Affordable Hospitality

CONTENT

Opportunity OverviewOverview of StrategiesThe CompanyThe Brands

A clean, safe, convenient, and affordable place to stay when away from home.

AFFORDABLE HOSPITALITY

a generally strong economic growth forecast, and the home to some of the region and world’s most popular cities and resort locations (Bangkok, Bali, Phuket, etc.). In the future, the ASEAN market expects to also significantly benefit from the ongoing increased travel from Chinese and Indian consumers as they increase their international travel which will significantly include neighbouring countries in Southeast Asia.

The lodging industry in Southeast Asia is just starting to see a similar launch and growth of new lower cost/limited service hotel chains to service this growing base of discount and no-frills oriented business and leisure traveller/consumers. In addition, there is a more ingrained view of affordable travel and hotel accommodations in the Southeast Asian market, with a much higher percentage of spending on shopping.

What’s clearly missing is affordable, recognizable, branded accommodation that provides the growing business and consumer base a known, identifiable and reliable brand: one that also provides the confidence and comfort of the quality lower cost experience they are looking for. Such branded affordable accommodation is defined by the consumers to include convenient locations, safe, clean and sanitary rooms, comfortable beds/linens and bathrooms, and other appropriate services such as internet access and air conditioning, all within a unique, albeit simple, design setting. In short, a “good reliable value” option.

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There are more people travelling to more places, more often, for more reasons, than any time in the region’s history.

Opportunity Overview

Southeast Asia is experiencing an unprecedented boom in travel, driven by the exponential growth in domestic tourism and the increasing development of low-cost inter-regional travel in the region’s largest markets.

Southeast Asia, as defined by the trade zone “ASEAN”, represents a particularly high growth area due to not only the number and growing popularity of the low cost carriers based in these markets, but the close proximity of the countries (generally less than 2-3 hours flight time),

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While there is significant room stock at the three-star hotel level and below, the vast majority of the hotel operators can be characterized as independents without the necessary systems, brand recognition, technology or financial mechanisms nor the focus to drive a truly branded multiple-unit rollout program locally and/or region-wide. Current budget oriented offerings rarely meet the growing base of business and leisure customers’ increasing demands for the above mentioned quality and efficient service, hygiene, sanitation, safety, internet access, design and convenience.

The select service market is a travel segment that needs rooms now and whose growth potential is limited only by the ability to execute within the desired demands of the consumer. The leading American, European and even the China based discount and other hotel brands have been slow to react to the exploding Southeast Asian market. It is anticipated that Southeast Asia will somewhat follow the growth experience of China over the last five years. In fact, the branded select service hotel penetration (as a percentage of rooms available) is a fraction of that in developed markets such as Western Europe and the USA. A limited number of new Asian based brands are emerging to pursue this market and are performing well.

Vanguard has identified and developed what it believes to be the best of these new existing and potential brands across Southeast Asia, and has executed various licensing

agreements and/or joint ventures on a market-to-market basis to build/expand the viable locally branded chains. Vanguard aims to gain a sustainable foothold in each market in order to more fully exploit this unprecedented opportunity in the region.

What’s clearly missing is affordable, recognizable, branded accommodation that provides the growing business and consumer base a known, identifiable and reliable brand.

AFFORDABLE HOSPITALITY

Regional market opportunity:

• The growing number and popularity of the low cost carriers in the Southeast Asia region

• Close proximity of the countries in the region, which is home to some of the world’s most popular cities and resort locations

• The growth of Asia Pacific tourism with Southeast Asia leading in tourist arrivals and receipts.

• ASEAN: International Tourist Arrivals in ASEAN will top 100 million by 2015 (five times what they were in 1991).

• Southeast Asia has a generally strong economic growth forecast

• Lodging industry in the region is just starting to see a growth of new lower cost/limited service hotel chains

• The wide presence of Millennials, a generation which will provide the majority of spending for travel and leisure in the next 5 to 10 years.

• Asia Pacific has an exponential middle class growth, that will triple Asian consumption by 2020 and the intention to spend on travel is the highest in the world.

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REGIONAL- Critical “Affordable” Hotel Success Factors:• Current size and growth of domestic tourism market.• Current size and growth of inter-regional travel market.• Projected RevPar (revenue per available room).• Cost of real estate (freehold and or leasehold).• Access to debt financing instruments (bank loans).• Regulatory environment (land ownership, licensing, etc.)• Competitive landscape (at hotel price point).

The markets that Vanguard has identified for development fall into Southeast Asia, home to over 600 million consumers. The area represents one of the fastest growing travel markets in the world.

Overview of Strategies

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A key country selection criterion was the ability to find and execute agreements with significant value-add local partners. Considerations included: 1) proven contributors of local market expertise and influence in international joint venture arrangements; 2) willingness to allow Vanguard to operate the business (financial, operations, etc.); and 3) experience and/or significant knowledge of local property/hospitality/real estate businesses in the given targeted country and cities.

Vanguard appraised and prioritised the key Asian markets according to the resulting view of the prevailing and anticipated market opportunity, and subsequently developed business strategies around the following four countries:

• Philippines• Malaysia• Indonesia• Sri Lanka

Vanguard uses a dynamic pricing model, driven by room booking software that is generally consistent across all brands. This translates to greater revenue control, lower cost of sales and generally better overall room yield management.

Vanguard has developed a prioritised roll-out of the target countries and brands given: 1) the anticipated available capital; 2) the need to gain a significant foothold and first mover position in each market; 3) the form of the design and capital required for the hotels; and 4) what can be executed and managed given the existing and planned Vanguard internal and external resources.

It is key in the early years of growth, and depending on the geographic market partners, for Vanguard to be the developer, an owner, and the operator of all of its properties.

AFFORDABLE HOSPITALITY

PHOTO CREDIT: WWW.FLICKR.COM/PHOTOS/JOIZ

BACKGROUND

Vanguard was founded in 2009 with a clear strategy to develop a quality branded select service hotel chain business in Southeast Asia. Vanguard has been successful in developing differentiated joint venture agreements in key countries that it is pursuing with “blue chip” partners. Vanguard thus leverages and gains access to its partners’ local knowledge, influence and experience in real estate, and access to local financial sources as part of its strategic blueprint for development.

Vanguard’s hotels meet the needs of today’s business and leisure consumer, and offer high margins driven by low development costs, minimal labour and related operation costs, and efficient, clean and well designed rooms. Vanguard’s select service hotels are therefore budgeted, and forecasted to achieve EBITDA levels in excess of 50% and net income in excess of 25% on a unit-to-unit basis.

MANAGEMENT AND ORGANIZATION

The Vanguard philosophy is to focus on proven individuals with exceptional execution capabilities; a team that can project manage property development, effectively rollout operations systems and processes, and reinforce the Vanguard low cost, not low quality, mind-set. Vanguard combines experienced hospitality professionals in the areas of low cost travel, brand development, finance, and operations management with support by well respected consultancy services in areas of real estate, legal, accounting, and construction.

The Vision

Vanguard Hotels intends to become a leading owner and operator of affordable branded hotels in Southeast Asia over the next 5 years.

The Mission

• Vanguard Hotels will provide dynamic, aspirational branding options for our customers; evolving to meet their needs as they grow and change over time.

• Vanguard Hotels will work with highest quality foreign investors and local partner companies in each market to provide the right formula to arrive at a suitable hotel experience for our customers in that country.

• Vanguard Hotels will aim to provide these hotels to customers at a price point, and in an operating enviroment that allows for maximizing the profit opportunity and providing the highest possible returns to its shareholder partners.

TRAINING

Vanguard trains and develops all employees through Vanguard Hotels Training Academy. The Academy helps develop employees’ full potential to become true professionals in their field of expertise. Variety of training methods and programs are provided to help improve employees’ performance and self-fulfillment, making them more effective on the job. This benefits the Vanguard organisation, the partners and its customers.

DESIGN AND DEVELOPMENT

Vanguard employs standardisation in its designs through the use of prefabrication technology. Standardising design and material application allow for tailored solutions and efficient selection of materials, methods, equipment and labour deployed on sites.

Prefabricated buildings lend themselves to a design and build contract, with materials coming from external source and contractor simply assembling the materials on site. This procurement method consolidates risk into single points of responsibility for design; coordination; cost and quality. Vanguard’s collaboration with a project management firm with contractors experienced in the design and application of the prefabricated materials ensures that all aspects of the materials’ advantages are utilised. As a result, Vanguard’s hotels are managed more cost effectively and are functional, livable and sustainable.

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The Company

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The Vivid Hotel brand was born out of the general concept that the typical hotel guest in Asia desires more for what he is paying and paying less for things he doesn’t use. The premise of “less does not mean bad” is key to understanding the model. Correctly identifying the customer’s needs from a hotel and providing only those services at an affordable price is the way forward.

Vivid provides a platform for strongly reflecting the desired brand image (visible, clear, energized, graphically “attention grabbing”). The name inspires a sense of pride of guest experience (out-front, confident, part-of-the-city, etc.). The name will carry through the look and feel of the facility, representing a single-minded focus in visually arresting décor, energized ambience and helpful hotel staff.

The Vivid Hotel brand is simple. It will not offer multiple restaurants, banqueting, business centres, etc., all the myriad of things that hotels offer, whose customer utilisation is minimal, which costs a large amount to provide. It will focus on those elements that the customer actually uses. It will offer an efficiently designed room and bathroom. The bed and fittings will be excellent. It will offer necessary technology in terms of large flat screens with the best entertainment, sports and news connections and the best broadband connection possible in a given market. It will provide breakfast and all-day snacks, informal places for meetings, an exercise facility and quality information for customers to find restaurants, spas, shops, etc. The product is simple as it has very few moving parts. Vivid offers value at low price points for customers and still makes great returns for investors. Therefore, the plan is to create a product and a brand offering that is at the heart of this market and roll it out in an expeditious manner.

Vivid Hotel brand overview:

• Confident and proud...a city hotel offering a guest experience that reflects the contemporary city vibe. Visually and operationally impactful, functionally efficient and a guest experience designed to reward and satisfy aspirational needs.

Vivid HotelsVanguard’s affordable city leisure / commercial brand

AFFORDABLE HOSPITALITY

The Brands

METROblue Hotel brand targets the creative millennial or Gen-Y travellers who are looking for an unique alternative hotel to complement their travel experience, offering a cosmopolitan experience, but does so at a price that business and leisure travellers can afford.

As fitting of a premium economy accommodation, the hotel is relatively small with facilities limited to the essential ones as required by the target customers - open plan reception area with coffee retail, street access where possible, self check-in counters and free wi-fi. Each guest rooms are designed with guest optimum comfort in mind.

The design theme of Metro-polis, are carried through the interior design with suitable artworks, materiality, lighting and fitting selections. The key feature is the black and white local urbanscape photography highlighted with the blue energy flux - the Metro Verve. This distinctive approach to the interior design concept gives an offering that shall stand-out in the ever competitive market segment.

BRAND CHARACTER

Stylish. METROblue Hotel is understated yet aspirational in its feel, contemporary and just chic enough to appeal to its sophisticated audience.Approachable. The sense of style is balanced with genuine warmth; METROblue Hotel is unpretentious, hassle-free, friendly and above all comfortable. Every element of the hotel make guests feel at ease.Local. The unique nature of each hotel is underpinned by a sense of place. Each hotel should authentically reflect local culture and values and guests should feel the character of the host city and neighbourhood. The hotel could only exist where it is located.Sense of surprise. The hotel staff strive to make the guest stay memorable, via little gesture of appreciation when it is least expected.

METROblue HotelsVanguard’s affordable economy brand

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Go Hotels (www.gohotels.ph) is a brand owned by Robinsons Land, a subsidiary of the JG Summit Group, one of the Philippines’ leading conglomerates. JG Summit holdings include Cebu Pacific, the Philippines’ leading domestic airline. The connection to Cebu Pacific is a powerful enabler and driver of our operations in this market. The goal is to fully optimise the synergies in the Philippines between Cebu Pacific Airlines and Go Hotels (a pull through revenue strategy).

Vanguard has executed a contract to own and operate 20 Go Hotels over a five-to-seven year period. The first five Go Hotel sites are in construction: Go Hotel Manila Airport, Go Hotel North Edsa, Go Hotel Cubao, Go Hotel Malate and Go Hotel Timog. Vanguard’s flagship Go Hotel Manila Airport is set to open November 2015. The 6th and 7th hotel locations are identified and it will be in Makati and Boracay, respectively.

Go Hotel focuses primarily on Filipino customers. These include short to medium stay business and leisure travellers who regularly visit cities and who arrive, work, dine and need a hotel that gives them what they need: a good night’s sleep, a comfortable shower, a great base from which to work or explore; eliminating the additional features that they seldom or never use – pools, multiple restaurants, spas, banqueting, business centres etc – but are effectively charged for in traditional hotel models.

Go Hotels brand overview:

• Go Hotels is an essential service hotel providing quality accommodations, with a complete and convenient travel experience.

• Go Hotels offers value-for money rates for the services needed.• Go Hotels has “a place for every Juan”.

Go HotelsVanguard’s franchised brand

AFFORDABLE HOSPITALITY

www.vanguardhotels.com

Vanguard Hotels Pte Ltd1 Fifth Avenue, #03-03A Guthrie House, Singapore 268802Tel (65) 6533 2802 Fax (65) 6533 2807Email info@vanguardhotels.com.sg