Almost a year after Pegasus Capital acquired Six Senses Resorts & Spas, Timothy France catches up with its former founder and CEO, who is now channelling energy back towards his first
love – the Sonevas – and taking sustainability to the next level
Sonu Shivdasani
Chairman and CEO
Soneva Resorts, Residences & Spas
Was letting go of Six Senses an easy decision for you to make?
It was a decision I had been toying with for about three or four years, making excuses for not doing it. At the time we were in discussion with a private equity partner about taking a larger stake in our holding company, and we eventually decided it would be better if they bought Six Senses and we kept Soneva. This allowed us to focus on one strategy and to stamp out any brand confusion that had arisen.
I think Six Senses really needed its own clear strategy to grow and evolve through management agreements, while Soneva also needed to focus on its own priorities and approach. Keeping the two brands in-house didn’t make much sense at that point, and letting go of the Six Senses and Evason brands was an expedient way of buying out shareholders from our holding company and regaining 100 per cent ownership of it.
With hindsight, I am very happy with the decision and am starting to see the benefits of a Soneva-only focus. From the perspective of Eva (his wife) and I, our workload has improved enormously. I’m able to focus my time on areas I feel will be more productive for the business, and we are starting to see Soneva pick up, develop its own identity and create new opportunities for the future.
Much of the business development over the years was for the Six Senses and Evason brands, now leaving you with just two Soneva properties. Did you get sidetracked?
A little bit. We brought Deutsche Bank into the group in 2000 to take advantage of some interesting opportunities within the tourism industry during the post-Asian crisis period. The agreement we had at the time was for Deutsche Bank to buy existing distressed assets, such as Phuket Island Resort and Club Aldiana Siam in Hua Hin, and upgrade them. That worked quite well, earning us more fees and more exposure to best practices as we had more properties, but I think it diluted the Soneva focus.
Now we are clearly one brand, and focused on our core philosophy of Slow Life and our Intelligent Luxury mission. I am confident this will deliver and drive results, and looking ahead to 2014, we will be in a much stronger place than if we had retained Six Senses.
Soneva recently made the headlines for not proceeding with your Sri Lanka project. There were rumours that it was because the company had cash problems. Is this true?
When we started the joint venture with Aitken Spence Hotels in 2003, the expectation was to invest a total of less than US$20 million. The war then put things on hold. When we came back to this project two years ago, the increase in the site price as well as construction prices meant that we were looking at close to US$50 million as an investment into the project.
There was a limit to how much equity we were prepared to contribute into Sri Lanka. The understanding between Aitken Spence and our Sri Lanka joint venture vehicle was that each party would contribute US$8.5 million of equity. The remainder would be financed by bank lending. The banks were very aggressive two years ago when we restarted the project and initially contacted them.
However, when Aitken Spence recently approached them to conclude arrangements, their loan books were full and their attitude had changed. They were demanding higher interest rates and were not prepared to lend as much as earlier indicated. As a result of this, the equity we were asked to contribute went up materially so we opted to put the project on hold.
This general boom in the country and the inflationary pressure on the supply side reminds me of the world in 2007/2008 when projects were substantially delayed and costs ended up nearly double of original forecasts. However, the demand side is affected by the reality of the global economy today, which is much softer.
Where will Soneva go from here?
The next big project would be to build Soneva Gili in the Baa Atoll (Maldives) with 15 or 20 water villas. It will be a 30-minute boat trip from Soneva Fushi because we want to use the overheads and the infrastructure of the existing resort to support the new one. For example, all the laundry would be done at Soneva Fushi and all the supplies would come from Soneva Fushi, with deliveries every two days and a daily visit by the GM, with a strong RM on site.
Our future strategy is to own sites that are remote but accessible, and we like institutional destinations such as Bali, where we are in discussions with a developer, and we are also looking at Ibiza. We will also introduce Soneva Secret, which is a tented camp. The first will be in the Maldives and we are hoping to open this by winter 2014. Soneva in Aqua is the next progression as we move from beach to water villa and now to a floating villa.
The liveable space on the boat will be that of a two-bedroom suite. One has a crew of five and the ability to travel throughout the destination. In short, it is a moving and floating Soneva guest experience. We are considering this for the Maldives and Thailand.
“We are starting to see Soneva pick up, develop its own identity and create new opportunities for the future.”
Six Senses was previously looking at a riverside property in Bangkok. Is Soneva interested in urban locations?
Yes, we are considering ventures in London, Paris and New York because at the end of the day our focus is the leisure client, not resorts. By 2020 there will be another one billion middle class travellers around the globe, so we want to identify locations where there will be a real pressure on supply. In some areas, such as Phuket or Pattaya, they will double or triple their hotel inventory as demand grows, but there are certain locations where they will run out of space.
So the Maldives will run out of islands in about 15 years if tourism demand continues and Bali will run out of great beaches. London, Paris, New York are great leisure centres but there is a finite amount of real estate and as demand doubles or trebles, RevPAR is going to rise.
Will you have an asset-light approach to business development?
The Soneva strategy is to own at least 50 per cent of the property. So essentially what you have is one operator, one owner, one philosophy, one brand. This will give us consistency right through the business, which is especially important when you have complicated brand values.
Today we own the Soneva brand and all the real estate that Six Senses (Resorts & Spas) used to own, but we are slowly selling the non-Soneva real estate. So Evason Phuket was sold in May, we closed on Evason Hua Hin in September and we hope to sell Six Senses Laamu before summer 2013.
Going forward, we have decided that managing other people’s hotels is not a great way of capitalising on the Soneva brand. We would rather keep the brand, get management fees, but always have at least 50 per cent of the equity because there is a lot of value in selling residences, which helps us to tap our loyal customer base and preserve ownership.
You have always been a strong proponent of sustainability. What is lacking in the hospitality industry?
We are driving a campaign to get the hospitality industry to ban branded water and bottle on site instead, which creates 15 per cent cost savings. We would then ask campaign members to contribute 10 per cent of that savings to water charities. If the global hotel industry got involved, we would generate about a billion dollars per year and enough cash to eventually solve the problem of water supply. So it annoys me when you go to your minibar and there are five bottles of branded water with the compliments of the hotel.
Fundamentally, (sustainability) makes economic sense, so where it doesn’t cost in terms of guest experience and it’s cheaper and more efficient to deliver, I just can’t understand (why we don’t adopt such practices). Bottling water on site and replacing disposable amenity kits with pump action bottles has to be more efficient and cost-effective than importing branded products. It’s just such a waste, even idiotic. These points of differentiation are unnecessary, unsustainable and wasteful, so little things like that really bug me.
The challenge now is also about taking sustainability to new levels and become decarbonising, whereby we want to be absorbing carbon dioxide rather than emitting it.
This article was first published in TTG Asia, February 8 – 21, 2013 issue, on page 9. To read more, please view our digital edition or click here to subscribe.
By Timothy France
