PACIFIC REPORT : Asian Hospitality : Hotels: While many U.S. chains are cutting back, others run by Japanese and Chinese companies are expanding--but selectively.


While much of the U.S. hotel industry has retrenched after suffering expansion-related losses in recent years, Japanese- and Chinese-owned companies are aggressively buying and building new properties in America to increase their presence in the hospitality business.

Anticipating an industry rebound, well-heeled Asian hotel operators are aggressively hunting for high-profile properties and building new facilities in major travel destinations such as Los Angeles, San Francisco, San Diego, Miami and Atlanta.

To be sure, hospitality has become a riskier business, and executives at Asian-owned hotel companies concede that they are gambling on growth. Occupancy rates nationwide have been tumbling, and a number of U.S. hotel firms are in poor financial condition or have been selling troubled properties.

However, the Asian firms hope to capitalize on their worldwide reputations, growing numbers of Asians traveling abroad, customer loyalty and cross-marketing with their other operations, such as airlines. They also note that they are aiming at the less-volatile part of the hotel market: luxury four- and five-star properties.


Deluxe hotels primarily attract business executives and well-to-do tourists--the kinds of travelers who tend to travel despite recessions, says Jack Barthell, managing partner at the Los Angeles offices of Kenneth Leventhal & Co., an accounting firm that provides consulting services to the hotel industry.

“The industry has overbuilt and there are too many hotel rooms,” Barthell says. “But these (Asian) operators are planning to appeal to the high end of the business, which is faring better than the rest of the industry. Asian hotel companies are the bright light of the hospitality industry right now. They are generally strong . . . and well-managed. By expanding, they are bringing different parts of the world closer--making the world more of a global village.”

Indeed, American hoteliers such as Hilton Hotels--once the leading expansionists in the hospitality industry--have given way to Asian firms that are planting their corporate flags on properties around the globe. Chains such as Hong Kong’s Omni Hotels and the Japanese-owned Pan Pacific Hotels & Resorts are searching for opportunities to acquire or manage additional properties in the United States.

Meanwhile, the corporate emblems of companies such as Hong Kong’s Peninsula Group and Japanese-owned giants such Nikko Hotels International and ANA Hotels are becoming common in Asia, Europe and America.

In fact, ANA Hotels, owned by Japan’s All Nippon Airways, is poised to make an even greater splash in the U.S. hotel industry. The company last week announced that it plans to acquire or build 10 to 15 new hotels over the next five years in the United States and Canada, including a new 500-room hotel on Grand Avenue near 7th Street in downtown Los Angeles. ANA plans to commence construction at the site later this year and expects to complete the $150-million project by 1993 or 1994.

While ANA studies designs for a new Los Angeles property, Hong Kong’s Peninsula Group and Japan Air Lines’ Nikko Hotels are putting the finishing touches on separate hotels in Beverly Hills. Both properties--luxury hotels with a myriad of amenities--are scheduled to open later this year.

The Los Angeles area is a prime target for many Asian hoteliers because location is crucial in the hospitality industry, said Yoshio Tanaka, president of ANA Hotels International, parent of ANA Hotels USA. Tanaka visited the Southland last week to help celebrate the opening of ANA’s Los Angeles office, which will serve as the company’s North American headquarters. The company already owns three hotels in the United States--one each in Hawaii, San Francisco and Washington--and 28 properties elsewhere in the world.

“Los Angeles is the gateway to the American continent for the Japanese and it is the gateway to the Pacific Rim for the American people,” Tanaka said.


Noting that Los Angeles attracts more Japanese investment than any other U.S. city, Tanaka said he hopes to attract many Japanese business travelers.

Luxury hotels cannot survive on the business of only American travelers, said Paul T. Carolan, vice president for sales and marketing for ANA’s North American operations. “Deluxe hotels also need business from Asian, European and Latin American travelers,” Carolan said.

Carolan acknowledged that there has been a temporary decline in business travel and tourism.

The average occupancy rate for hotels nationwide has fallen to 55.8%, down from 58.9% a year ago. In the Los Angeles area, the drop has been even more dramatic--to 60.9% from 67.7%.


But Carolan said he expected long-term growth in the hotel industry to resume when the recession ends. He also said ANA can carve out a larger niche in the American market despite industry problems.

“While we have seen dramatic overbuilding, the industry continues to offer significant opportunities for the best operators (with) strong international organizations, strong marketing and visibility in key cities,” Carolan said. “We’ll grow through construction, acquisition and conversion of existing properties.”

ANA has targeted Chicago, Boston, New York, Hawaii and Miami as future hotel sites. However, the company is particularly focused on building a West Coast presence, with plans to build or acquire new hotels in Portland, Seattle and San Francisco. In addition to building a flagship property in Los Angeles, ANA plans to establish a presence in San Diego.

Meanwhile, some other Asian-owned companies are on the prowl for opportunities in the West. For example, Omni Hotels, owned by the Hong Kong-based Wharf Ltd., plans to acquire properties along the Pacific Coast over the next five years and wants to purchase at least one Western hotel some time this year, said Stephanie Seacord, a spokeswoman for the company.


Seacord said Omni wants to acquire existing hotel properties rather than build new facilities because it’s concerned about the nationwide glut of hotel rooms. Omni has 35 U.S. hotels, but only three are west of the Mississippi.

“Some travelers look for Omni, but can’t find us in the West,” Seacord said. “If we’re going to be a national chain, we’ll need a presence in all the major (American) cities.”

Some other Asian-owned companies recently expanded their presence in the West. Pan Pacific Hotels & Resorts, a subsidiary of Japan’s Tokyu Corp., opened its Pan Pacific Hotel San Diego last month. The hotel is part of a $130-million office-and-hotel complex in the city’s financial district.

“We’re very optimistic about San Diego as a business and leisure destination,” said Linda Adams, a spokeswoman for Pan Pacific Hotels.


The company already has a Southland presence through the Pan Pacific Hotel Anaheim, which opened in 1984, and it acquired San Francisco’s Portman Hotel in 1990. The company is also looking for an opportunity to manage hotels in Seattle and in Southern California, Adams said.

“Our goal is to be in major Pacific Rim cities and Los Angeles is our next target,” she said.

The Peninsula Group, owned by a Hong Kong company, has nearly arrived in Los Angeles. The company plans to open its deluxe Peninsula Beverly Hills in August.

The Peninsula Group will be competing with Japanese-owned Nikko Hotels International, which will open the Hotel Nikko at Beverly Hills this December in a bid for more of the business-traveler market.


“Our goal is to build a hotel in all the (coastal) gateway cities,” said Alphy Johnson, general manager for Nikko’s soon-to-be-opened Beverly Hills property. “We’re looking for opportunities in Seattle and Boston now.”

Building Boom

Asian-owned U.S. hotel properties completed, renovated, nearing completion or in the design stage

Name or Site: Hotel Nikko Atlanta Owner: Japan Air Lines Status: Opened in October, 1990 Name or Site: Pan Pacific Hotel San Diego Owner: Tokyu Corp. Status: New property opened April 2 Name or Site: The Peninsula Beverly Hills Owner: Peninsula Group Status: New property to open in August Name or Site: Essex House, New York Owner: Japan Air Lines Status: Reopening in September after major refurbishing Name or Site: Hotel Nikko at Beverly Hills Owner: Japan Air Lines Status: New property to open in December Name or Site: ANA Hotel Miami Beach Owner: All Nippon Airways Status: New property to open in fall, 1992 Name or Site: Grand Avenue (site), Los Angeles Owner: All Nippon Airways Status: In design stage


Asian hotel companies looking for opportunities to expand in the United States

Company: Parent ANA Hotels USA: All Nippon Airways Nikko Hotels International: Japan Air Lines Omni Hotels Group: Wharf Ltd. Pan Pacific Hotels & Resorts: Tokyu Corp. Peninsula Group: Hongkong & Shanghai Hotels Ltd. Sources: ANA Hotels USA, Nikko Hotels International, Omni Hotels Group, Pan Pacific Hotels & Resorts, Peninsula Group

Some Prominent Asian-Owned California Hotels Name: Le Meridien, San Francisco Acquired: ANA Hotels USA (Japan) When acquired: 1988 Approximate purchase price: more than $100 million Name: Regent Beverly Wilshire, Beverly Hills Acquired: Regent International (Hong Kong) When acquired: 1985 Approximate purchase price: $125 million Name: Biltmore, Los Angeles Acquired: T.A.T. Los Angeles Ltd. (Japan) When acquired: 1989 Approximate purchase price: $220 million Name: Mark Hopkins, San Francisco Acquired: Seibu/Saison Group (Japan) When acquired: 1988 Approximate purchase price: Acquired as part of $2.27-billion purchase of Inter-Continental Hotels chain