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Ascott’s Franchise Agreements Signals Its Future Direction
Tradeable, Tradeable Ideas | 13 June 2014
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By: Lim Si Jie
Articles (169) Profile
  1. Franchising will be a key driver of growth for Ascott in the future.
  2. Economic growth in Laos will see greater influx of expatriates to Laos, thus pushing up demand for serviced apartments.
  3. The move to sign such franchise agreements would allow Ascott to expand its brand name and gain greater brand recognition much more rapidly.

Franchising Agreements
Ascott has secured its first franchise agreements in Vientiane, Laos and Bali, Indonesia.

The agreements are for an operating serviced residence in Vientiane that will be rebranded as a 116-unit Somerset Vientiane in the 4Q2014, and a 194-unit Citadines Kuta Beach Bali scheduled to open this August.

Ascott awarded the franchise for Somerset Vientiane to a subsidiary of LCD Global Investments, a real estate and hospitality group listed on the Singapore stock exchange.

Under the agreement, the serviced residence will be managed by Ascott for the first two years to ensure that it is refurbished to Somerset brand standards before transitioning to a franchise arrangement.

The Bali property is a 194-unit serviced residence that will be called the Citadines Kuta Beach Bali and is scheduled to open in August this year. The franchise for this property was awarded to PT Menara Permata Propertindo.

For The Future
Franchising will become one of Ascott’s growth drivers for the future. Through the franchise agreements, Ascott have added two more cities to their portfolio to reach 85 cities worldwide. Franchising will allow Ascott to build its scale rapidly in existing markets, while at the same time, expand into new markets.

This business model will bring Ascott closer to achieving its target of 40,000 apartment units globally by 2015 together with investments, management contracts and strategic alliances.

Moving In Tandem With Economic Growth In Laos
The Laos government has been attracting foreign direct investments in its natural resources and hydropower sectors. As the Laos government pushes for more economic reforms and creates more special economic zones across the country, the number of expatriates and corporate travellers in the economic hub of Vientiane will increase.

This will generate significant demand for serviced residence, especially since there is a lack of international-class serviced residences in Vientiane

Growing Presence In Indonesia
While most of Ascott’s guests are expatriates and business travellers on extended stay, more leisure travellers are also choosing to stay in Ascott’s serviced residences. Bali is a popular destination for holiday, meetings and conferences.

With Citadines Kuta Beach Bali, guests can enjoy the familiar homely environment that Ascott provides in another renowned destination. It will also further reinforce Ascott’s position as the largest international serviced residence owner-operator in Indonesia. Ascott has over 2,400 apartment units across 11 properties in Jakarta, Surabaya and Bali.

Bullish
The move to sign such franchise agreements would allow Ascott to expand its brand name and gain greater brand recognition much more rapidly.

In addition, I like how Ascott’s latest franchise agreements aligns with macro economic trends. It is certainly much easier to ride the trend than to work against the trend. The Laos government will want to make up for the lagged economic growth in the past few decades. Demand will grow at a much faster rate than most Asian countries if the Laos government is able to attract foreign direct investments by ensuring stability and peace in the country.

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Si Jie is no stranger to investing having started his journey at a young age. He is heavily influenced by acclaimed investors such as Benjamin Graham, Peter Lynch, and John Rothchild.

Please click here for more information about this author.

Ascott Residence Trust  1.300 -0.010 -0.76%   
Business: REIT invests in income-producing real estate assets which are used or predominantly used, as serviced residences, rental housing properties and other hospitality assets.

Insight: Apr-19, 1Q19 revenue increased 3% due to stronger ... Read More


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