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The Strait Times – Firmly anchored in economy hotel sector – December 2011

By Esther Teo
The Strait Times
Dec 3, 2011

FORMER shipping executive Michael Kum may have traded the world of support vessels and barges for the more people-centred job of hotels but he is not putting his feet up.

Mr Kum, 67, is the new chairman of chain M&L Hospitality, a family firm that has a significant presence in the Asia-Pacific region and plans to expand.

Although he has no previous experience in the hospitality sector, his frequent travels in his former job gave him a sense of what to look for in a good hotel. The opportunity to interact with more people in the industry also appealed, Mr Kum said.

“Shipping is very different from real estate. Real estate is for long term. So for us, being a family, we would like to see that we have some properties that we can own for a very long time,” he added.

It is certainly an unusual turn for Mr Kum, who has spent more than 30 years in the shipping industry. He co-founded Offshore Equipment in 1976 to charter support vessels and barges for the oil and gas industry.

The family concern expanded over time, was renamed Miclyn Offshore and eventually sold to a financial institution in 2007.

“Like any business, when you have the chance to divest and if the price is right, you do it,” noted Mr Kum.

Now his sights are set on the new line of business, which he will run with daughter Jocelyn, who is chief executive of the parent company M&L Offshore Investments.

The firm started with a 630-room hotel acquisition in Sydney for between $180 million and $200 million in 2009.

Its portfolio has since grown to 11 hotels in eight cities worth about $1.4 billion, including two in Singapore – in Novena and Bencoolen – under the Ibis brand. Other hotels are in New Zealand, Australia and Japan. All the properties are operated by international operators like Sheraton and Hilton.

Revenue has been growing, although Mr Kum declined to reveal exact figures. Average occupancy rates are also healthy at about 90 per cent.

All the firm’s hotels were acquired after they were built but M&L is open to developing a site from scratch, although Mr Kum is “very selective” and nothing is on the cards as yet. Location, he stressed, is key to any purchase decision.

And as a family business, the firm is not pressured to buy or to exit any properties, so it can consider its decisions more carefully.

It is targeting the economy sector – mid-scale hotels of 31/2 to four stars with about 250 to 500 rooms.

The firm is also looking at opportunities in new markets such as Thailand, Indonesia, Vietnam and Malaysia, which all offer more room for growth than Singapore’s “tight” market, Mr Kum said.

He added that despite economic concerns in Europe, he is confident that the good location of the firm’s hotels will ensure that they remain “fairly profitable” in the event of a financial crisis.

“These are the hotels that most commoners go to stay and they can afford the room rate. If you’re talking about $300 a night for a room, a lot of people may shy away, especially for those who don’t have the budget.

“But we’re talking about $150 per room on average (for our hotels), which is a very reasonable number.”

This allows his economy hotels to be more resilient in a crisis, he noted.

Mr Kum also said he will not rule out the possibility of listing a real estate investment trust (Reit).

Reuters had earlier reported that the firm has plans to list a hospitality Reit on the Singapore Exchange to raise around $450 million.