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Monday June 13, 2011

When going to work is a joy

360 Hotels Group boss turns modest venture into an excellent piece of business.

360 HOTELS Group has gone from zero to hero. What began as a modest venture in 2007 to operate about 100 rooms for the owners of Hock Lee Shopping Complex, has been a huge success.

Group managing director Malaysian-Canadian entrepreneur Steve Ng plans to operate 900 rooms in Kuching alone by 2013.

The group remains mostly an operator, preferring not to own the properties.

Ng: My wife and I enjoy working.

But Ng does head another company that is in charge of the development of Plaza Merdeka, an up-and-coming mall in Kuching’s historic heart. It is a gem of a location, and Ng intends to operate his flagship hotel there, tentatively called 360 Waterfront.

Having spent 25 years in Canada in the hospitality and golf course business, Ng has brought with him a wealth of smart ideas that has jumpstarted Sarawak’s tourism industry.

On the drawing board are new hotels close to Kuala Lumpur’s Bukit Bintang and Kota Kinabalu. For all his grand plans, the hotelier is surprisingly soft spoken and chooses his words rather carefully. But that’s not to say he is afraid to criticise.

With The Star, Ng talks about why Plaza Merdeka brings him equal measures of excitement and headaches, Sarawak’s tourism challenges and how good business is all about being cost effective.

Question: Can we begin with your background?

Answer: I left Kuching in 1978, I was in Form 4 and at St Joseph then. I went to Vancouver, studied, got married – my wife is from the Philippines – had a family there and everything. But my parents were in Kuching and were getting old. That was a great reason to leave things behind and come back here.

Q: Have you always been in the services and hospitality business?

A: Yes, for most of my wife and my professional career, from the late 1980s until we left Canada. Over in Canada, there’s high labour costs, here obviously, it’s much cheaper. So when we were there, we learnt that you need to be efficient and think out-of-the-box all the time. We had a good time at it.

But after my dad suffered a stroke in 1994, I was making an average of five trips back annually. I was away from Canada about three months of the year. My wife told me that family life wasn’t going to work like that. So we moved back. My wife and I still work together. We are very fortunate people.

Q: What was the biggest re-adjustment?

A: We came back thinking of retiring fully. The focus was on the kids. We have three, the eldest was 12 years old at that time. Getting my kids to get used to schools here was a bit tough. We weren’t convinced the education system was good enough. The system is quite poor. Anyway, three years later, my eldest left for the UK for his A-Levels. He’s now at Cambridge University doing medicine. How time flies.

But the great thing about being in Malaysia back then was AirAsia. The budget airline had just started, and we were travelling very often.

But after about six months, my wife and I got bored. [Laughs] Really bored. Nothing to do. She said, “This is crazy, it’s not working at all”. So we started another company again out of interest, not for money. We enjoy working.

Q: And that first business here was to build Plaza Merdeka?

A: It was the right timing. We had good support with the other partners who came in to join us. That project was what led to the 360 Hotels Group.

Q: Is it rent-only, or a mix of rent and buy?

A: We don’t have big enough pockets to do rent-only. The property development is a joint venture with the government, which provided a portion of the land. Our formula for the centre goes like this: 20% of the 350,000 lettable area is sold, the balance is leased.

We have Parkson. It will be the largest one in Sarawak, about 50% larger than The Spring’s. We also have Kamdar, which took 30,000 sq ft. We have Everrise Supermarket, and we are now in the final stages of discussing with Level-Up Fitness, which might take 10,000 sq ft.

Q: Is it going to be a high-end mall?

A: Our position will not be higher than The Spring. A bit of The Spring and below in fact. We’re looking at a demographic of 40% bumiputra, 30% Chinese shoppers and the rest tourists. We are trying to pull in a more diverse crowd. When I was growing up, society wasn’t as segregated as it is now. I believe in places like India Street Pedestrian Mall, where it is about 50% bumiputra, 30% Chinese and tourists make up the rest. We hope to emulate that.

Q: What stage is the building at?

A: We’ve just passed the most difficult part. We have gone down to basement level three. That’s quite deep, about 15m under. From 7m and below, it was all rock. It’s a great foundation, but digging most of the rock out was difficult. The other difficulty was the proximity to old structures. At some parts, we had just four feet of clearance. We have a number of settlement issues, which we anticipated. We went to all the shops and told them that this will happen. We assured them that when it happens, we will fix it, no questions asked.

Q: Did you settle with the ones who had illegal structures?

A: Put it this way, you have a shop with an illegal structure, but you didn’t build it. You bought it or your ancestors added it on. Someone comes and builds next door and your building starts to crack. As far as people are concerned, before we came along, there was no problem. I don’t deny we caused cracks. So we fix it.

Q: Kenbest is building a lot of shopping malls too. Do you worry about a glut of commercial spaces?

A: I think we have good anchors and that will ensure our success. Management is very important in terms of advertising and promotion. The Spring does both very well. Hopefully we can do as good a job as them.

Q: Inflation means people’s purchasing power is lessened. Is that something you are concerned with?

A: Purchasing power isn’t really diminished. On retailing, it’s more to do with our small population, and the fact that there are too many shophouses around. The money is there, but it’s spread out. For a good mall, it’s a question of how you draw in the crowds. The Spring has been able to do that. Furthermore, overseas retailers will tell you, “In the whole year, six months you don’t make money, three months you actually lose money, and around Christmas season is when you cover the losses and make a profit.”

Q: What is your hotel business model? I’ve seen 360’s rooms, it seems that’s where all the money is spent.

A: We started out at Hock Lee spending most of the money on the rooms. In the budget hotel, that is also the case. For budget rooms, they start from RM50 per night, and get 32-inch televisions, 20 free channels and nice large showers. That makes it cost effective for the customer.

It is always about the numbers – just like what we, as the operator, can return to the owners, based on, say, a projected 70% occupancy rate. It’s got to be win-win-win – for the owner, operator and guests. Given high occupancy, we could always raise prices, but why bother? Let the customers be happy.

Q: Corruption and kickbacks are something people know happen, but the matter is never really talked publicly. Your thoughts?

A: Yeah, well, we’ve had people come to us and offered kickbacks. I tell them, “We don’t do this,” and then they ask, “Then how does the operator make money?” [Laughs] We make our money after operations begin. It’s the honest way right?

Q: In a way, your business model is quite similar to AirAsia’s isn’t it?

A: Build at a low cost, sell at low cost, and then get high volume. It’s a volume game. It’s also about promoting properly. We are going to hook up with more airlines, maybe Firefly, soon. Cross promotion is important.

Imagine this: You create 60 rooms. Sounds like very few right? But it gets complex fast. First, you’ll need to advertise to get volume. But with 60 rooms, the overhead is going to be too high. So you need more rooms actually. Okay, say you settle at 100 rooms. That’s about 3,000 room-nights a year. How many friends do you have? [Laughs] Okay, say you have 100 friends, who each stay five nights, that’s still only 500 nights. The point is that the mass market must want your product. The most difficult part running a hotel, and for the tourism industry in general, is to get people try you out for the first time.

Q: 360 Hotels Group is advertising with Tiger Air. How important is the Singaporean market to us?

A: Singapore is very smart, not that I like their society. I prefer the haphazard way of life in Malaysia. But when it comes to tourism in Singapore, they are working with everybody. When Sarawak goes to them asking them to help sell us, they do it. What do they get out of it? Well, once their tourists end their Singapore holiday, they fly to Kuching, and then go back again to transit at Singapore. Very smart. The Tourism Ministry there analyses every little detail. So we should be promoting ourselves more within the region. The key are the hubs: KL, Singapore and Kota Kinabalu.

Q: Do you have hotel plans in KL?

A: We are in the final stages of designing one there. It is located where all the pubs are, just off Lot 10 and Pavillion malls. We are looking at 250 rooms, with a budget price of RM200 and RM220 nett.

Q: Sarawak Tourism Federation has highlighted difficulties for budget operators to get licences. Your thoughts?

A: Some are facing compliant issues. You need to comply with the minimum set by the Fire and Rescue Department. Safety is a legit concern. For 360 Hotels Group, we complied, and at same time, we were fortunate to get approvals fast. It’s not always a fair process. That must change in the future. We need proper zoning by-laws, things like that. Right now, authorities can’t just shut people down. They need a grace period. There are other problems too, like metal theft. It’s dangerous.

Q: Do you feel we have enough products to offer tourists? The average tourist length-of-stay between 2001 and now has dropped, from nine to six days.

A: Well, arrivals have increased, but what we are seeing is a lot of Indonesians using us as a gateway to get out of Borneo. On products, is there enough? Yes and no. We must be willing to create more. If you look at Main Bazaar, for Westerners, they would have converted the place into a historic area by starting with simple things like proper documentation.

Q: But there was a heritage trail that ran briefly, which is now coming back right?

A: You see, the focus keeps changing and we need to be more aggressive promoters. More creative too. In Kuala Lumpur, they have durian tours. The Japanese and Taiwanese love it. Sarawak has great potential. Look at all those caves that are an hour from Kuching, there isn’t enough promotion.

Q: In the long term, will you have more businesses outside Sarawak?

A: After we are done in Kuching, the obvious ones are in the central and northern regions like Miri. Our prime focus is at KL and KK, and possibly Penang if we can find a good location.

Q: It feels to me Sarawak’s tourism potential are in semi-rural areas. Would you enter those markets?

A: No. Those are resort markets, which are too seasonal.

Q: Let’s talk about something a little different. How important is English proficiency?

A: The younger generation has lost a lot when it comes to English. It’s not that kids should not learn Bahasa Malaysia – my Malay is poor, and I’m not proud of it, but English is necessary to get good jobs. I can’t overemphasise that enough. Without good English, your range of jobs dwindles.

Q: What is your opinion on all this talk of meritocracy?

A: I can only speak on behalf of my hotels. We run with a low staff ratio but we take good care of them. The average take-home pay for our service staff is 50% higher. You’ve got to build teams where everybody understands what one person does affects everyone else.

To a large extent, meritocracy has to be the way forward. If you do a good job and never see a chance of promotion, I don’t think that’s good. You can’t have morale problems within an organisation.

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