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Opportunities for Dusit Thani: Thai Restaurant Expansion in the Philippines

Essay by   •  October 7, 2017  •  Business Plan  •  2,563 Words (11 Pages)  •  763 Views

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Opportunities for Dusit Thani:

Thai Restaurant Expansion in the Philippines

Investment Rationale & Business Incentive

The impacts of seasonality and emerging of digital platform have become a new competitive force causing traditional lodging companies to re-examine their business models. Dusit Thani Group, also known as Dusit International, is a Thai multinational hospitality company. Today the company is a leader in hotel management and education, operates 29 properties and has over 50 confirmed projects in the pipeline in key destinations worldwide. To further capitalize on these successes, the company has a goal to develop strategic frameworks to expand its international presence and help Philippine Hoteliers Inc., its subsidiary in the Philippines, sustain its growth in a long term.

Current Situation -- Overview

As of 2017, Dusit International has 29 properties located in ThailandUnited Arab EmiratesUnited States, ChinaMaldives, Philippines, IndiaEgypt and Kenya. The Company operates under 5 trademarks, including Dusit Thani, Dusit Princess, dusitD2, Dusit Residence Serviced Apartments and Devarana. The group's other business are hotel management of both Thai and overseas properties, and education, through the Dusit Thani College, Le Cordon Bleu, and upcoming Hospitality College in Manila. The company also operates its own signature Devarana Spa and commercial building for rent. Dusit will continue to geographically diversify particularly through asset-light Hotel Management Agreements and franchising, also look to invest in hotels in key locations as well as other hospitality-related businesses.

Current Situation -- Why New Business?

Financial Overview

  • Hospitality business generated 85% of total revenue while contributed only 48% of EBIT in 2015. Hotel business generates low margin due to high expenses by nature of the industry (utilities, F&B, etc.).
  • Seasonal and cyclical risk exists due to the overweight in the hotel business
  • 70% of total revenues generated in Thailand, entails geographical risk.

Group revenue and EBIT contributions 2016[pic 1][pic 2]

Source : Dusit Thani Annual Report 2016

*Hospitality includes owned & Hotel Management Agreement

  • Facing short-term revenue loss -- The company plans to launch a new mixed-use property development on its plot between Silom and Rama IV, where a flagship hotel Dusit Thani Bangkok and Dusit Thani office stands. The construction will start in mid-2018 and expected to be completed by 2024. The development entaial a short-term revenue loss as the Dusit Thani Bangkok comprised 17% of the total revenue of the Dusit Thani group.
  • Dusit currently focus on expanding footprint globally without taking on huge capital investment. It aims to sign 20+ new agreements each year over the next few years. However, HMA generated only a small amount of revenues, according to an insight interview.

Summary – where we are currently

[pic 3]

Strategic Direction: What is the Next Chapter?

In order to build sustainable growth and expand its international presence, Dusit has identified 5-year strategic goals which are:

  • Geographic expansion – to raise its revenue contribution ratio from both domestic and international operations to 50:50 in effort to diversify geographical risk.
  • Creating new business units contributing 10% of total revenue – to neutralize risk by nature of hotel business

In addition, Dusit also identified framework for new business investment, Including

  • Preferable business characteristics with growth potential, new market expansion and those adjacent businesses with opportunity to leverage Dusit’s strategic resources and competency.
  • Quick-to-profit deals with possibility to deploy franchising model.

Thai Restaurant Expansion in the Philippines

Current Situation - Philippine Hoteliers Inc 

After two decades of operating a lone hotel in Makati, Dusit International is planning to expand outside the Philippines’ National Capital Region with pipeline hotel projects over 2,000 rooms in many regions. The hotels will also integrate a new hotel and restaurant management school-- Dusit Hospitality Management College, which will create strategic resources that can be leveraged to synergize with adjacent business.

Business Incentive for Restaurant Expansion

Diversifying into non-hotel business could help balance portfolio, reduce cyclical risk and help regulate cashflow throughout the year. Moreover, Restaurant expansion can create opportunities to leverage Dusit’s core competency in restaurant management and attract new customer to Dusit’s platform.

Objective

To explore new business opportunities in Manila by reconceptualize the current “Benjarong” to go beyond hotel outlets.


Overview – Benjarong

Benjarong is an authentic Thai restaurant established within hotels under Dusit Thani trademark.

Location:         Dusit Thani Manila, Makati, Metro Manila

Offering:        “Authentic Royal Thai Cuisines” provided by Thai chef with full bar & private dining area available

Feel & Touch:        A place for special occasion, elegant luxury traditional Thai interiors, Thai classical music, staffs wearing traditional Thai costumes

        [pic 4][pic 5]

[pic 6]

Positioning:        Fine dining Thai restaurant  

Price:        ~1250P/person

Differentiator:        Being the only luxury fine-dining Thai restaurant in Manila and the only brand with a strong authenticity perception.  

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