Built up by HP Kong 55 years ago, family-owned Lotus Tours’ challenge is to remain competitive in today’s digital environment. Leading the travel service provider and ticketing wholesaler’s charge is second-generation Kong, who is sowing the seeds for growth with technology and staff
Patrick Kong, Deputy chairman/CEO Lotus Tours, Hong Kong
You didn’t start off your career in travel. What made you join Lotus?
After graduating with an MBA in 1979 from the US, I returned to Hong Kong in 1981 to work in a merchant bank. Influenced by the American hippy lifestyle, I was a reluctant businessman and despised conglomerates. I returned because I am the only son and I wanted to be with my dad. While I enjoyed travelling, I stayed away from the travel business because the company was already well established.
In 1991 my employer, UPS, moved to Singapore. This was an opportunity for my sister and I to start thinking about doing something good for the company. As an engineer, I find joy in inventing something different, so our No. 1 goal was to set up a mission statement (not yet a common practice for corporates at that time) and change the company culture. (Until then) we were a family-run business without staff cohesiveness.
We trained university graduates like Ken Ng (now general manager and COO) and Keller Mak, who made her comeback to Lotus early last year (as general manager and chief distribution officer), and they became our new blood. But opportunity knocked in 1994, and I decided to take up an appointment as one of the initial five regional importer-principals for BMW AG in China.
In 2007, however, I was diagnosed with lung cancer and had to retire from work. After a complete recovery, I decided to return to Lotus under semi-retirement in 2008. I am now primarily responsible for positioning the company in the 21st century and expanding its businesses in China. My father is a detail manager, while I am a dreamer. I see myself as a facilitator of our staff’s dreams.
Your staff seem to be at the heart of your business.
People are our most important asset and they are part of my family. Our team is very loyal, as over 30 per cent of our entire workforce has been with us for more than 10 years. In fact, the managers like change and I never reject their proposals. We adopt an approach of collective responsibility (meaning we share our troubles), so we are proud that we do not lay off any staff in a bad economy.
In 2010, we motivated our staff by launching a year-long paid maternity leave and three months’ paid paternity leave. From last year, staff trips have also been combined with employee development and test marketing practices to offer our staff the chance to experience newly designed travel routes, so that they can share their personal experiences with customers to enhance the quality of service.
Tell us about the unprecedented Management Share Ownership Programme you’re intending to implement.
The idea came from my stint with UPS, where one of the mission statements was that it would always be managed by its owners and owned by its managers. My father and I want to take care of our loyal staff and this is the best and most sustainable way to do so. Such a change in ownership scheme is a big experiment in Chinese society as it’s against the tradition of family-controlled businesses.
We will issue shares to managerial staff every year and these are tradable. As Lotus is not listed, we can decide our share price. It’s a low-risk investment with guaranteed outperformance, so it will have even better returns than Hong Kong’s Mandatory Provident Fund. Eventually, our family’s ownership share will be diluted and the staff can influence the price by working hard for high profitability. If they retire within 10 years, they are required to sell their shares back to the company.
We have appointed all general managers as directors of the company in preparation of the programme. We have also put all our travel-related companies under a holding company, Lotus Travel Group, to facilitate the distribution of shares.
“If we aren’t different, there is no innovation. We can’t sit still, be bored and continue doing the same thing…Our next priority is to reinvent how travel content is distributed within the region.”
How would you like to see Lotus evolve in the next 50 years?
We have to be different. If we aren’t different, there is no innovation. We can’t sit still, be bored and continue doing the same thing. This is why we went back to the retail world in 2010. In 2010, retail comprised 30 per cent of the business, and ultimately we hope to grow it to 60 per cent.
For Hong Kong, diversification through organic growth is the direction we will take. Last year, we relaunched our high-end retail unit, GeoTraveller, and inaugurated its cruise centre in anticipation of the soon-to-be-completed cruise terminal. In the coming months, one of our new strategic thrusts will be to promote in-depth cultural and heritage travel to China. This reflects our passion for travel, our pride of heritage and our love of Chinese culture.
We also recently established a wholly-owned travel agency in Taiwan as well as in Guangzhou and Shanghai. We need to be aware of our critical paths to enhancing our distribution network, both online and offline.
We have succeeded in accumulating a basket full of the best value travel content in the Hong Kong market. We will continue to build on that to become one of the most comprehensive content providers for Greater China. Our next priority is to reinvent how travel content is distributed within the region. We are experimenting with new distribution channels, and will see how to make traditional distribution channels more efficient.
How are you embracing technology to achieve this?
Our goal is to be the city’s most efficient travel consultant. Back in 1991, we were the first one to install mini mainframe computers followed by the automation of our back office and the launch of a B2B platform during the dot-com era. Stiff competition from direct suppliers as well as online channels continues to prompt us to adapt to challenges.
Our newly signed 10-year partnership with Amadeus provides us with an innovative suite of tailor-made solutions that improves operating efficiency, offers greater customer convenience and reduces overall IT spending in line with the company’s long-term strategic goals. These solutions include a guided booking platform, a smart checking system, a corporate self-booking website and Amadeus Travel Office Manager. It’s vital to cater for our future staff with a user-friendly system.
And after that?
The next step is to get Amadeus to create a B2C website. Internet travel portals are taking off slowly but surely due to the convenience. At the moment, they are only being used for search wwwpurposes or last-minute bookings. We plan to have a website targeting different market segments, i.e. GeoTraveller for cruise.
The ultimate goal is an upscale site equipped with dynamic packaging, which means clients may create custom-made FIT packages with their preferred hotel and flights. Currently, most bookings are static, based on fixed airlines and few choices of hotels. It will require immense effort to shift from static to dynamic. Package airfares are available, but the hotel part is challenging as they charge different room rates in different periods.
This article was first published in TTG Asia, January 11 issue, on page 7. To read more, please view our digital edition or click here to subscribe.
