Despite oversupply woes, this hotelier’s big on Asia

Oversupply is a growing problem in Asia's hospitality market, but the boss of ultra-luxury Rosewood Hotel Group has a glass half full mentality and regards it as "healthy competition."

"I am not worried," Sonia Cheng, CEO of the Hong Kong-based company told CNBC's "Managing Asia." "Sometimes, competition is healthy for the market [because it] pushes you to innovate and develop creative concepts."

Rosewood Hotel Group, formerly known as New World Hospitality, is the hotel management arm of Hong Kong's property giant New World Development. It was founded by Sonia's grandfather Cheng Yu-Tung who is also the man behind jewelry chain Chow Tai Fook. It owns deluxe New World Hotels as well as neighborhood lifestyle Pentahotels, and was renamed in 2013 following the acquisition of Texas-based Rosewood Hotels & Resorts. Now, the group has 50 hotels across 18 countries.

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Going forward, the younger Cheng is set on expanding the footprint of the Rosewood brand, with booming Asia as her priority.

Next year, the ultra-luxury hotel brand plans to open in the Cambodian capital Phnom Penh and in Phuket, followed by Bangkok, Bali and China's Guangzhou and Sanya in 2017. Meanwhile, Rosewood Jakarta will be operational by 2018.

"We currently manage 20 hotels under the Rosewood brand across 11 countries. Our goal is to double it in the next 5 years, with maybe a third of it in Asia," the 33-year-old said. "Asia will be our big focus."

Sonia Cheng, CEO of Rosewood Hotel Group.
CNBC
Sonia Cheng, CEO of Rosewood Hotel Group.

Plugging into China

The ambitious expansion roadmap began in the region's most coveted market, with the launch of Rosewood Beijing last October. The 283-room high-end hotel located in the Chinese capital's central business district, took a longer-than-expected five years to complete due to a host of challenges including delays in government approvals, Cheng said.

But all the hard work seems to have paid off.

"The response has been tremendous [and helped us] to maintain the top three position in the market in terms of occupancy rates," the Harvard graduate told CNBC. "The Chinese market consumes about 50 percent of our clientele, along with high-end individual travelers and corporate travelers which are very important customer groups."

China currently has about 110,000 luxury hotel rooms. With a glut of nearly 25,000 rooms due to enter the market in the coming months, oversupply is a growing issue, according to research firm STR Global. A double whammy of a cooling economy and an austerity campaign exacerbated the woes of the mainland's luxury market.

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While Cheng acknowledged that Asia's oversupply issue is most severe in China, room rates offered at her hotels will not be lowered.

"Even if there is a rate pressure, we try to maintain our brand positioning so Rosewood Beijing's rates remain in the top three in the market. Hotel isn't a short-term game," Cheng said.

Rosewood's focus on service quality also differentiates the brand from its high-end competitors. "We really focus a lot on personal and intuitive service, and that justifies our premium rate," the CEO added.

In the long run, Cheng told CNBC that she is confident about the growth potential of the world's second largest economy: "China will be one of the most visited destinations so there are a lot of long-term potential. Gross domestic product (GDP) is still accelerating, and China remains as one of the largest luxury markets in the world, so I am optimistic about the hotel sector here."