OUE Group to Rebrand Mandarin Orchard Singapore as Hilton Singapore Orchard

OUE Limited

2020/3/26 14:35

PR83451

 

SINGAPORE, March 26, 2020 /PRNewswire=KYODO JBN/--

 

- Transformational rebranding with addition of new income-generating spaces to

drive growth in sustainable returns and value

- Rebranding will allow the hotel to leverage Hilton's strong brand recognition

and global sales and distribution network

- Hotel set to become Hilton's flagship in Singapore and the largest Hilton hotel in Asia-Pacific

- Major refurbishments to take place from 2Q 2020 onwards to capitalise on weak

operating environment due to COVID-19 and to position the property to benefit

from the expected recovery in the Singapore hospitality sector once travel confidence resumes

- Expected relaunch of hotel in 2022

 

 

OUE Limited ("OUE") and OUE Commercial REIT Management Pte. Ltd., in its capacity as

manager (the "Manager") of OUE Commercial Real Estate Investment Trust ("OUE C-REIT")

have collaborated to rebrand the landmark Mandarin Orchard Singapore to Hilton Singapore

Orchard ("Re-branding Exercise"), following a comprehensive and strategic review.

 

Logo-https://photos.prnasia.com/prnh/20200326/2761482-1LOGO

Logo-https://photos.prnasia.com/prnh/20200326/2761482-1-a-LOGO

 

OUE, which is the master lessee of Mandarin Orchard Singapore, has entered into

a Branding and Management Agreement (the "BAMA") with Conrad International

Management Services (Singapore) Pte. Ltd. ("Hilton") to rebrand Mandarin

Orchard Singapore into Hilton's flagship in Singapore.

 

Under the BAMA, Mandarin Orchard Singapore will relaunch as Hilton Singapore

Orchard—Hilton's flagship in Singapore and the largest Hilton hotel in

Asia-Pacific—with product and service offerings aligned with Hilton's brand

standards. Hilton will have the exclusive authority to operate the property

upon the opening of Hilton Singapore Orchard.

 

Asset enhancement works to add new meeting facilities as well as refreshed food

and beverage offerings to cater to the growing demand for regional and global

meetings, incentives, conference and exhibition ("MICE") events have also been

planned. The planned refurbishment will be conducted in phases and will

commence in 2Q 2020 to capitalise on the current challenges facing the

hospitality industry due to COVID-19. The refurbishment is scheduled to be

completed by end-2021. During the refurbishment period, Mandarin Orchard

Singapore will continue to operate under the management of Meritus Hotels &

Resorts, the hotel management company under the Hospitality Division of OUE.

 

Upon its relaunch in 2022, the hotel will feature 1,080 well-appointed rooms

and five restaurants and bars including an all-day dining restaurant. The hotel

will also boast meeting and function spaces spanning a total of 3,765 square

metres, including three ballrooms.

 

"We are presented here with exciting opportunities to tap on the strong brand

recognition, global distribution network, and industry-leading innovations that

Hilton brings, as we reposition the property more strategically for the longer

term within Singapore's landscape of robust tourism growth and at the same time

increased competition in the hospitality industry," says Mr Brian Riady, Deputy

Chief Executive Officer of OUE.

 

Mr Riady added, "The rebranding of Mandarin Orchard Singapore is a fitting

culmination to its 50-year legacy as the benchmark of gracious Asian hospitality

in Singapore, following a comprehensive and strategic review by OUE in collaboration

with OUE C-REIT. For the customer, this new chapter translates to exceptional service

experiences synonymous with the Hilton brand. For our employees, being part of an

international hotel chain offers tremendous opportunities for career growth and development."

 

Ms Tan Shu Lin, Chief Executive Officer of the Manager said, "We firmly believe

in the long-term value of our landmark asset. This strategic partnership

presents an attractive opportunity to strengthen the property's position as one

of the premier hotels in the prime Orchard Road segment."

 

"The rejuvenation into an upper upscale hotel combined with the addition of

more income-generating spaces within the property allows the Manager to create

value and drive sustainable returns in line with our proactive asset management

approach. The current challenges faced by the Singapore hospitality sector also

present a timely opportunity for us to carry out the extensive renovations,

with the rebranded hotel expected to be ready in time to take advantage of the

sector's anticipated recovery," added Ms Tan.

 

Rationale for the Rebranding Exercise

 

Prominently located in the heart of Singapore's premier Orchard Road shopping

and entertainment belt, Mandarin Orchard Singapore, which began operations in

1971, is part of OUE C-REIT's portfolio, under OUE Hospitality Sub-Trust. OUE

and the Manager believe the Rebranding Exercise will significantly enhance the

property and drive growth in long term sustainable returns and value to the

Unitholders of OUE C-REIT.

 

The benefits of the Rebranding Exercise are as follows:

 

(a) Hilton's strong brand recognition and marketing enhance the property's

competitive positioning

 

The rebranding of "Mandarin Orchard Singapore" to "Hilton Singapore Orchard"

enables the property to tap on Hilton's strong brand recognition and marketing,

enhancing its competitive positioning alongside other upper upscale hotels

along Orchard Road. The Hilton brand is the flagship brand of the Hilton

portfolio and has more than 570 properties across six continents[1]. Based on

the Brand Finance Hotels 50 2019 Report, the Hilton Hotels & Resorts brand is

the world's most valuable individual hotel brand.

 

(b) Hilton's strong global distribution network and established partnerships

complement the property's existing distribution and marketing strategies

 

The property stands to benefit from Hilton's strong global distribution

network, allowing it to tap into the higher yielding luxury market for both

leisure and corporate segments with the brand's pipeline of global key accounts

and established partnerships with global travel companies. This complements the

property's current strength in serving regional guests, particularly in the

leisure segment, as well as diversifies its business mix and enhancing revenue,

distribution and marketing strategies.

 

(c) Opportunity to drive more direct booking business on the back of

established guest loyalty programme

 

The property, which will be the largest Hilton hotel in Asia-Pacific when it

relaunches with 1,080 rooms, will also be able to expand its reach to more than

100 million members worldwide through the highly successful Hilton Honors guest

loyalty programme, as it drives more direct booking business.

 

(d) Positions the property to better capitalise on long term growth drivers in

the Singapore hospitality sector

 

With the addition of new meeting spaces as part of the Rebranding Exercise, the

property will be well positioned to cater to growing demand for MICE events, as

Singapore continues to grow and enhance its profile as the top Asian MICE

destination for regional and global events. Although the Singapore hospitality

sector will be negatively impacted in the near term by the COVID-19 situation,

the Rebranding Exercise positions the property to capitalise on the expected

recovery in the sector once the situation is under control and travel confidence resumes.

 

Furthermore, with increased vibrancy from the planned revitalisation of the

Orchard Road shopping precinct, supported by sustained efforts by the

authorities to amplify the appeal of Singapore as a top global destination to

business, leisure, and MICE audiences worldwide, the longer term outlook for

the Singapore hospitality sector is favourable.

 

Master Lease Agreement ("MLA")

 

OUE is the master lessee of the property under a master lease agreement entered

into between OUE, the trustee of OUE Hospitality Sub-Trust and the Manager (the "MLA").

Under the terms of the MLA, the master lease shall be for an initial term of  15 years from

25 July 2013, with an option to renew for a further term of 15 years.

 

In conjunction with the entry into the BAMA, OUE Hospitality Sub-Trust (as the

owner of the property) has provided an undertaking to Hilton that in the event

the MLA expires or is otherwise terminated, OUE Hospitality Sub-Trust shall

nominate an affiliate (failing which, OUE Hospitality Sub-Trust will assume)

the obligations of OUE under the BAMA. The Manager will, when appropriate and

in due course, decide and propose the appropriate course of action in such event.

 

Key commercial terms of the MLA remain unchanged. Under the terms of the MLA,

there is downside protection from the master lease for OUE Hospitality

Sub-Trust as the MLA has a fixed minimum rent component of S$45.0 million per

annum, which will provide income assurance to Unitholders of OUE C-REIT

throughout the period of phased renovation and ramping-up of operations.

 

Financial Impact on OUE C-REIT

 

OUE C-REIT expects to incur capital expenditure of approximately S$90.0 million

in the Rebranding Exercise, with a projected return on investment of approximately 10%

on a stabilised basis. The Manager intends to draw down on existing loan facilities to fully

fund the Rebranding Contribution progressively over the renovation period. As the capital

expenditure will be expended in phases, the exercise is not expected to have any material

impact on the aggregate leverage or earnings of OUE C-REIT for the financial year ending

31 December 2020.

 

[1] Source: https://newsroom.hilton.com/hilton/page/quick-facts

 

For further information and enquiries, please contact:

 

OUE Limited

Adrian Tan

Senior Vice President,

Hospitality Asset Management

Tel: +65 9618 5081

Email: adriantan@oue.com.sg.

 

OUE Commercial REIT

Elaine Cheong

Senior Vice President, Investor Relations

Tel: +65 6809 8704

Email: elaine.cheong@ouect.com

 

For more information on OUE Limited, visit www.oue.com.sg

 

For OUE Commercial REIT, visit www.ouect.com

 

SOURCE: OUE Limited

 

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