Why do you want to expand beyond Indonesia when the country still offers so many opportunities?
One, because as Indonesians travel more outside of Indonesia and see a Harris, Yellow or Pop! hotel, I am sure they will take to these (homegrown) brands. Two, the Harris Hotels brand is a success story in Indonesia. If I have Harris properties in Bangkok, Manila or elsewhere in the region, the brand will indirectly become more successful in Indonesia, as it will gain more credibility in the eyes of travellers. We will not be perceived as a local but an international brand.
You have been mulling to go regional for some time, so why is now the right time?
Actually, I have the vision to expand outside the country since 2012, but going out by myself as an operator will take a lot of time to build up relations in other countries. (When entering) a new destination, there is a risk of not getting the right partner and owner, and that may impact the brand. It can even kill a brand that I have been building for so many years.
These concerns had not stopped me from developing outside Indonesia but I needed a different strategy. I started to look for a strategic partner with three objectives: one, to complement (Tauzia Hotels); two, the company should have a strong base in Asia; and three, someone with a long-term vision.
How did it lead you to Ascott, and not some global hotel company with presence in Asia?
My objective is that the partner must complement us. What is the point of partnering another big world player? Cash wise, it may be good for me, but they will kill a brand that we have invested in over the years. My partners, hotel owners and employees believe in the brand. If I should merge with a partner who will dilute or rebrand with theirs, it will be a pity, so I need a partner who needs and believes in the future of (Tauzia’s) brands.
What do you mean by long-term vision?
Because in today’s financial market, private equity and banking (firms) have short-term interests. When they like it they buy it, raise the value and then quickly sell it. I don’t want that. It will be out of my control, and I want to remain in control of the company.
How do you eventually find Ascott as a partner?
I have got people knocking on my doors while I also knocked on others’ doors. Over the years, I found two candidates that I had fallen in love with. One was not an Asian brand but they were based in Asia. All criteria were met, but the negotiation process was not easy and the deal fell through.
The other candidate is Ascott and it fits all three objectives I have been seeking. They are in the para-hospitality business, in the residential market, their guests are long-stay and they have no F&B operations.
We, on the other hand, are in the hotel business, our guests are short-stay, we have F&B services, and our properties range from budget to luxury. Our square metres are smaller while their residential (units) are much bigger.
Both are hospitality companies with totally different markets. We have bigger F&B components because our hotels have meetings and conventions (services), which is something they don’t (offer). Their structure and management system is simpler, and their gross operating profit is different from us.
We share a similar vision in running a long-term business. This is not two companies merged into one; it is Ascott taking shares in Tauzia to grow the company.
You are passionate about your brands, but you also let Ascott hold two-third shares. Why?
My number one objective is development. They will bring me a network of developers, so that we can move fast. Two, (Ascott has) financial credibility in the region which sometimes can offer a back-up. Three, the hospitality business has changed a lot in the last 10 to 15 years, and we are depending more on technology. We require more means in term of technology to invest in mobile applications and access to many other tools. We need more technological muscle to follow the (changing market needs).
But aren’t you concerned that with a majority stake they will have a bigger say?
The idea of getting a partner is to make sure that Tauzia’s inventory grows in the next few years, and that growth will most probably be generated by their resources.
On the other hand, for the interest of the company’s growth and expansion, having a 30 per cent stake of a big plate for my family’s future is better than owning 100 per cent of a small plate. Some of the investment will be to grow the company.
On their side, they also do not want me to run away. My stake, though minor, is still 30 per cent, not 10 per cent or five per cent. It is fair.
Both sides have made this (partnership) a long-term decision. They agreed to a 70 per cent stake because they want to grow Tauzia beyond Indonesia.
I am committed to run the company in the next five years as CEO. Moreover, we have an executive committee (with representatives from both companies) to make decisions.
Why did Tauzia set up a regional office in Singapore?
The Green Oak, the holding company of Tauzia Hotel Management, is based in Singapore. Communication wise, we call it Tauzia Singapore Regional Office.
You need to be in Indonesia to grab the Indonesian market. If I want to grab the worldwide market, I need to be based in Singapore as it is a financial hub in the region. As soon as you are present in Singapore, immediately your visibility is international, even if your property development is outside the country.
Having a regional office in Singapore will help me with marketing the (Tauzia) brands in the big countries like Thailand, the Philippines and Vietnam. Once I get three or more hotels in Manila or Bangkok, for example, I will need to have an anchor in these countries and I will open Tauzia Thailand and Tauzia Philippines. Like Indonesia, Asians are very nationalistic. Once we have a number of our brands in a country, we need to become a domestic network in the destination.
Correction: This article earlier referred to CapitaLand as Tauzia’s partner. It should be Ascott, which is a wholly owned serviced residence business unit of CapitaLand. The story has since been updated to reflect that.