A bar at an Ovolo hotel in Hong Kong, where the company was founded 20 years ago. Photo / Supplied
A family-owned Hong Kong hotel company expanding rapidly in Australia now has New Zealand on the radar.
Ovolo bills itself as an independent lifestyle hotel brand, and is eyeing properties in New Zealand at a time in the property and tourism cycle that it believes will work in its favour.
Founded and owned by the Jhunjhnuwala family, Ovolo has 13 properties in Hong Kong, Bali and Australia and with unique, boutique hotels is skewed towards millennials or "those who think like millennials".
Its chief executive, Dave Baswal, said the company was looking at Auckland and Queenstown for expansion as well as Christchurch and Wellington.
Ovolo is open to different types of operating here; including management contracts, buying existing assets, and less likely, partnering to build new properties with joint ventures. Growing numbers of empty or under-used office buildings could be re-purposed as hotels.
He said the next six to nine months would be critical for hotel owners.
"There's an opportunity coming after two years of Covid had to put a bit of a dent on the cash flows of independent owners."
They could face the threat of recession, rising interest rates and a shortage of labour, meaning they could be willing to sell out.
The sweet spot for Ovolo was 80 to 200-room hotels.
The company has faith in the long-term growth of the travel sector. Having tripled its room count in the past five years, including adding two properties during the pandemic, market conditions are now ripe to take advantage of the recovery.
After opening its first hotel in Bali late last year, Ovolo is also keen to grow in major urban and leisure destinations in Asia including Tokyo, Singapore, Bangkok and Phuket.
"This is the perfect time to expand the Ovolo brand and we are open to discussions with strategic partners who would like to be part of our growth journey," said Girish Jhunjhnuwala, Ovolo's founder and executive chairman.
The 20-year-old company says that in the first quarter of this year transaction volumes in Australia and New Zealand were at record levels.
"Developers, family offices, high-net-worth individuals and institutional investors are looking at the hotel sector with renewed interest as they diversify from retail and office space due to shifting consumption and work patterns."
The company believes travel demand is set to return to pre-pandemic levels by 2023-24, further accelerated by an increased desire for people to buy experiences.
"Indeed, lifestyle hotels are set to lead the market out of the pandemic, with demand for this sector more than doubling from 2014 to 2019 and set to double again by 2023. There is a clear and growing preference for the highly connected and experiential nature of lifestyle hotels."
The company seeks to avoid the cookie-cutter approach of other hotels, said Baswal. While some other hotel brands started off as cutting edge they had been swallowed up by big chains and lost their points of difference.
While there was no right or wrong approach, he said Ovolo wanted to retain its unique features, including inclusive breakfasts, "social hours", 24-hour gyms were available, loot bags on arrival and free mini bars.
He said the mini bars were aimed at creating home comforts and would include wine, beer, sodas and snacks. One Auckland traveller who has stayed at an Ovolo hotel in Sydney said the mini bars were generously stocked.
Baswal said traditional mini bars weren't as profitable as they would appear. Equipment set up costs, cleaning, maintenance, monitoring stock and billing systems ate into profits of the notoriously expensive facilities.
The company says room rates are higher for lifestyle guests such as those at Ovolo hotels. They are willing to pay premiums of 15 per cent or more which drives both higher yields and profitability.
One room in one of its Melbourne hotels next week is today selling for A$359 ($394) a night.
It had introduced a 100 per cent vegetarian menu in many of its hotels in response to demand, Baswal said.
"It's good for the body, mind, soul and the environment."
Ovolo's interest in the New Zealand market comes as there are continued signs of some recovery for hotels in the face of increased room supply, analysts Horwath HTL says.
Average revenue per room reached $92 in May, an increase of 28 per cent on April, but well below the $104 reported in May last year and $122 before the pandemic in May 2019, according to data from Hotel Data New Zealand (HDNZ).
Occupancy and revenue per room continue to be influenced by MIQ hotels (only some of which have returned to the market) and supply growth caused by the opening of new hotels and hotel expansions.
While the reported average occupancy rate for Auckland hotels was 10 points down on last year, total demand increased after a net supply increase of 15 per cent over the past 12 months. Supply increases of 8 per cent in Christchurch and Queenstown, and 7 per cent in Wellington have also contributed to the reported occupancy rate declines.
Hotel operators reported a strong increase in business travel, both domestic and international since the opening of the borders to Australia and other visa waiver countries, Horwath HTL says.