keep coming back.

Palais de Chine's Chang, who was transferred to the Taipei hotel early this year from the affiliated Fleur de Chine Hotel at Sun Moon Lake, says he has launched a "late check-out" service to gain customer loyalty. Customers who request the service can check out at 1 p.m. rather than the standard 11 a.m.

"Top-flight service means making customers feel that ‘everything is going smoothly,'" Chang says. But to provide service that exceeds the customer's expectations, good people are the key.

The Fleur de Chine, where Chang previously served as general manager, finished third in the international tourist hotel category in CommonWealth Magazine's Golden Service Awards, announced in July. From the Fleur de Chine to the Palais de Chine, training employees has been Chang's greatest challenge.

"Fleur de Chine is a leisure hotel and the guests are very relaxed," Chang says. "But Palais de Chine is more of a business hotel," where the power of observation becomes extremely important. Hotel employees need to be able to perceive the needs of customers amid their tight schedules, and satisfy those needs even before guests make requests.

People with that power of observation represent the kind of talent all five-star hotels wish for, but the hotels' biggest challenge is that such talent is in short supply.

"I have to fight with hotels from Singapore and Macau to get my hands on local trainees," says Hotel Royal's Shen. Seniors at National Kaoshiung University of Hospitality and Tourism are usually already "reserved" by overseas hotels six months before they graduate.

Though Taipei's five-star hotels face formidable challenges, they continue to expand in number, and whether competing for market share or competing for talent, they are almost certainly auguring in an exciting new era for top-flight service in Taiwan.

Translated from the Chinese by Luke Sabatier

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