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22 November, 2024

Minor Hotels aim to double portfolio in 5 years, including 22 new venues in ANZ

By Grant Jones

Minor Hotels Group has unveiled an ambitious plan to double its portfolio, with plans to top 1,000 hotels worldwide, including adding 22 in Australia and New Zealand, within the next five years.

Minor Hotels Group currently operate 561 hotels worldwide with another 114 signed projects in the pipeline. China and Southeast Asia account for 44 of its upcoming projects. Another 173 projects are under negotiation, including 22 in Australia and New Zealand, plus 58 in China and Southeast Asia, 52 in Europe and Latin America, 41 in the Middle East and Africa.

Minor plans to get to their goal using their asset-light policy to unlock capital by owning or leasing more hotels, with most properties being franchised and managed rather than directly owned. They remain receptive to other opportunities, including potential expansion into the holistic wellness sector.

“In the next two, three years, or five years, we want to get close to 1,000 hotels,” Minor International Group CEO Dillip Rajakarier told the Skift Global Forum East in Dubai on Wednesday.

To get there, Minor will use a real estate investment trust, or ‘REIT’, into which it will transfer ownership of certain assets. It will then sell shares in the REIT to investors.

“The reason [for the REIT] is that the company has evolved a lot, and creating a REIT, will help us with two things,” Rajakarier said. “One is our debt. We’ve had debt because we acquired NH Hotels in 2018 [for $2.9 billion] and we went through Covid. The other [reason] is growth. The funds will reduce our debt, then we will use the proceeds to help us with our next stage of growth.”

Minor’s core priority is to solidify its presence in Asia with China and India as the key markets due to their large scale. Their home location of Thailand remains their primary market in Southeast Asia, but they are interested in entering new markets such as Japan, while exploring expansion opportunities in Vietnam, Indonesia, Malaysia, and the Philippines. The group plans to launch around 10 new hotels in Asia next year and 100 hotels across the region by 2026.

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Minor chairman Bill Heinecke told Bloomberg that an REIT could help cut debt in half.

Of Minor’s 561 hotels, a third are owned by Minor, another third are managed, and another third are leased, mainly those in Europe. Larger hotel companies like Accor, Hilton and Marriott operate on an asset-light model where the vast majority are managed and very few are owned by the companies themselves.

Rajakarier said Minor wants to stay an “owning company”.

“Even if you do a REIT, we will hold at least 55 per cent to make sure we own those assets. The upside you get on your equity return is much higher than a management fee you’d get from hotels. It’s the revenue upside, the asset appreciation. Being an owning company, we will still own the REIT as well.

“The strategy has a clear plan. We know our growth areas. We’re focusing on how to leverage our relationships. We’re not a management company, we’re an owning company. We own hotels, unlike the others who manage hotels and really believe in fees. We don’t. We have an owner’s mindset and that makes us different.”

Minor’s hotel growth has been rapid, owning just a dozen properties 15 years ago.

Rajakarier said: “We are the small M. We are not the big Ms (Marriotts) of the world, and we don’t aspire to be. It’s not about planting flags and cannibalising revenue streams. When your owners spend millions of dollars investing, it’s about making sure you are in key, strategic locations. Your brands have to match with the experiences you deliver, and our brands are very segmented.”

Feature image: Minor International Group CEO Dillip Rajakarier.

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Minor Hotels Group