Regal is king in Kong

It's a thrill to emerge at Chek Lap Kok, Hong Kong's new airport. That's partly because tales of passengers being guaranteed lost luggage, lost bearings and lost tempers turn out to be myth, and partly because the vast airport terminal, on a man-made island, lands you slap-bang in the 21st century. As the much-vaunted gateway to Asia, set to handle an estimated 35 million passengers and generate £420m in its first year, it doesn't disappoint.

Keen to cash in on all that potential business, Regal Hotels International has poured HK$2b (£165m) into building one of the region's largest hotels on site. The first 385 of the planned 1,100 bedrooms are on schedule to open early next year, after 18 months' work. The rest will follow in mid-1999.

Yet it hardly seems a great time for a hotel group that already owns four of the top-end hotels in Hong Kong to have so many extra rooms to fill. With 75% of the former British colony's hotel trade coming from the rest of Asia, the economic crisis in the region, particularly Japan, has hit business hard.

James Lu, executive director of the Hong Kong Hotels Association, says that while rack rates haven't changed, achieved room rates have dropped by an average of 30-40% since July 1997, with the group tour category worst hit. He explains that, although occupancy rates are at a respectable 75%, bolstered by the growing number of visitors from China and Taiwan, not enough revenue is being generated to compensate for the lost high-spending Japanese.

Indicative of the economic climate, and perhaps in Regal's favour, the airport hotel is the only major one to open this year. Lu also reckons that fallout from Asia's recession will force hotel developers to rethink. He predicts that the 10,000 new bedrooms scheduled to come on stream between 1998 and 2000 will be cut to 6,000.

But Regal is bullish. Dennis Oldfield, executive assistant manager of the Regal Airport Hotel, says that the group is taking a long-term view and the fifth hotel will give it strategic importance in the region. "Hong Kong won't lose its mantle as the core of the South-east Asia region, and it is the gateway to China," he asserts. "It's an easy place to do business and nothing has changed since the [British] handover."

Regal pitched for the airport site against about 20 companies. Under the terms of the 25-year lease, it will be the only hotel there for the first two years, and for the first 15 years the only hotel with direct access to the terminal, via a covered walkway.

Not only is Oldfield cheered by predictions from industry watchers such as Lu that Hong Kong will be back on its feet by 2000, he has faith in Regal's strategy for the new hotel to target the conference, tourist, commercial and airline markets evenly, as well as plumb new markets. "We won't avoid the downturn," he says, "but we can spread the risk over various segments."

So, besides drawing on the traditional airport hotel customer base of delayed or transit passengers and airline crews, the hotel will also bring in local conference and leisure trade by making the most of its 16 meeting rooms, business centre, ballroom for 800 people, nine restaurants, two swimming pools, gym, and health and beauty facilities.

Looking further afield, Oldfield explains that the hotel is well placed to make the most of Hong Kong's growing status as a regional conference hub for businessmen flying in from other Asian cities such as Shanghai, Seoul and Taipei. Similarly, he believes the potentially inconvenient one-hour journey time from the new airport to the heart of Hong Kong can be turned to Regal's advantage. Businessmen can offer to meet those contacts that fly in for a day or night in one of the hotel's meeting rooms instead.

Oldfield even sees the hotel being used as a stopover for tour groups working their way around South-east Asia or en route to China. To bolster this type of custom, he says that other incentives will be offered, such as harbour trips and beach parties to the nearby island of Lantau. The hotel could also be a godsend for passengers stranded during the typhoon season.

But Regal's bid to spread its markets, and thus its risks, doesn't stop there. Next April, in what Oldfield believes is a first, the hotel will make use of the covered walkways that link it to the terminal to operate passenger lounges for the airport within the hotel. For an entrance fee, probably about HK$99 (£8), as many as 300 travellers who are in transit or with time to kill can use a range of facilities, including computer workstations, showers and changing rooms, and a swimming pool, gym and health club. There is also a check-in facility, operated by the airport.

Restaurant facilities will be available in the lounge, although food and beverage is not included in the price. And as the hotel is also providing F&B for Thai Airways, Air France and JAL business-class lounges, Oldfield is quick to point out that the hotel's lounges are not in competition with them.

Oldfield refuses to reveal predicted turnover but says that accommodation will account for 60%, with 40% coming from F&B and the other strands. Despite the chilly economic climate, the group reckons the hotel will achieve at least 80% occupancy in 1999. But it is taking no chances and, in the first few months, a special offer will slash 50% off rack rates, which start at HK$2,100 (£255) for a standard single room. This is besides the Super Value package, priced at HK$1,350 for a single plus HK$200 for a twin share (£164 plus £24).

All told, the burden of filling 1,100 extra rooms sits easily on Oldfield's shoulders. He has confidence in the group's ability to run airport hotels, having operated Kai Tek at the old airport for 15 years. That hotel is now being repositioned as a city hotel.

Recruitment

The economic crisis gripping Asia has put the squeeze on recruitment in Hong Kong, reversing the trend of the late 1980s, when frenzied hotel development meant that there was a high demand for skilled staff. Ironically, however, it means less of a headache for Belinda Yeung, Regal's director and vice-president, human resources, who needs 900 staff for the new airport hotel.

A hiring freeze is one of the measures implemented last year by Regal and most other hotels, attempting to sit out the economic downturn. The hotels association's James Lu says there have been few redundancies, and staff reduction through natural attrition has reduced the ratio of staff to rooms by only 0.2%. Still, this policy makes it particularly difficult for Brits who want to go out there to work.

The 300 vacancies for the first phase of Regal's airport hotel were quickly filled, partly by transferring 120 excess employees from the other four hotels. The bad news for British hopefuls is that the balance is being recruited from districts around the airport.

This policy to recruit locally is being operated despite the fact that English and Mandarin speakers are being sought. English is a first requirement for staff with guest contact, and Yeung is also looking for Japanese and French speakers, depending on how the guest mix of the hotel pans out. In response to the increase in Chinese visitors, a Mandarin teacher has been employed, as most locals in Hong Kong speak Cantonese. "We need experienced staff and, as a lot have been laid off from other hotels, there's no skills shortage," explains Yeung.

The unemployment rate bears testament to this, having risen from 1.92% to 5%, theoretically creating an employment pool of some 170,000 people. And Yeung can also recruit from Hong Kong's training schools.

Those Brits who do find work may have to compromise, particularly at junior managerial levels. "The hotel industry is not doing well, so many expats are now taking local packages with no extra holidays and lower pay," says Yeung, who adds that a receptionist may earn HK$10,000 (£1,210) gross salary a month, but tax is only 15%. There are no minimum wage or minimum working hours regulations, and catering staff are paid monthly, rather than hourly.