In his just-published memoir, Malaysian-born billionaire Robert Kuok — who appears on both Malaysia’s richest and Forbes Billionaires lists this year — devotes a chapter to the rise of his Shangri-La Hotels & Resorts. He recalls its origin in 1968 as a 10% stake in a deal for the parcel near Orchard Road in Singapore where the initial Shangri-La later would rise. A prominent commodities trader, Kuok, 94, came to see luxury hospitality as useful diversification. But it was also, as in the slightly condensed passage that follows, another window on the business of human nature.
In the hotel world — in any business world — you must look for three ingredients 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 sub-standard 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.
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 favors.
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 favored 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… .
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 [and rice-trading mentor] 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 shabu-shabu 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 parlors, 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% 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%, 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….
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… .
[Shibata was asked to translate diplomatically a subsequent negotiation in Seoul that failed to go well.] 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%, I also own 50%. 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-story 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.
From “Robert Kuok, a Memoir” (Landmark Books, 2017)