Robert Kuok on Shangri-La Hotels

 

         All the passages below are taken from the book “Robert Kuok---A Memoir” written by Robert Kuok with Andrew Tanzer. It was published in November 2017.

 

IN 1968, a new ball came into my hands: I was offered a ten percent shareholding in the land where Shangri-La Singapore sits today. This seed eventually sprouted into Shangri-La Hotels & Resorts. As of September 2017, there were 100 Shangri-La hotels in operation, which are widely regarded as one of the finest chains of luxury hotels in the world.

I didn't plan to develop a hotel chain at the outset, but I was eager to diversify from commodity trading. Why? Commodity trading is inherently risky. The only way you can trade commodities and make a fortune is to take substantial risks. You either go long and hope the market will rise, or you go short and hope the market will collapse. There is no joy in getting too big in commodities trading. If you reach too high, you are in danger of going bust. I am reminded of the case of Julio Lobo, a legendary Cuban-born King of Sugar. Once renowned for his judgment, he got it badly wrong in the volatile year of 1963 - and it left him penniless. If I tried to grow bigger and bigger in commodities, I would always run the risk of suddenly losing US$50 or 100 million at a go.

Hotels were one way to diversify, though the seed I planted in Singapore germinated in a fairly convoluted way. It all started when my old friend Ang Toon Chew, the man who had showed me the rice trade in Bangkok in the early 1950s, was approached by a land broker in Singapore in 1967 to purchase the land on which the Shangri-La Singapore sits today. Borneo Company (Inchcape Group) wanted to sell 5.5 hectares on one side of Orange Grove Road, which branches off from Orchard Road, and another 0.8 hectares across the street. Borneo Company bungalows sat on both sites.

Toon Chew very astutely bargained and knocked the price down to S$5 a square foot for the 5.5 hectares and a lower price for what he called the inferior piece across the road. I heard about the land deal through the grapevine.

I eventually built three Shangri-La buildings on the larger site - the original tower block, the Garden Wing and the Valley Wing - and Shangri-La serviced apartments on the smaller lot. But I was not involved in the original acquisition of land.

Toon Chew bought the sites through Petaling Garden, a Malaysian real estate company of which he was founder, chairman and largest shareholder. My old commodity-trading friends Ho Yeow Koon of Singapore and Tan Kim Yeow of Penang were also large partners in Petaling Garden. They planned to build terrace houses on these prime Orange Grove Road sites, until a Cambridge trained architect named Heah Hock Heng (my second son Ean later married Hock Heng's niece) and my close friend Jacob Ballas both got involved.

Hock Heng had been to see the three Petaling Garden partners and told them, "Don't build terrace houses there. That's a foolish thing to do. It's a waste of prime land. Build a hotel instead." Hock Heng, who was a friend of mine through his older brothers, harnessed Ballas, a leading stockbroker of Singapore. They both urged Toon Chew, Kim Yeow and Yeow Koon to build a hotel, not two-story terrace houses, on such beautiful land virtually in the middle of the city of Singapore.

When the Petaling Garden partners replied, "We don't know how to build a hotel," Hock Heng and Jacob Ballas suggested that they approach me about joining with them. For one thing, they noted, I got along well with senior Singapore Government officials, so I could help in applying for permission to convert the land from residential to hotel use.

I spurned the idea at first. I showed a bit of temper and said, "I don't want to be mixed up with that crowd in any kind of property development. I have had enough of them."

There was a history to my animosity towards the Petaling Garden partners. I was an original shareholder in Petaling, but had sold my stake in the early 1960s after I had a tiff with Ang Toon Chew. We planned to build a housing development near Kuala Lumpur. I wrote a letter, in English, to a Malay friend who was district officer and could help us to gain government approval for the project. Toon Chew, who didn't know one word of English, wanted to correct my letter. I got very upset with him. "You are picking on nonsense," I said. I went back to my office, called up Kim Yeow and sold all my shares in Petaling Garden to him.

Soon Ballas, who was my stockbroker, started working on me to join in the Orange Grove Road development. "Come on, Robert. Don't always be so quarrelsome and uppity with people. You're just hot-tempered. Cool down. I have talked them around. They are willing to let you come in."

Jacob Ballas was a fantastic friend who taught me a great deal about the Jewish faith and practices. He was born of a poor Sephardic Jewish family in Baghdad, but, through hard work and shrewdness, made money in Singapore and became the leading member of the Jewish community there. He founded the stockbroking firm J Ballas & Co, and was later appointed Chairman of the Singapore Stock Exchange.

Jacob's father, Shua Ballas, emigrated with his family from Baghdad to Singapore, where he dabbled in various kinds of businesses before going bankrupt during the Great Depression. Jacob's father died when Jacob was quite young, leaving only him and his mother. A very devout Jew, Jacob's life was wound around his mother. I knew I could never call him after 5 pm on Fridays because he rushed home to shave and prepare to observe a proper Jewish Sabbath, which begins at sundown Friday evening. The Ballas family kept a kosher household, and even trained their Cantonese servant to cook kosher meals. So, Jacob grew up with a strong religious discipline.

Jacob only finished O-levels in school, then he started work as a car salesman. His big break in life was with Sun Life Insurance. Jacob had the gift of the gab. He could talk the hind legs off a donkey, and he sold many, many insurance policies. In colonial times, most Chinese tended to be shy and not talk too much in case they fell afoul of the authorities. You were supposed to be obedient, nice and get patted on the head by the colonial governors or the civil servants. It was the same story in Malaysia, Sri Lanka, Hong Kong and the other British colonies. It took a Sephardic Jew, throwing caution to the wind, to talk and talk and talk. He was a roaring success in insurance, and, within two or three years, was the leading agent in terms of sales.

My first encounter with Jacob was an inauspicious one. In his school days, he befriended a bright Eurasian called Hugh Lewis, who went on to Raffles College. After graduating from Raffles post-war, Hugh was appointed a food controller in the Malayan Colonial Government, which was how we became reacquainted. One day in the late 1950s, Hugh called up and said, "I have an old classmate and friend, Jacob Ballas, who is a leading insurance broker in Singapore. He would like to come and see you."

I responded, "Hugh, if it is to sell me an insurance policy, please don't introduce me." Hugh pleaded with me - I think he was under a lot of pressure from Jacob.

Jacob came to my office with Hugh, who left shortly afterwards. Jacob talked a lot and I listened to him, then I counter-argued. I said, `Jacob, you're trying to sell me, what, a £10,000 policy? Now, if you are trying to sell me a £100,000 insurance policy on my life and it's a ten-year policy, I have to contribute around £ 10,000 every year. It's a big chunk of my income. If I take a policy of £10,000 and I contribute £1,000, which I can easily afford, if I drop dead within the first ten years of my policy, my beneficiaries will receive £10,000. That's not enough to send any one of them to college. In other words, I am chasing my own tail all the time."

Later, we met at the odd party, and, when I began to sniff around the stock market and sometimes trade in shares, Jacob would say, "Oh, do this, do that." He was a shrewd investor and a kind and generous man. We became great friends.

Jacoh's favourite hobby was the horse races at the Singapore Turf Club. I wasn't interested in the races, but I saw very early on why Jacob became successful. He was extremely streetwise; not an intellectual.

So how then did Jacob prosper in a Chinese city? It's very simple: Chinese sometimes regard fellow-Chinese as their own worst enemies. When Chinese become super-rich in Singapore, in public they might seem very warm to each other, almost hugging and kissing at the Turf Club or in restaurants. But in their hearts they all had daggers semi-drawn. If Mr ABC had suffered a minor insult at the hands of Mr XYZ, to whom did he go to pour his heart out? On whose shoulder could he cry? Eventually, they all went and cried on Jacob Ballas' shoulder.

That is the human world. It is the world of the butterfly. How do plants pollinate? The butterfly's sticky feet picks up some pollen; the insect flutters to other plants and the seeds form. Because he was a streetwise man, his pleasure in life was meeting his fellow beings. You never found Jacob spending hours reading, thinking or writing.

So everyone came to him. They talked about virtually everything, from the biggest scandal to the most unimportant little event. And Ballas knew how to coo and to sigh at the right times. He saw cross-sections of strengths and weaknesses in Chinese businessmen and through these insights he even knew how to invest in their companies, when to buy and when to sell.

I have long felt that there are many traits shared by the Jews and the Chinese. For example, when they meet a stranger for the first time, they size him up very fast. How much can they confide in this stranger, where are his sharp edges, should they steer clear of him?

So it was this dear friend, Jacob Ballas, who patched up my relationship with the Petaling Garden crowd.

My indirect talks with the Petaling partners went on for weeks before they officially approached me and asked if I would join them. They needed my help to get the site approved for hotel development. I replied, "Okay, but I am an outsider today. What do you want me to do?"

They said they would cut me in for ten percent, prorated according to their shareholding in Petaling Garden. But, they quickly added, "We've been sitting on the land for a year, so you have to compensate us for it as well as the appreciation in land value."

I thought to myself, "When I invited Ang Toon Chew and Tan Kim Yeow to be my sugar-refinery partners in Prai in 1959, I brought them in on the ground floor. The refinery was already a roaring success by 1966, making them pots of money. I also offered them ground-level entry into my flour-milling business. But now they offer me this piece of land, and it's not at their cost-price. They want paper profits on appreciation of the land. They are bringing me in on the third floor."

The irony was, though I owned only ten percent, it was my personal effort that made the whole project hum. I had stayed in some of the finest hotels in Europe and America in the 1950s and 1960s and made many quiet observations. I take in everything around me deeply. In fact, in my subconscious, I had admired the hotel industry - I don't think I ever voiced my feelings to anyone - and knew that if one day I became a hotel owner or developer I would build some very fine properties.

In the 1960s and the first half of the 1970s, I spent an average of 70-100 days a year in excellent European hotels. I stayed in small hotels in Bury Street, London, such as Quaglino's. Then, Grosvenor House Hotel along Park Lane became my favourite London hotel for many years. I only switched to the Dorchester Hotel down the road because Dorchester installed IDD dialling much earlier. In Grosvenor House, when you picked up the phone, you had to ask the operator to get you an overseas line. For a businessman, that's not only tedious - it was also losing me precious business time. So, I became a frequent guest of the Dorchester and, even during peak season, I could always get a room. I also stayed at Inn on the Park.

Going across to Paris, I stayed at The Crillon and at George V, but my Paris favourite became Le Bristol. In Rome I stayed in Excelsior, and in Munich in two fine hotels. In Geneva my favourite was Hotel D'Angleterre. In 1965, I went on an extensive European trip with Joy, my late first wife. One of our first stops was Vienna, and we stayed in the Imperial Hotel. I was so impressed! From the outside, the building wasn't very much, but as soon as you stepped into the hotel you knew you were in an extremely well run place. The Imperial was a smallish, 200-room property, but each room was beautifully appointed. That hotel grabbed my imagination and made a deep impression on me.

So, I felt that if anyone ever asked me to build a hotel, I would know what I wanted. My mind took mental photographs of everything I saw and experienced - various physical comforts and discomforts and, of course, service qualities.

Probably the best service I ever had was in Grosvenor House and the Dorchester in London. At the Dorchester, it was my good luck to get to know the front-desk reception staff, the butler in my room, the room-service waiters, the Dorchester Grill waiters, and the doormen. I recall that many of the doormen were retired soldiers or policemen, big chaps who stood about 1.9 m tall. The driveway of the Dorchester was very tight. Rolls-Royces drove up, taxis snaked in between limousines, and yet that one doorman could manage everything efficiently. I thought their performance was nothing short of brilliant.

And I could say the same of all the others I met in the Dorchester Hotel. If I must single out two outstanding staff, one would be my butler, Leslie; the other a waiter whose name I have regretfully forgotten. Leslie was a slim, very smart-looking young Englishman. As soon as I arrived, I'd press the button to call for him. Leslie would come in, say, "Good morning, Mr Kuok," open my suitcase and unpack everything for me. Then I'd press a second button for the waiter. When he arrived, I'd say, "The usual," and he'd bring me a pot of hot tea and scrambled eggs on toast.

Meanwhile, Leslie would be collecting my two pairs of shoes for polishing, my shirts and two suits for pressing. I often wondered how he managed all this with just two arms. He opened the door and let himself out. Within 40 minutes, he was back with the two pairs of shoes polished, at least one shirt and both suits pressed. That was real service! I gave him a £1 tip. I am talking about the 1960s, so a pound was fairly large. But I've found that service is not a matter of just tipping. It's a matter of treating the man as a friend: "How are you, Leslie? How have things been in my absence?" And said with true feeling. In other words, I really cared for him, and he felt it, so he responded in like manner. That, I believe, is the way to treat people. It's not just about throwing money around. In none of my travels have I experienced service equivalent to the smartness of the Dorchester in those days.

Nevertheless, learning to become a hotel owner in Singapore was an excruciating experience for me. We groped. Heah Hock Heng, our architect, didn't have real hotel design expertise, but he'd met a Japanese hotel architect named Yozo Shibata, who was involved in the Mandarin Hotel in Singapore. The Mandarin was on Orchard Road about 3 kilometres from our site. By the time we met Shibata, whom we eventually hired as a consultant architect, the Mandarin's foundation and piling were finished and the building was constructed up to level four or so. In other words, George Lien and his team had a head start over us by at least two years.

I remember that at one of our early hotel board meetings, I predicted that we would overtake them, and indicated that that must be our target. I had met Lien and knew he'd be very indecisive and would keep on chopping and changing plans. He didn't like this and he didn't like that; he scrapped this and he scrapped that. We opened the Shangri-La in February/March 1971. George Lien's Mandarin opened a few months later.

Speaking of board meetings, my partners were a joke at the beginning. At the first proper board meeting, I said to them, "We can talk in Chinese, but the records must be kept in English. Don't you agree?" They all said yes. I owned only ten percent, yet I took the chair without formal appointment. Nobody wanted to propose me, but neither did they want to propose anyone else. The meeting had to start, so I called it to order and sat in the chair that became the Chairman's chair. When the minutes came out, I was the Chairman.

I pointed out that they had not even properly arranged the affairs of the hotel company. I found a shell company and said, "Look here, this company is insolvent, but it's owned by ten firms. So it's insolvent but it's not bankrupt. It's got a tax credit. Let's buy the shell from the other partners." The shell company was called Guan Thong & Company Limited. "Having bought it, we'll inject this Shangri-La land into it. We'll go to the registrar of companies to change the name, and then we'll also recapitalize the company to make it solvent." We did as I proposed.

Now, what's the origin of the wonderful name Shangri-La? The hotel was not named when I joined Ang's group. Credit for the name must go to an old French friend of mine, Georges Toby, a Moroccan-born Jew who worked for many years in Tokyo for Sucre et Denree, the large Paris-based sugar trader. Georges' boss sent him from Tokyo to see me in Singapore sometime in 1968. I didn't have much sugar business with Georges. I took him to the Raffles Hotel grill for lunch; then we ran out of conversation. He was unwilling to leave me, so I said, "Mr Toby, I've got an appointment to go and see a piece of land on which I am building a hotel with my partners."

He said, "Hotel? May I come along?"

We jumped into my car. From Raffles Hotel to the site is about 5.5 kilometers. Georges said, "What are you calling the hotel, by the way?"

"Well, as you can see, this is called Orange Grove Road. I'll call it Orange Grove Hotel," I replied.

Georges shouted in my car, "That's a stupid name!"

I said, "Okay, have you any better ideas?"

Georges hesitated for about two or three seconds and said, "Got it: Le Shangri-La!" I immediately thought: what a wonderful name!

Georges finished his work and left Singapore. I brought the name "Shangri-La" to my partners. They all shouted me down. Toon Chew cried out, "One of the massage parlours I go to in Bangkok is called Shangri-La." A thought immediately went through my mind: "If my wife's name is Ann and I meet a hooker called Ann, then does that make my wife a hooker?" How irrelevant and illogical! What are these guys talking about? So I said, "Okay, rubbish. No sweat off my brow. If you don't want the name, forget it!" Thank goodness we kept it.

I took to commodities trading like a young duckling takes to water. But hotels - I didn't have a clue! I didn't understand good hotel architecture, interior design, management, or even room size. What I did know from my experience in the business world was that if you meet with the wrong types and you're led up the garden path, you could lose years of time and end up with lawsuits on your hands. Then you would be tied up in knots.

I began to appoint assistants, one of whom was my brother-in-law, Leslie Cheah. I often lost my temper with him. Leslie wasn't streetwise and took wrong turns. I repeatedly had to haul the whole train back to the starting point and turn it left instead of turning right.

The Japanese architect, Shibata, began to play a growing role in designing the hotel. I provided some input, more from the business-economics point of view, leaving the technical design and construction of the hotel to him and an English engineer named Jack Simpson, who had retired from the Malaysian Government and came to work for Kuok (Singapore) Ltd.

In 1968, after Shibata had produced some drawings and plans, he invited a couple of my colleagues and me to meet him in Tokyo. Halfway through the meeting, Shibata could see that we were really greenhorns, totally lost. He asked, "Who is managing the hotel?"

We said, "We're going to try and manage it ourselves."

Shibata said, "That's difficult, Kuok-san. Hilton and Sheraton already have operations in Singapore, but there is a new group called Western International Hotels (later renamed Westin) of Seattle. I recommend you try to get in touch with them."

I had never even heard of the company and asked if I needed to fly to Seattle.

Shibata said, "Wait. According to my information, they will be in Bangkok. They are talking with Dusit Thani Hotel (Shibata was a designer for Dusit Thani, too). I believe the Chairman and Chief Executive, Eddie Carlson, will be there." Carlson would arrive that very evening in Bangkok and stay for two days.

I immediately booked a seat on a flight arriving in Bangkok that evening. I checked into the Erawan Hotel, which was within walking distance of the old Peninsula Hotel (no relation to the Hong Kong firm), where Carlson was staying. The following morning, I waited until 9:15 am to call, in case Carlson was exhausted from the long flight from the US, but not so late that he may already have left for his appointments. An American, Carlson's assistant, answered my call.

"May I speak to Mr Carlson, please."

"Mr Carlson? Yes, this is Mr Carlson's room, but who are you?"

"Robert Kuok from Singapore."

"What business do you have with him?"

"He is not expecting me, but I'd like to have a word with him."

"Oh, you know he is a very busy man and every minute of his time is already arranged. I don't think he can see you."

 "Well, could you please ask him for me?"

 “All right, hold on."

There was murmuring in the background. The assistant returned to the phone and said, "I am sorry. I have checked with Mr Carlson, and he really is too busy. He won't be able to see you."

I said, "Well, you might let him know that I am going to build what I think will be the best hotel in Singapore. I know that he would like to manage a hotel in Singapore. So if he's not prepared to talk with me, he's going to pass up a very good opportunity."

The man inquired on which road would the hotel be situated. I described it to him. He asked me to hold on for another moment, and went and spoke to Carlson. After a minute another voice came on the line: "Eddie Carlson speaking. Is that you, Mr Kuok?"

I said, "Yes," and we chatted.

He liked what I described and said, "I can spare about fifteen minutes. Where did you say you are staying?"

I had told him that I was in the Erawan, just around the corner. "Okay, I'll come with so-and-so, who's traveling with me, my VP. Expect us in about five minutes' time."

He ended up staying for almost an hour. We chatted and within five minutes hit it off. We were on the same wavelength, talking the same language with the same enthusiasm. We got warmer and warmer. But that was Eddie Carlson, a lovely man with high principles who wanted a good deal. And he was talking to someone who also wanted a good deal. There were no side issues, no lining of pockets; everything was clean and above board. Then we both relaxed. We almost had an agreement; we had only to flesh out certain details. We weren't going to quarrel over terms, because we had discussed and agreed on the broad principles.

Then, somehow, the conversation strayed to politics, culture and the Vietnam conflict. He asked me what I thought about Vietnam. This was, after all, at the height of the Vietnam War and, sitting in Thailand, we were practically next door to the conflict. My Japanese friend at Mitsui & Co, Mizuno Tadao, had fed me information from time to time about the ferocious American bombing of Vietnam. I recall Mizuno saying something like, "According to Mitsui's information, from high up in the Japanese Government, three days of American bombing of Vietnam is the TNT firepower equivalent of the entire 1944 Allied bombing of Japan." I was churned up by all this killing and maiming.

I replied, "Mr Carlson, why are you Americans bullying the Vietnamese? Why go there to bash their heads in, defoliate and contaminate their rivers and their soil - Agent Orange and all that."

His face turned black; he was furious; he grew stiffer and stiffer. In his mind, he must have thought, "I am now talking to a communist." Our relationship soured in that instant; the atmosphere changed and suddenly he was looking for an excuse to end the meeting.

I could see his assistant was as if jumping on hot coals. Now, when I get started, I don't let up. So I rubbed a bit more salt into the wound. I said, "If you have any influence at all back home, you should go back and tell your government to end this monstrous war as soon as possible. You are killing a lot of innocent Vietnamese people, human beings who don't deserve to die. You're pummelling away at these poor people."

Carlson ended the meeting abruptly. We shook hands very coldly. He said, "Goodbye," turned around and left the room.

I was quite taken aback by Carlson's reaction. In my mind, as he was crossing me out of his mind, so was I crossing him out of my mind. I thought, "I am not going to do business with a man who can't even listen to the facts! If he refuses to believe that two plus two makes four, then what sort of management company am I signing up with? Of course I am not going to sign up with him."

The fact is, I very often talk politics in business. That's why I am what I am. I feel that the two are indivisible, and my partner had better know how I feel about life. Otherwise, how can any partnership last?

So I returned to Singapore from Bangkok. Jacob Ballas, who was a director of Shangri-La, had heard of my impending meeting with Eddie Carlson. He asked me, "What happened?" So I told him the whole story. Jacob said with a sigh, "Oh my God, Robert; you and your political views again."

I said, "Ah, never mind, Jacob. You know I am a strong-tempered man. I don't need him either. Forget them."

After that Bangkok encounter, Western went quiet on me for three months. Then, one day, when I planned to leave for London at about nine in the evening, I had a noon-time call from Jacob. "R-o-b-e-r-t," he said. Whenever Jacob's voice started like that, I knew he was onto a thorny subject. "Have you heard that Bob Lindquist and Bill Keithan [both senior vice presidents] of Western Hotels are in town?"

"Yes, I've heard."

He said, "They called me today. They came around to see me, to ask me to please make an appointment with you."

"I don't want to see them," I said. "They were rude to me after a nice meeting. They talked politics. I spoke my mind, and they wanted to play big-power politics. Just because they are American, they are not going to impose their will on me!"

Jacob cajoled me, "Come on, Robert. Cool down. Cool down. Keep your shirt on. Don't fight with everybody. These fellows want to pay a courtesy call on you. Don't be rude."

"I know they've gone around town and discovered there is no better location than ours, no better hotel than what Shibata is designing for us. Forget them!"

Jacob pleaded, "Robert, ten minutes. See them at five o'clock. Your flight is not until nine."

My wife, joy, was around and, of course, she gave me a glance asking, "Why are you so uppity?" These gestures help in a family. So I relented.

"Okay, I'll see them. What's more, since they've come from America, I'll put a bottle of champagne on ice. Have them come around four-thirty this afternoon."

They came to my home in Queen Astrid Park. They were very nice, polite and accommodating, almost as if atoning for Eddie Carlson's earlier behaviour towards me. Bill Keithan was in charge of hardware, the look of the hotels; Bob Lindquist, who later rose to become company president, was strong in operations. They said they'd been around Singapore and yes, frankly, they had to admit that we had the best product available. They wanted to recommend to their head office that Western negotiate a management contract with us.

I was accommodating. I said, "Fine. I have not signed up with anyone." I pointed out that my shareholding (at this point) was only ten percent. The conversation ended on a happy note, indicating that we would reopen talks. As they were about to leave, I said, "Bob, I want to ask you a very personal question. The months of silence, was it due to the fact that when the subject came around to Vietnam, Eddie thought I was a communist?" I saw a terrible cloud sweep past his face. They both blushed and gave each other embarrassed looks. So I said, "Well, Bob, if you don't want to answer the question, it doesn't matter. For me, I have my answer." Carlson must have gone back to Seattle, briefed those guys and said, "Kuok is an interesting man, but I think he is a commie." I said to Lindquist and Keithan, "Okay, I am prepared to forget the past, provided Eddie Carlson does the same."

They replied, "Mr Kuok, believe us; that's fine. Otherwise, we wouldn't be here today." Then they returned to Seattle and I flew to England that night for my sugar business.

Within a few weeks, we had an invitation to go across to Seattle. That was in December of 1968. I took Geh Ik Cheong and Tan Chin Nam, Tan Kim Yeow's younger brother. I said to the two of them, "I'll stay in my hotel suite. You two go out as battering rams first." They went off for two and half days of talks. First day, very slow progress. Second day, a bit more progress. I said all along the way, "Don't get bogged down. Wherever you cannot proceed on a point, agree to list it. When you have gone through the whole draft agreement, give me a list of the points where you are bogged down."

Every time Ik Cheong and Chin Nam got stuck on a point, they dealt with Western's executive vice president, Harry Henke III, and narrowed down the list of disagreements. On the third afternoon, Ik Cheong and Chin Nam phoned me. "We are down to about 20 sticking points," they said. "Can you join us now?" I said, "Fine." I put on my shoes, went down, and shook hands with Western's people.

Henke was one of the most marvellous Americans I have met in my life. I said to him, "Harry, now's the time for give-and-take. What do you say someone be the umpire. He'll read out point number one of disagreement and whoever can give way says, `We concede.' But let's do it as friends." We started and he immediately said: "Concede." Next one, I think I said, "Concede." We breezed through the list in less than half an hour. Once or twice we discussed a point on which either he convinced me and I conceded, or I convinced him and he conceded.

Then Chin Nam, who loved to gamble, said to Ik Cheong and me in Chinese, "Hey, since we have finished, how about the three of us go down to Las Vegas and see a bit of the gambling world?"

I asked Lindquist and the others, "Is it possible to help us hurry up and have this agreement typed so that we can sign it? If it takes two hours, can you get us a flight that leaves between 7 and 8 pm for Las Vegas?" So that was how we left, all in a hurry.

We flew first to Las Vegas, stayed two or three nights, gambled and saw Boulder Dam. Then we flew to Los Angeles - my first trip there - and stayed in a new Western hotel, Century Plaza, and met the general manager, Harry Mullikin, who later rose to Chairman and CEO of the parent company.

Western's terms for managing the Shangri-La Singapore were quite fair: A US$200,000 front-end fee for their expertise during construction, and then five percent of gross operating profit after the hotel opened for business in 1971. But they made a large blunder in the contract. They inserted a clause saying the contract would stretch ten years from the date of signing in Seattle. We didn't open the hotel until two years and four months later, so Western only received seven years and eight months of revenues. They were good hotel operators and a fine bunch of people, but they weren't skilled businessmen.

By the time the contract came up for renewal in 1978, Eddie Carlson was gone, which was a pity since we were close friends whose minds worked virtually on the same wavelength. United Airlines, based in Chicago, had swallowed Western. After United bought Western International Hotels, they took the CEO of Western, Eddie Carlson, and made him Chairman of UAL.

Within the first three or four years of owning a hotel in Singapore, I realized that there was very little magic in running it. So, by 1978, I had already decided to establish my own hotel management company in Hong Kong. However, at that point I was so involved in developing my other businesses that I didn't want to get bogged down with a new venture. So, I offered Western a five year extension for the Singapore Shangri-La, and they took it.

Around the same time, I built Kowloon Shangri-La Hotel in Hong Kong. Here again, Western blundered by missing an opportunity to invest in a prime piece of Hong Kong real estate before an enormous escalation in property values. I offered them 25 percent ownership of the property, joining me at ground level even after I had already put money in for more than six months. I kept the offer open for two months. They asked for an extension and I said, "Okay, I'll give you one more month." They sent staff over, checked with some locals and kept on looking at this gift horse of mine in the mouth. Maybe all gift horses have bad breath, but they mistook the bad breath for a bad deal. The deadline came and I kept quiet. A few weeks later, they regretted that the deadline had passed and they made many attempts to call me from Seattle.

"Please, we want to come in now," they said.

I told them, "No way. Nowhere on earth can you find a man who will give you an offer for three months, even allowing you to look at the gift horse over and over in the mouth. No way!" I had made up my mind to manage Kowloon Shangri-La, but Western pleaded and I gave in and agreed to a management contract. I bought myself time, really.

Later, Eddie Carlson expressed his deep regret for passing up the offer to invest in the Kowloon Shangri-La. He said to me, "In future, Robert, I want to be in any of your China deals. Please, if you don't mind, be kind enough."

I replied, "You don't want to join me in China, Eddie."

At that time, if China gave you a 20-year cooperation deal they were being generous (Shangri-La Beijing, my first major hotel project in China, was granted only a 13-year cooperation period). "I do it for the love of my motherland, the birthplace of my parents. It's in the marrow of my bones to help the country. Why should you want to help China? Eddie, you must help America." He appreciated my advice. Of course, today China looks good, but imagine what I had to go through in the early days.

In about 1970, I decided that we should try to list Shangri-La Singapore on the local stock exchange, even though we did not have a business record. It was very fashionable then to go public. The Singapore Finance Minister was Hon Sui Sen, who unfortunately died quite young. I went to see him personally for permission to list. We had a quick meeting of minds and he agreed. Then I said, "Can you now wear your hat as Chairman of Development Bank of Singapore?"

He replied, `All right, what do you want me to do?"

I said, "I want to borrow money."

Hon Sui Sen agreed that DBS would lend up to about 20 million Singapore dollars at a favourable interest rate.

We offered shares to the public at $1.20, upon Hon Sui Sen's approval. As the original partners, we had put up front-end money to build the hotel. Since we had incurred costs, we felt that it was only fair to charge a 20 cent per share premium, especially since the value of the land had appreciated.

Shortly after we went public in 1970, the stock exchange collapsed. Stock markets have these bouts of influenza. It was doom and gloom for about three months.

As the market crashed, Shangri-La shares fell to $1.10, to $1.08, to $1.06, and even as low as 92 cents. As the stock dropped, I started to buy. I bought and I bought. In the end, when I looked up, I controlled about 40 percent of Shangri-La shares and had realized my dream of controlling the company. I suppose descendants of those who got watered down by me will say that I contrived the market collapse. I would love to be credited with such supernatural powers, but the truth is that it was pure chance and opportunism on my part.

As I indicated, my entry into hotels wasn't premeditated. But having started one hotel, I realized I couldn't stop there. If you own just one hotel you might as well sell it at the right time - it's more of a burden than anything else. You must expand logically and sensibly.

After Shangri-La Singapore, we moved on to the resort hotels of Rasa Sayang and Golden Sands in Penang, Malaysia, and then on to two resort hotels in Fiji, The Fijian and The Fiji Mocambo. Since these were all resort hotels, I didn't invite Western to participate because I knew they would frown on them; that it was beneath their dignity to get involved.

Then we decided to build big-city hotels, including ShangriLa Kuala Lumpur, Kowloon Shangri-La in Hong Kong, ShangriLa Bangkok, then the Island Shangri-La Hotel in Hong Kong, and many hotels in the major cities of China from the 1980s. All these came along one after the other. As of 2017, we own and/or operate 100 hotels. Of these the Kuoks own 80. We have another 36 projects being planned or under construction.

I never studied hotel management, but whatever I learned at home and in school taught me that everything in life is very simple. So why complicate matters? Weary travellers need to sleep on a comfortable bed; they need to have a good bath; if they're too tired to walk 100 metres to a restaurant, you should provide some good food and beverage outlets for them. Everything else is a gimmick. It's really a hostelry pattern, just as when the tired, dusty horseback rider hitched his horse at the inn, ate and drank and retired to bed to awake fresher and recharged the next morning.

I could make the same statement about the need for simplicity in doing business in general. Mind you, I'm not saying that certain businesses are not more complex in nature, but I am saying that within a complex business you don't have to make it more complex. In each and every business, whether simple or complex, there are simple ways of tackling problems and operating the business. It's those who adopt convoluted ways who never get to the top, because they are tripping themselves up all the time.

I studied the Swiss hotels. But the Swiss run very small hotels ranging from 20 rooms up to about 300 rooms. After all, Switzerland is a very small country. One has to take a blend of the crisp Swiss style of management and the American factory style of management, where they have hotels with 1,000 or even several thousand rooms. To my mind, the optimum scale is somewhere between 800 and 1000 keys (an executive suite with four rooms counts as one key).

As in a factory operation, size gives you economies of scale. You can install bigger, more efficient boilers for hot water and more efficient air coolers; you can hire talented managers, including a top-quality hotel general manager, by spreading the cost over 800 rooms. All business on earth is management. In the hotel world - in any business world - you must look for three ingredientss when you hire staff: talent, integrity and the stamina for hard work. If any of these three traits are missing, forget the guy.

When constructing the hotel, you cannot cut the cost to lower than its true value. Everything has a true cost: the cost of good quality marble, quality timber, quality builders. There's a classic Chinese phrase: tou gong jian liao - steal on workmanship, cut back on building materials. If you attempt this, you are really cutting off your own nose. For example, some developing countries have substandard cement, and surely you don't want to be using that. To save money, you need to focus on preventing leakage of expenses that would result in exaggerated costs. If you don't employ good staff, they could steal from you or connive with the various outside contractors to rob you. That happens all the time.

If you build an 800-key hotel sitting on one of the crossroads of the world, you can achieve a high occupancy, which enables you to charge a rate commensurate with the value that you are offering. It's like being a fisherman. Where are the currents flowing that bring schools of fish? You must park your hotel where those schools of fish tend to swim. You shouldn't be fishing in an area of the ocean where there is no current and therefore no fish around.

I don't like hotels that make a practice of overcharging. I think that Shangri-La has got it right: it has a name, a standard, and we are looking to the long term. We, of course, want to make money every year - and we are making money every year - but we are not there to cut the throats of our customers. I want them to go away happy and satisfied.

But I admit to feeling very sorry for hotels - and many of them in my own chain - that are unable to charge decent rates because of over-keen competition. You have nepotism and cronyism in the developing world. When somebody becomes the Prime Minister or President, he may hand out money-making favours.

One of the first things these pretenders think about is building a luxury hotel. They spend money as if it were water and do things such as adorning the bathrooms with gold taps. It's all a lot of nonsense. They spend two to three times what I would spend on the same room. Shangri-La hotels are dressed up smartly to qualify for a five-star hotel appellation, but they are not ornate or fancy. I don't build dream castles.

These favoured businessmen are not interested in hotel management. They want to make money, but they are not managers themselves. They have never managed anything in their lives, so they employ foreign firms to manage the hotels. Most of these companies offer very tough terms. The owners know nothing better, so they accept terms that mean that when the management company makes money every year the owners are in some years still losing. By the time the owners are making some money the management companies are laughing their way to the bank every day. I have seen those contracts.

What distinguishes the Shangri-La is that the owners are very hands-on. We try very hard not to interfere with professional managers, and yet, at the same time, we draw a very fine distinction between the priorities and requirements of an owner versus the priorities of a manager. So, early on, I set up a policy implementation committee mechanism in each hotel. The committee includes the general manager of the hotel and one or two people from the owner's side. If it does its job correctly, management and owner will always work in concert for the betterment of the hotel.

As I stated, we shall never build ornate hotels, or monuments to perpetuate the memory of anyone. I have always felt that business very quickly tends toward the sordid. It may start with noble ideas, but it quickly descends to the sordid. Maybe it's because the extremely competitive nature of business renders it so, and for you to survive you gravitate toward the sordid world. But if you are a member of the sordid world, what noble enterprise or calling are you practicing? There is nothing to create a monument about.

So, I came up with a saying that I constantly repeated at the early board meetings of Shangri-La Singapore. I said, "We must set out to do three things, in this order: To look after our hotel staff; to look after our guests; to look after our shareholders." I quickly explained why I did not put looking after guests first: It was our duty as owners to look after our staff properly; to motivate them; to show them that we are not grasping, selfish owners. By setting good examples - by treating them as kindly and generously as an enterprise is permitted to do, by treating them as fellow human beings (and by not behaving as lords and masters) -- we motivate them to provide the best service to the guests, our customers. If we do everything sensibly, we end up rewarding our shareholders with good profits from which we can pay decent dividends.

I would be deceitful if I led you to believe that all Shangri-La projects have gone smoothly. I'll cite four examples, of which only the first, in Bangkok, ended well. The second, in Tokyo, never came off; the third ended maddeningly in Seoul; the fourth was a project in Myanmar which needed time.

I wanted to build a hotel in Bangkok. My old friend Ang Toon Chew recommended a piece of land in the vicinity of the main bus terminus. This was in the late 1970s. Thailand was already a nation of over 45 million people. Bangkok was the hub from which buses departed in all directions. So it's a huge bus terminus, and still is. I went with Toon Chew to see the site, a large piece of land. We were just about to bid at auction to procure the land when I called on another old friend, the late Suree Asdathorn, a leading Thai sugar miller and exporter.

I told Suree, "I am looking at this land. I respect you very much. Will you please join me as a shareholder?"

Suree, who was one of the finest Thai businessmen I have ever met, asked, "What, which piece?" I described it to him again. He said, "I know Bangkok like the palm of my hand." Indeed, he had emigrated there from China at the age of eleven. So he warned, "No, Robert, don't put a hotel there! It's hell! There is noise, smoke and pollution. Why put a nice hotel there? It can't even support a three-star hotel."

"Well, then where?" I asked. Suree introduced me to the present site of the Shangri-La Bangkok on the banks of the Chao Phraya River - and invested in the property.

I sometimes employ this tactic when I'm in doubt about a project: I chat with a man cleverer than myself and offer him a joint-venture deal. If he says, "Oh my God, it's an awful thing," then you know it's poison, and you're able to see the deal clearly through other people's eyes.

The near miss in Tokyo came during Japan's roaring 1980s. Our sugar-refining partner in Malayan Sugar Manufacturing - Nissin Sugar - approached us about building a Shangri-La hotel on reclaimed land in Tokyo Bay. My eldest son, Beau, liked the site. Then I made a trip to Tokyo, and went to have a look at the location, near the Odaiba lighthouse. I thought, "My God, this is way out of the city. It's almost half way to Tokyo Disneyland. What for?"

So, I called up my Japanese architect, Shibata, and he put me right: "Kuok-san, why do you want to build a hotel now? Because of this bubble and inflation in Tokyo, the construction workers have made increasing demands on all the contracting firms. A single Japanese worker is the most costly worker in the world today. None of the big contractors can build cheaply. So you will be building at an astronomical cost. You'll never make money if you build a hotel right now"

After listening to half an hour of Shibata's advice, I made up my mind, then and there, that we must withdraw from the project forthwith. I called up Beau and asked if we were deeply into the deal. He answered, "No." I said, "Cut!"

The epitaph to this story is that on a trip to Tokyo one or two months later, I met young Morinaga Tametaka, the heir to Nissin Sugar. The Morinaga family gave us a dinner at a famous shabushabu restaurant near Hotel Okura. After dinner, I rode to a nightclub in young Tametaka's car. He showed great displeasure that I had cancelled the hotel project and made him lose a lot of face. I said, "I am sorry, Tametaka-san. You may have lost face, but if I hadn't saved you and myself from this project, you could have lost your whole company. You could be bankrupted by the failure of such a large project." Reflecting on this episode, it's not hard to understand how so many Japanese firms ran into hot water in the 1990s by "saving face."

The most irritating of these three proposed hotel projects was in South Korea prior to the 1988 Seoul Olympics. Shibata was the intermediary. He was the architect for many of my hotels, including Shangri-La Kuala Lumpur, Shangri-La Bangkok, Shangri-La Kowloon, Shangri-La Singapore and Beijing Shangri-La. He called me one day to say one of his customers in Korea, a Korean Japanese named Kwak Yu Ji, wanted to build a hotel with me in downtown Seoul.

"He's got a beautiful piece of land within 200-300 meters of the mayor's office," Shibata said. "He owns it. He has taken a lot of time and trouble to accumulate this piece of land, buying out small lots and joining them all together. Can we come and see you?"

Kwak, whose Japanese name was Nakayama, had made a fortune in pachinko parlours, a slot-machine game that is a slightly seedy, cheap form of entertainment in Japan. I thought, well, since he comes recommended by this Japanese architect friend, he can't be a bad fellow.

Nakayama came to Hong Kong. He spoke fair Japanese. I don't speak Korean, so Shibata interpreted, translating Nakayama's Japanese into English. We agreed to participate in the project. The reason I accepted the deal was that it allowed me to become a 50-percent partner, meaning he didn't keep majority control. I thought, "Well, that's a nice situation to be in. Of course, I prefer to be 51 percent, but how can you ask a man who is asking you to become his partner to hand over control to you?"

This was late 1985, and I sensed that the Korean won would strengthen very fast, so I told my treasury, "Please remit about US$35 million into Korea straight away." We took advantage of the then-weak won by remitting the money to an American bank in Korea and converting it into won. Then we commissioned Shibata to draw up some hotel schematics.

I went to Korea some ten times for this project. After the fourth or fifth trip, I thought I could safely delegate negotiations to Beau because the trips were coming thick and fast. Beau went up about every three weeks. But our partner, Kwak Yu Ji, gave us a song and dance all the time.

One day I said, "I think this schematic is good."

He replied, "No," and we spent five to six hours trying to redesign the bathroom. He would take out stacks of paper, sketch it himself, then say, "No, no," crumple it up and draw another one. We'd break for lunch, then he would come back and repeat this nonsense. Because of our inability to communicate - Shibata was not at these sessions - he had interpreters, but these aides were terrified of him. I believe he even manhandled some of his assistants; he literally stood them up and slapped them. He was crazy.

At first, I thought I would let him have his way; that the man was just a bit eccentric. But it got to the stage that he never approved plans. Then, one day, I said, "Isn't it your intention to appoint Shibata as architect?"

He said, "No way!"

Everything seemed to fall around me. He had asked Shibata to introduce me to him. He was indebted to Shibata over that, and now he's calmly telling me, "Why do we need to appoint Shibata?"

Shibata was a proven hotel architect. What's this fellow got up his sleeve? It may be that he was trying to drive a hard bargain with Shibata, getting Shibata to work for him for almost nothing. He probably had come up in life the hard way. Probably there were Korean architects available prepared to work for nothing. Our way is, if you want quality service, you pay for it. Shibata had already designed many hotels for me.

Finally, I realized that I couldn't go on like this. More than two years had elapsed. I had wanted to rush the project so that we could build the first 200-300 rooms (the final product was supposed to be 700 rooms) in time for the 1988 Olympics. But the project dragged on and dragged on and dragged on. Every time Beau came back I sensed he was making no headway. So one day I said, "Beau, I am taking it back into my own hands."

I called Shibata and said, "Shibata-san, can you meet me in Seoul? This will be a showdown meeting with Nakayama. I don't want anybody else present, just the three of us. You must be the interpreter, because I am going to say some harsh words and I want him to keep his face. The best way of success is if he doesn't lose face."

They came to my hotel suite in Seoul. I said, "Shibata-san, please translate what I am going to say. Nakayama, can you give me a deadline by which time you will approve the design? Number two: What influence do you have to get early approval for construction to start? I want to know these two dates." He refused to answer. He said he was still not happy with the design, and sidestepped all my questions. I went on and on and on. I was sidestepped, sidestepped, and red herrings were spread across my trail.

I said to Shibata, "Shibata-san, can you hear what's going on? We cannot go on like this. Please tell Mr Nakayama, I have decided as of this moment, after all my attempts to talk with him and getting nowhere, that I want to pull out of this project now. I have made up my mind. I am telling him, serving notice on him, I am pulling out of the project."

When he translated it into Japanese, Nakayama's colour changed. He muttered, "You can't do it."

I said, "Of course I can do it. This has gone on for too long." He kept on protesting that he wouldn't let me out. I said, "Okay. Shibata-san, you know the agreement was signed and the land is now all in the company that owns it. He owns 50 percent, I also own 50 percent. In the past, I let him behave as if he owned it all. As from this moment onward, I have as much say as he has. So I am willing to stay in for a few more years, any number of years; but nothing that he wants to build will be approved by me. Let's play the same game together. He's played it against me for two and a half years. I have taken too much nonsense. Now I want to exact my revenge on him. Please translate it."

The man was flustered. Then I said, "You know, I have already confirmed my return flight. I have barely ten minutes to collect my bag and go to the airport. I don't want to say any more. You tell him I am leaving now"

So I got up and said, "Goodbye, Shibata-san." I shook hands, went to my room, picked up my bag and left for Seoul airport to catch a flight home.

Within days, Shibata called me from Tokyo. He said Nakayama had called him and said, "I accept your decision to withdraw, but you have made profit on the foreign exchange with your early remittance. I want one-half of that profit."

I responded, "He can have it."

Another businessman's reaction might have been to sue the guy; to litigate. I say: In life, when you can get out, get out. Life is not reasonable. You mustn't face life thinking everybody is going to be reasonable. You must look at life and assume everybody is going to be unreasonable. After all, I was making half of the foreign exchange profit. I took my money out and quit everything. I didn't even want to talk about the appreciation in real-estate values.

That was the end of my involvement in Seoul. It was a very unfortunate experience. Today, a huge office building sits on that site.

In 1993, my second son Ean and other personnel from Kuok Singapore accompanied a Singapore government delegation on a visit to Myanmar. This was the era of the first opening up of the country. After he returned, we sat down and chatted. He urged our family to invest in Myanmar as a way of helping the country move forward. I knew Myanmar from the rice trade years ago, but my last visit was around 1960. Of course, Myanmar had been under military rule for many decades, and the economy had stagnated for much of that time.

We sent more people to Yangon and, by the following year, we had established good relations with local Burmese businessmen who helped us invest in several pieces of land in downtown Yangon. In 1994, we began building a hotel and apartments, and a Traders Hotel was opened in 1996 at a cost of nearly US$80 million. However, mainly due to the economic sanctions placed on Myanmar by Western nations, the economy went into a long decline. The hotel struggled and did not make a profit. Two apartment blocks built on another site that we acquired were never finished. But I personally sensed that Myanmar would one day change, and we remained committed to the country.

That day came in April 2011, when U Thein Sein took over as President and embarked on a gradual process of opening up Myanmar both politically and economically Our Traders hotel in Yangon, which was re-branded and re-named Sule Shangri-la in 2014, now sees strong demand for its rooms, as investment and tourism have taken off. In 2013, we completed the two apartment blocks that we had started to build in 1997, and we are operating them as 240 serviced apartments. We have started construction on a 23-storey office tower next to Sule Shangri-la, and within the next three to four years we will open another Shangri-La hotel adjacent to the serviced apartments.

In addition, we are actively exploring investments in the agricultural sector through Wilmar International, as we look beyond Yangon to opportunities throughout the country. [pg 203-233]

 

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How did Robert Kuok manage to build and operate 100 Shangri-La hotels in such a short time?

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