Why Steven Pan sold Regent

Pan: bringing back Regent Hong Kong a key motivation behind the IHG joint venture

When Steven Pan fought off some 20 suitors eight years ago to become the new owner of Regent Hotels & Resorts, he had high hopes.

In a 2011 interview, his mission was to bring back the brand to its full glory and grow the portfolio to 30 or 40 hotels in five years, from seven or eight properties in operation at the time. He talked about building a global infrastructure for the new Regent, a worldwide reservations system, a web marketing system, a sales and marketing and operations team. He picked Ralf Ohletz as president, a hotelier from the school of Adrian Zecha who, together with Bob Burns and George Rafael, founded Regent in 1970. He appointed Burns honorary chairman.

Pan: bringing back Regent Hong Kong a key motivation behind the IHG joint venture

Eight years and US$56 million later (excluding the investments on building that global infrastructure), there are only six Regent hotels in operation and three to open, in Jakarta (2018), Harbin (2019) and Phu Quoc (2020). In fact, Regent has shrunk and the 30 to 40 hotels by 2015 was a pipe dream rather than pipeline.

“I am not sure why it hasn’t grown, except that it is hard to grow a small management company. That, I do know!” said Mark Edleson, founder & president, Alila Hotels & Resorts, who faced the same crossroads in 2014 and is now part of Two Roads Hospitality comprising over 100 hotels in five brands.

Pan did not reckon the industry would be facing game-changing challenges that squeeze smaller hotel groups. The sharing economy, for instance, drove industry consolidation – a bun fight among chains for economies of scale and customer loyalty.

Said Robert Hecker, managing director Pacific Asia, Horwath HTL: “Probably the biggest challenge (for Pan) was in creating a sufficiently resourced development and management infrastructure to support growth and performance needed to fulfil third-party owner needs and expectations.

“I think it has reached a point where a partner with sufficient scale and brand/marketing/distribution expertise is the only way to realise the underlying and full value of the brand, and such party would need a majority stake to make such a commitment and have it serve a key role in the growth.”

Added Bill Barnett, managing director, C9 Hotelworks: “Lack of a global loyalty programme, basing the group in Taipei was not easy, and lack of scale.”

Asked what compelled him to let go a majority stake (51 per cent) of Regent to InterContinental Hotels Group (IHG), Pan told TTG Asia: “The decision for the joint venture (JV) is mainly the unique opportunity of Regent Hong Kong and the fact that IHG is committed to develop Regent as the super luxury brand of the group. The industry factor is the scale and distribution.”

What would he do differently on hindsight? “I would have deployed a lot more resources to development to sign more Regent hotels in the early years,” Pan said.

Pan grew up with the Regent brand since Regent Taipei, which he owns through Formosa International Hotels, opened in 1990. “I live and breathe Regent; it is the one and only for me. Mr Burns was the founder and I’m proud to be the steward of the brand and will do everything I can to ensure its prosperity in IHG care.”

IHG, too, has a natural connection with Regent. In 2001, IHG (then Six Continents) Asia-Pacific CEO, Richard Hartman, gave the chain its biggest deal in the region when it acquired the Regent Hong Kong and rebranded it InterContinental. IHG badly needed an InterContinental flagship and the Regent, a waterfront hotel with marvellous views of the harbour, was a coup for the brand. Additionally, IHG was also one of the suitors that Pan elbowed out in 2010 in the bid for the Regent brand.

So when Goodwin Gaw (Gaw Capital led the purchase of InterContinental Hong Kong in 2015) called him about a potential JV with IHG to rebrand the hotel back to Regent Hong Kong, “I immediately agreed,” Pan said.

“The combination of Regent Hong Kong and IHG’s scale will accelerate Regent’s global expansion to gateway cities and resorts. With the rebranding of Regent Hong Kong, Regent will regain a global luxury flagship. It’s a win-win-win for IHG, Gaw and us.”

Still sexy?

But the question is, is brand Regent just a romantic apparition or does it still have traction today? Its sexiness lies in the notion that an Asian-based hospitality group could outsmart European and US chains by ushering new standards of luxury. In the 80s and 90s, Regent was the first hotel brand to introduce the five-fixture bathroom, the all-villa resort and the mixed-use hotel development.

But do new luxury travellers care for a five-fixture bathroom? And why didn’t Regent flourish even under Four Seasons Hotels & Resorts, which acquired it in 1992? The property in Singapore was even rebranded Regent Singapore – A Four Seasons Hotel, as if Regent could not stand on its own merits.

Regent also did not grow under Carlson Hotels Worldwide, which bought it in 1997.

But Hecker believes brand Regent still has motive power. “The outpouring of positive sentiments after the deal announcement about the legacy of the Regent brand indicated strongly the Regent brand’s lasting goodwill in the market and the desire to see its former prominence restored. IHG will need to reconcile the existing properties and ensure all new properties are in line with a restoration of its luxury image, perhaps a new/contemporary luxury image.”

Edleson agreed: “I think it still has a good name. Kenny Gaw is excited about this deal because he can now reopen the Intercontinental Hong Kong as the Regent Hong Kong as it was originally known and he stated it again at HICAP Update (recently) in Singapore. That alone should be a great boost for the brand. IHG should be able to grow it faster than it has grown over the past few years.”

Barnett points to other luxury brands like Four Seasons and Ritz-Carlton which have a high number of projects with branded residences, saying Regent gives IHG this key tool. “It is well-suited for both urban and resort residences, so it is a strong strategic move,” he said.

The clarity of the 51:49 per cent joint venture is also a plus point, with IHG handling operations and development, and having the right to buy up the remaining 49 per cent in phases from 2026. A source said Pan appears to be another hotel owner who wants to operate and develop and own – yet it takes a very different skills set to operate successfully.

Asked how much say he’d have over Regent going forward, Pan said: “I will be chairman and act as brand ambassador for Regent. IHG will develop and manage all Regent hotels outside Taiwan, while we continue to operate in Taiwan. IHG is evaluating key executives for Regent JV and we certainly recommend and hope IHG will retain key leaders like Ralf, who has been the concept master behind Regent.”

Asked what’s the best scenario for him eventually, he said: “The best scenario is to remain JV partner with IHG because we believe in the future of Regent and we want to be part of the brand we love and nurture.”

In the 2011 interview, when asked when Regent would return to Hong Kong, Pan said: “It’s a question I think about every day.”

Now, he can sleep.

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