Five-star living

Kempinski Hotels is not only one of the oldest luxury hotel operators around – it now has a global portfolio of residential projects worth EUR 2 bln. Eyup Babur, director of Kempinski Residences, reveals what is likely to happen next On the top-shelf residential market

Mladen Petrov, ‘Eurobuild CEE’: Dubai, Qatar, Switzerland, Lebanon and Thailand. These are the countries where you will be soon opening Kempinski-branded residences. Such projects are also planned in Namibia, Indonesia and Saudi Arabia. However, I can’t see any Central European cities on the list of your upcoming openings.

Eyup Babur, director, Kempinski Residences: I beg to differ. Let’s start with some basic figures though. We now have 3,000 apartments in use or in the project phase in properties across the world with a total market value of more than EUR 2 bln. We have residential projects in Europe, the Middle East, Asia and Africa. Europe, the Middle East and Asia each represent roughly one third of our portfolio. Africa has only a very small share in our portfolio currently, but we can also see great potential for us there.

What’s the place of Central and Eastern Europe in your European plans then?

Bratislava, Moscow, Nizhny Novgorod, Rostov-on-Don, Novosibirsk, Minsk, Kyiv, Vilnius, Baku, Tbilisi are just few of the cities where we have upcoming hotel and residential projects. We also recently opened our first hotel in Croatia, which comes with residences too, priced at as much as EUR 10 mln. This proves that the region is certainly on our radar. In Slovakia we have a residential property in the High Tatras. In Budapest we also own a well-established hotel. The very fact that there is a hotel in the city helps for a future residential development if any suitable opportunity arises. We are open for opportunities in Bulgaria and Romania. We are ideally looking for mixed-use developments where the hotel and residences are in the same complex; but in Istanbul, for example, we have one hotel and two residences which are separate properties but close to each other. In general, the Eastern European region has been rapidly developing, creating a solid base of people who are looking for the benefits of a 5-star hotel service and can afford such a lifestyle.

The luxury residential market wasn’t saved by the credit crunch though. In fact, in countries such as Bulgaria it 
suffered quite a lot...

Until the crisis hit we were seeing rapid growth everywhere. Over the last two years it was natural to see the pace of development and sales on the continent slowing down, with some openings being delayed. Now a rebound is occurring and we are getting back on track. The sentiment on the market is improving. With regard to the residential market, we are optimistic when it comes to Europe and the Middle East. As for the securing of financing, today branded projects still have a certain standing in the eyes of the bankers. For them, the involvement of an established brand diminishes the risk – this is obvious. These are expensive properties and the demand is always there. This is why even in 2008 and 2009, developers kept coming to us.

Are you all set in terms of geographical representation?

We are not planning any major changes in our portfolio in terms of geographical representation. The balance between our key markets – Europe, the Middle East and Asia – is pretty healthy and we intend to broadly maintain it, but I do agree that we could be more active in Africa, and we are making an increased push in Western Europe as well. In our view, these markets still remain unsaturated and hold considerable potential for more projects. The only strategic decision that we have taken is that from now on we are going to mainly focus on mixed-use projects rather than going for stand-alone residences. The projects we prefer feature hotels and residences, but we remain flexible in this regard and so can enjoy the synergies of also having shopping centre or office components within the complexes. From an operational point of view, bringing hotels and apartments together makes a lot of sense. This is all about the cost-effectiveness of the operation as well as the synergies: residents can benefit from all the perks the hotel offers, as hotels usually provide more extensive facilities than residences. Hotels justify such additional investment in economic terms. Our current strategy is therefore to go for residences combined with hotel complexes. 

How big are the apartment buildings that you develop?

It depends on the project. In a mixed-use concept, we can start from 50-60 units and go up to 200 apartments or even more; in Doha, for example, we have completed a 370-apartment scheme. We are interested only in prime cities and prime locations. Outstanding architecture is a must, and we are fully involved in the project planning and design. As an operator, we also have very high construction standards requirements. We want to make sure that whenever our name is attached to a project, it truly reflects the luxury brand standard.

Does that mean that you are only looking to work with big, experienced developers?

Yes, we always establish associations with strong and reputable companies in their respective fields and regions. We do provide the necessary technical assistance to them during the development phase. The technical services we provide are one of our sources of revenue. Furthermore, we are paid for the marketing services that we provide to developers connected with the sale of residential units. Developers also pay for the branding and management services of the property. In addition to this, we receive a certain fee from the sale of each apartment. We also provide community services for an association management fee – an arrangement which lasts for as many years as have been agreed contractually. And we also operate various facilities and outlets in the property, e.g. spas, restaurants, laundry and housekeeping services, plant care, pet care, transport and shopping services, and the renting of apartments on behalf of the owners.

You are certainly not alone on the European market…

As a hotel management company, we’ve been in the market for over 110 years. Although not for as long, we do have considerable expertise in residential management as well. Our company started this new line of activity at the beginning of the 90s with the first Kempinski-branded residential project in Beijing. I agree, the concept had been already rather popular in the United States for many years, but it has spread around the world quite fast and we have now taken our opportunity to get involved. We obviously do face competition from Four Seasons, Ritz-Carlton, etc., but we know them well from the hotel side, and feel that as an operator with a distinct European heritage we can make a strong case to developers. ν

How it all started

Berthold Kempinski was born in 1843 in Prussia, in what is now the town of Raszków in Poland. In 1862, his brother Moritz opened a wine shop in Wrocław (then Breslau) called M. Kempinski & Co, an enterprise which Berthold joined. In 1872, Berthold and his wife Helene moved to Berlin and opened a wine shop under the same name, which they soon expanded into a restaurant with rooms. As the Kempinskis had no sons, their daughter Frida’s husband, Richard Unger, entered the small company. In 1897, the Hotelbetriebs-Aktiengesellschaft Hotel management company was established, marking the historical beginning of Kempinski Hotels. Today the Geneva-based company manages 62 hotels worldwide, and has another 57 properties in the development and planning process.