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.

Chain is growing fatter all the time but its chiefs tell Raini Hamdi it can digest what it chews

From left: Denis Hennequin, Chairman & CEO, Accor; Michael Issenberg, Chairman & COO, Accor Asia-Pacific

Accor marked 30 years of Asia-Pacific presence last November with a bumper crop of hotels signed in the region. By 2015, it will have 700 hotels in operation in Asia-Pacific, from 550 hotels now, which is already a huge figure. Competitors such as Starwood Hotels & Resorts and Marriott International  are smaller: respectively, 320 hotels in Asia by 2014 (as of September 20, 2012) and at least 265 hotels by 2016 (as of October 31, 2012).

Some people say your first priority is to earn fees, increase shareholder value, which these numbers do perpetuate. What say you?
DH: It is not chasing numbers for the financial community but to answer to increased demand as a result of the booming economy here and in other parts of the world. We have a pipeline of 110,000 rooms within the next three years; 50 per cent is in Asia-Pacific because it is the vibrant part of the world today. Basically, supply is following demand.

How do you measure how successfully you’ve done for owners?
DH: The appetite owners show for our brands is the best measure. For them, it is a game of ROI. If they are not satisfied with what we bring to the party as operator, our pipeline will just vanish. To the contrary it is accelerating.

MI: We’re not in the business of running unsuccessful hotels. When you get it wrong (with a hotel), the amount of energy and the time it consumes to try and turn it around is distracting. So we really try and focus on success in terms of the right hotel with the right partner in the right location. More often than not, we do feasibility studies with the owners to make sure their project will be a success. We try and educate the owners when to expect success, as hotels take anywhere between three and five years to hit maturation.

What are the extra demands of running a public company?
DH: Public companies have more resources, as they are appealing to the financial markets. That’s a benefit, of course, but with greater benefits come greater challenges and responsibilities, so it’s about finding the balance (to satisfy) all the stakeholders – our people, owners, shareholders, etc – that’s my job.

What changes did you make since becoming CEO in January 2011 that did real good for Accor?
DH: We’ve been focusing on three strategies: brands, distribution and development.

We’ve been revisiting the strength of all our brands and segments, to make them even more efficient and a step ahead. We started with Ibis, but if you look at the whole portfolio, we’ve been doing the same exercise with all our brands, whether it is repositioning Sofitel, Pullman, MGallery, etc. There’s not one brand we’re ignoring in terms of finding out what its DNA is and how we can move it forward and lead the market segments.

In terms of distribution, today, having a good hotel, brand, location and people running it is not enough; you have to know how to sell the hotel to your guests, so we have been revisiting our distribution model and loyalty programmes. And finally, development. We were born in Europe and obviously most of our inventory is in Europe where we’re by far market leader. But we see that the world has become a village and we have to increase our presence outside Europe.We’re now leader in Asia-Pacific, Latin America, Africa and the Middle East – everywhere except North America.

“When we acquire companies we also acquire talent…When we bought Mirvac, we also got 3,000 people and there will be some great talent that we will mine.”

Are you confident of opening another 100 hotels this year, after last year’s bumper of 110 hotels, or will growth taper?
MI: In 2011, we opened about 65 hotels. Last year, with the Mirvac acquisition, it exceeded; without, it would be 68-70. Looking at our pipeline in the next three years, I expect to maintain that growth of opening 60-70 hotels.

How are you able to open 60-70 hotels a year without operation fraying around the edges, especially when there’s a staff crunch?
MI: As a hotel management company, we’re really two things: we’re a sales and marketing organisation and a human resource company. So the challenges are to make sure we have the right tools to fill the hotels and to have the human capability, which is the single biggest challenge, but in some respects the most rewarding, as we’re building tremendous careers for young people.

But that’s what we do. If you look back at our development in the last 30 years, from 13 hotels in 1990 to 550 last year, we’ve developed the systems, capability and the people to do large-scale growth. There was only one (Accor) academy for Asia-Pacific, then one Pacific, one Asia. Now, we have academies in China, Thailand, Indonesia and India.

When we acquire companies, we also acquire talent. Our CFO and CMO came from a company we acquired in 1993. When we bought Mirvac, we also got 3,000 people and there will be some great talent that we will mine.

DH: This also results in a cultural change for Accor. We’ve become truly international, from a French model, so to speak. When I’m here or in Latin America, Africa, Middle East, I find lots of new ideas and concepts that I can feedback into the original model, which is European. We’re benefiting from that cross exchange of culture and talent from all parts of the world. That’s the true competitive advantage of being international, to feed yourself with all the talent and different points of view. Successful global companies are the ones that understand new models better before anyone else does. There’s not one dominant model; that’s over. Actually it’s a collage.

MI: A good example was we had 300 French franchisees – owners of Novotel, Mercure, etc – meeting in Bangkok recently. They chose Asia themselves; they  wanted to see how more hotels are being built here, the latest trends, etc.

What will you be investing on in order to support 700 hotels in the region by 2015?
DH: Brand, distribution, development.

What are the key changes in Asia that you’ll be looking out for?.
MI: The biggest change is that our business is increasingly inter-Asia. China is the biggest driver, changing from an export- to a consumer-driven economy. Going back to some of your questions earlier about us grabbing shelf space, the fact is what’s happening in Asia is extraordinary. Even if China slows to seven to eight per cent, travel still continues to grow at 12-14 per cent. Then look at Indonesia, Malaysia, India, the Philippines and Myanmar opening up. We’ve dealt with financial crises and tragedies and those will continue. But we believe in the Asian century and that it’s here for the next 10 years.

This article was first published in TTG Asia, January 11 issue, on page 4. To read more, please view our digital edition or click here to subscribe.