Clement K.M. Kwok, managing director and CEO of Hong Kong and Shanghai Hotels, owner and operator of Peninsula Hotels, has been directing an aggressive renovation and expansion effort throughout the economic downturn. He sat down last week with Editor in Chief Arnie Weissmann in the New York property's recently renovated Peninsula Suite, a $24,000-per-night accommodation that features a $75,000 bed with a hand-stitched mattress.
Q: You've been spending a lot of money lately. In addition to this suite, you just finished renovating the tower in Hong Kong and have begun work on the original building there. Beverly Hills was recently renovated. You're getting ready to open your first hotel in Paris next year. You've introduced new room technology and upgraded other properties. But economic uncertainty lingers, and one of your competitors, Jumeirah, just abandoned its luxury venture in the U.S. (New York's Essex House is changing flags to J.W. Marriott.) Isn't it risky to spend so much money when no one is predicting a speedy economic recovery?
A: Operating economics are not easy, not since the global financial crisis. Costs continue to rise, but we're not really seeing an increase in demand, and room rates have suffered.
If you're generating cash, anyone can renovate. We do it because we have a long-term view. We have never sold anything called a Peninsula. As a public company, we invest in the properties with the belief that we are adding to their long-term value. And if you fall behind, it's difficult to catch up.
Q: What cities would you like to be in that you're not?
A: We want to be in London, but it's a question of finding the right quality of opportunity. We're also looking at other cities in India, other cities in China. Another in the United States is not out of the question. But I have no map on my wall saying my job is not finished until I have a flag in certain locations.
Q: Now that Chinese travelers are showing up in more places, do you have an advantage, being a Chinese hotel company?
A: The world we have grown up in and lived in was predicated on U.S. economic leadership. I continue to believe that's important. A strong U.S. is good for business. It can be supplemented by other markets. You have different market segments; I think there has been growth, and will continue to be growth, in Chinese customers.
Q: U.S. hotel companies have been very aggressive in China over the past decade, building "billboard" properties in major cities so that Chinese will look to their brands when traveling. Could it be that, ironically, Chinese travelers may be more familiar with, say, Marriott than a Chinese brand like Peninsula?
A: Having the Peninsula in Shanghai has brought a lot of attention to our brand. I do not regard the Peninsula as being behind anybody in terms of recognition. If looking at top-end luxury, we have that recognition. We're also well placed in Asia in terms of looking for deals in China. ... It's a hard place to find the right deals and the right people to do deals with. It's competitive, and it's a market that everybody wants.
Q: Much of the directional change in hospitality has been driven by design. Peninsula is very much a company steeped in tradition. Has the hotel design movement influenced how you renovate and build properties?
A: We want to provide an Old World experience for our guests. To some extent, we infuse new design elements into what we're doing. When we opened our hotel on the Bund in Shanghai, we were given permission to build there because [the Chinese government] wanted someone who would respect what the Bund was all about. But we didn't want guests to think they're walking into a hotel built 80 years ago. The challenge is to marry modernity while respecting tradition.
Email Arnie Weissmann at [email protected] and follow him on Twitter.