Standard sees Asia driving hospitality field
The head of the US hotel operator, whose biggest shareholder is now Sansiri, likes the prospects in the region. By Jesus Alcocer
Standard International, the US-based parent company of the Standard boutique hotel brand, will derive the largest part of its top line from Asia in 10 years after its 35.09% acquisition by SET-listed developer Sansiri Plc last week. Sansiri’s US$58-million (1.92 billion baht) investment in Standard is part of an $80-million investment package in four foreign hospitality and media companies, which according to Sansiri president Srettha Thavisin will help the company diversify away from the sluggish Thai property market and gain international name recognition.
Sansiri is Standard’s largest shareholder, and Mr Srettha will serve as Standard’s new chairman after the departure of founder Andre Balazs, the former chairman, who still retains a 20% stake in the company as well as stakes in specific hotels under the brand. Three other Sansiri executives will sit on Standard’s board.
Amar Lalvani, chief executive of Standard International, said the stock acquisition will not change the direction of the company but will change its speed.
Mr Lalvani and Mr Srettha met 20 years ago when Starwood Capital, where Mr Lalvani was working, invested in Sansiri in 1999.
“It was my first job, we came after the crisis and I met him while looking for opportunities in the region,” Mr Lalvani said.
The latest deal had been on the table even before the departure of Mr Balazs in March 2017 and is in no way related to his departure, Mr Lalvani said. “It was something that was planned for the international growth of Standard even before he left,” he said. “We needed resources to expand.”
Standard is an asset-light branding and management company that operates five high-end hotels under the Standard brand and seven lifestyle hotels through Bunkhouse, a Texasbased operator in which it acquired a controlling stake in 2015.
The Standard properties have become known in the market as hip hotels with a heavy emphasis on food and nightlife and a celebrityheavy crowd.
According to Mr Lalvani, just 50% of revenue from the hotels comes from room bookings, with the other half divided between nightclubs and food and drink offerings.
Standard became known for its heavy emphasis on media. It publishes a magazine and maintains a website stocked with culture, travel, food and lifestyle articles. About onethird of the office is young people developing content, which does not bring a substantial amount of revenue but does let the brand reach customers when they are outside of the hotel — in bookstores, galleries, etc.
The company may benefit from Sansiri’s purchase of 12.5% of lifestyle magazine Monocle for $6 million. More indirectly, it may also profit from Sansiri’s $6.6-million stake in shortterm rental manager Hostmaker, $12 million in Singaporean co-working space JustCo, and $300,000 in Farmshelf, a New York startup that “makes it easy to use hydroponic urban farms to grow high-quality produce”.
Six of the Bunkhouse properties are in the southwestern US (mostly Texas), and one is in Todos Santos, Mexico. More are coming in secondary cities like Austin, Nashville, New Orleans, Louisville and Portland. Bunkhouse hotels are “experience”-focused. Accommodations at the Marfa, Texas location, for example, include “renovated vintage trailers, safari tents, Sioux-style tepees, Mongolian yurts, and tent campsites”.
Standard is in the early stages of its expansion. Last year the company announced it would open its first overseas location in London, from which it would jump to cities like Milan and Berlin, and ultimately Asia.
The expansion will take place through the Standard brand; Bunkhouse will remain within the US market, where there are still many secondary cities to explore, Mr Lalvani said.
“Within five years,” he said, “90% of growth will come from international markets, with international markets providing 50% of the revenue. At that time, we expect Asia and Europe to contribute approximately the same to our top line.”
Mr Lavani said Asia will become the company’s largest market within 10 years, as well as its growth engine. “I wanted an investor that would help us expand in this part of the world,” he said. “The future is here, and the West is not as interesting, to be honest.”
Asked why he chose to start the Asian market push in Thailand instead of in larger markets like Indonesia or China, Mr Lalvani said: “We are not trying to be the biggest company, we wanted a partner that understands and respects our vision.”
Standard was also looking for an investor with expertise in developing standard residences. Moving forward, the company will add community-centred apartments to its hotel portfolio, though some of the residences may include hotel sections, he said.
The residences will be sold in Asia and rented in the US, where young consumers are moving away from purchasing homes, choosing instead to rent “experience condominiums”.
The selling point of the residences will be their common spaces, which may include, for example, a top floor “well stocked with whisky, wine and things to eat”, he said.
The company will start with one location in Bangkok, which it hopes to find in the course of 2018. The project will be a Sansiri development and the sales revenue will go to Sansiri, but the condominiums will be branded as Standard. Investment will come from Sansiri; the target launch date will depend on the property.
Units will be small but offer good pricing per square metre. Prices have not been determined yet, but they will be for the middle market. “Not luxury, they are for the young generation,” Mr Lalvani said.
The company will also build two hotels in Thailand, one in Bangkok and one in Phuket. The residences could be part of a mixed-use project including hotel rooms. No timelines or investment numbers are set, Mr Lavani said, but the investment will come from Sansiri.
The properties will be “high-end but below luxury, about 25% below the Peninsula”.
In the US, the company has expanded through the acquisition of its majority stake in Bunkhouse, but Mr Lalvani said he does not see the purpose of expanding by acquiring stakes in smaller players in Asia.
Standard is also seeking to enlist 10 independent Bangkok hotels to participate in its One Night platform by the end of the first quarter of 2018. It will also sign up 40 more locations across Hong Kong and Singapore by the end of the second quarter.
One Night offers discounted room rates at member hotels — independent hip properties screened by Standard — when users book after 3pm. Hotels give the app better prices than competitors Expedia and Agoda, because the rates are exclusively for consumers who book after 3pm.
“Few customers book after 3pm, so we give them an incentive to do so in rooms that would otherwise remain empty,” Mr Lalvani said. “About 65% of guests who book through One Night are locals, who may use it to avoid a night commute after a long day in the office.”
The future is here [Asia], and the West is not as interesting, to be honest. AMAR LALVANI Chief executive, Standard International