Hotel development in New Zealand has distinctive local characteristics. Chinese developers in particular face considerable challenges at every stage, from design, approvals and construction management to cost control.
So how can developers succeed in a fiercely competitive market, effectively control hotel construction schedules and quality, and achieve strong investment returns?
YIJU New Zealand interviewed James Zhang, chairman of Rosedale Apartments Ltd. The company's LEROY boutique hotel project, with its short development timeframe, low development costs and high investment returns, can be regarded as a model for boutique hotel development in the New Zealand market.
{Ad}
Project background:
The Apollo Square development on Auckland's North Shore occupies a total site area of 24000 square metres, with approximately 32000 square metres of floor area.
The project includes an apartment building, two commercial buildings and nine townhouses.
The second stage of Apollo Square is a medium-sized commercial building occupying approximately 7,800 square metres. It includes 15 retail premises, the 64-room LEROY boutique hotel, more than 100 parking spaces, and leisure and garden recreation areas. Construction began in 2017 and was completed in January 2019.
Precise positioning —meeting market needs, diversifying the offering
Responding to the market and understanding demand are the foundations of successful property development.
In an unpredictable property market, clear positioning, a diverse offering, customer segmentation, and professional development and operation are key to giving a project flexibility and resilience while strengthening its competitiveness.
Y: When positioning Apollo Square as a whole, what considerations led you to divide the development into three sections offering different products?
Z：The products were tailored to three different customer groups. The first stage comprised apartments aimed at the general market, with total prices kept within NZ$500,000–700,000.
The project has an excellent location at the heart of an established, upmarket North Shore neighbourhood, offering convenient access to shopping, transport, entertainment and education.
The second stage comprises retail premises and a hotel. Given its location in an established commercial area, we were confident of market acceptance as long as we developed an operating concept that complemented local amenities, translated it into high-quality, people-focused products and targeted them precisely.
The results show that we achieved this, with positive attention and feedback from many quarters.
Leasing and operations for both the hotel and retail premises are currently going very well. We are confident they will continue to improve as our reputation and brand grow stronger.
The third stage is planned to include apartments and townhouses, with construction scheduled to begin at the end of 2019. It targets a broad market, including professionals, migrant entrepreneurs and property investors.
Y: We understand the original plan for the street-front commercial site was office space. What prompted the change to a hotel?
Z：Tourism is one of the pillars of New Zealand's economy. The country has increasingly become a destination for travellers from around the world, welcoming more than 3,000,000 visitors annually, with numbers rising significantly each year;
my team and I are attuned to the market, and we agreed that Auckland's role as New Zealand's economic, cultural, shipping and tourism centre offered substantial scope for a tourism-driven hotel market.
On that basis, we carried out in-depth research and made a timely, bold and well-founded adjustment to our development approach. Adapting to the market is an enduring part of our business culture.
That is the background to the change in Apollo Square's planned use: staying true to our original purpose allows us to see it through.
Y: Did you consider positioning the hotel at the high end of the market?
Z：We certainly did. But after market research, data analysis and testing different simulated scenarios from a consumer perspective, we concluded that an urban boutique hotel would be more popular.
New Zealand is a country with an unpretentious way of life that values nature and simplicity. We believe visitors will feel the same: an urban style can blend with New Zealand's natural scenery and straightforward way of life.
Respecting customers' experiences and responding closely to market demand is the approach my team and I take.
Thoughtful planning— adapting to the site and taking an active role in planning and design
Sound, effective planning centres on making the best use of space, creating a comfortable layout and providing user-friendly functions, while also considering the project's overall returns.
For Apollo Square, we drew on useful lessons from outstanding projects while considering the development's own characteristics and original purpose. Team members in every role participated throughout all aspects of planning and design. Countless discussions and revisions produced the result we see today.
Y: What was the planning and design philosophy behind the Leroy hotel?
Z：The central design approach was integration and harmony, respecting the area's characteristics as well as consumers' behaviour and psychological needs.
In New Zealand hotel design, spaciousness, openness, comfort and comprehensive functionality are essential. Our rooms range from approximately 30 to 40 square metres.
Parking is provided at the standard ratio of one space per room.
Given the surrounding established residential neighbourhoods, we also included a ground-floor level of retail shops and restaurants. Alongside enhancing the hotel's own commercial functions, these enrich the surrounding retail and dining environment and add value to spending, creating a strong sense of integration.
Y: What should developers pay attention to when designing hotel projects in New Zealand?
Z：Differences in national circumstances, policy, environment and culture inevitably mean different approaches to development in New Zealand and China. In China, for example, planning parameters are already clearly defined when land is acquired, leaving businesses little scope to optimise a development themselves;
in New Zealand, provided we meet site coverage, height limits and height-in-relation-to-boundary standards, we have considerably more room for creativity.
For us, there is a very real opportunity to turn our design ideas into reality.
In China, successful project experience can quickly be replicated in the next development, as seen in the rapid product replication strategies of property companies such as Vanke and Wanda. This is difficult in New Zealand: each site's natural conditions, slope and orientation differ, resulting in different regulatory requirements. Every project must be considered comprehensively in light of its site, placing greater professional demands on us.
Developers should be deeply involved in design rather than delegating everything to designers.
Generally speaking, commercial designers in New Zealand have relatively limited experience, while simply transplanting designs from China may not meet local standards.
Combining the strengths of design approaches from both countries so the final scheme meets local requirements and better reflects the project's value requires close collaboration between developers and designers. This helps bring out the full potential of the design expertise.
Effective management——drawing on management experience, bringing together professional networks
Development in New Zealand requires coordination among all downstream businesses to ensure realistic timeframes and higher quality effectively and efficiently. Close coordination across every stage is essential for the project to progress quickly and successfully.
Y: We understand Apollo Square had a very short development timeframe and the entire process went smoothly, without any downstream business letting the project down. How did you control and manage the development process?
Z：The construction stage is critical, particularly in New Zealand, where construction timeframes are long, working hours are short and there is simply no way to rush the work.
Scheduling work sensibly within the available time is therefore a critical task.
Another important issue is carefully selecting subcontractors, which requires thorough homework. You need a good understanding of them beforehand and an established network of reliable contacts.
A failure at any stage can delay the entire project.
Getting all subcontractors to cooperate and work effectively is a major challenge for construction and management teams.
It takes project management experience and, more importantly, experience managing large projects and an effective professional network.
Why have so many large, well-known New Zealand construction companies ultimately collapsed? The main reason is that they took on too many projects without enough effective management teams to support them, leaving the projects unable to function.
Once a project stalls, it inevitably affects the company's projects as a whole.
Y: Construction costs on this project were also very well controlled. How did you manage construction costs and quality? What useful management experience can you share?
Z：Meticulous attention to detail, wholehearted commitment and precise control at every stage.
You need to strike the right balance between controlling costs and maintaining quality.
For example, leaky buildings are a common problem in New Zealand. We avoided that issue from the outset by designing the entire project in reinforced concrete. Even if problems arise later, repairs will be straightforward.
Securing tenants and managing operations —carefully selecting brand-name businesses
Securing an operator and managing operations are also among the most important stages of hotel development.
Hotel development in China is fiercely competitive. To reduce development risk, developers usually secure an operator first, signing with a brand before planning and design and then designing to its requirements. This avoids later alterations to the property and reduces vacancy risk.
In New Zealand, however, the approach must suit local circumstances.
Y: Hotel development in New Zealand must be very different from China. When did you seek an operator for the LEROY hotel, and why did you choose LEROY?
Z：We sought an operator for the project's hotel during construction.
Commercial property is scarce in New Zealand. While our project was under construction, seven or eight parties approached us to discuss leasing or buying.
Following due diligence and negotiations, we ultimately selected the LEROY brand.
We chose it first because the brand's positioning aligned well with our project's, and second because it had strong operating capabilities. Since opening, average occupancy has exceeded 80%.
Y: What do you think made this project successful?
Z：Overall, first, the product was well positioned; second, the timing of its launch was right.
There are two important concepts in property: location, and timing.
Get those two factors right and you are essentially in an unbeatable position.
About the interviewee: (photo)
James Zhang, chairman of Rosedale Apartments Ltd
A graduate of China Pharmaceutical University, he migrated to New Zealand in 2003 to study management and finance.
Specialising in business management, he has worked in property development since graduation. His experience in China covers more than 200,000 square metres of residential and commercial development, with all projects becoming local landmarks for quality and brand recognition.
In New Zealand, he successfully developed the Apollo Square mixed-use complex.