Selling the unpolished diamond

"The Philippines is a diamond that is not polished on all sides. Unfortunately, it is the unpolished side that most foreigners see," said Barcelo Hotels and Resorts chief executive officer for Asia-Pacific Joan Cogul Capdevila. (Cogul, whose first name is a common one for males in his native Barcelona, is called John in the Philippines).

Among hotels, the unpolished side shows up in uneven service. "Many of the hotels outside Metro Manila are family owned. These were put up without considering the importance of location and of economies of scale," said Cogul. "Given the fixed cost of running a hotel, it must have at least 60 rooms to be profitable."

Barcelo currently manages three local hotels and resorts, one for each year that it has been in the country. These are the Barcelo Pearl Farm Island Resort in Samal Island; the Sarabia Manor Hotel and Convention Center in Iloilo; and the Asturias Hotel in Puerto Princesa. A fourth management contract–for a resort near Metro Manila–will be signed by end-September.

Barcelo, which is the second biggest tourism group in Spain, is also actively scouting for other hotels it can manage in Metro Manila, Cebu and Davao. A management contract is normally between five and nine years.

In Metro Manila, the company is specifically eyeing locations in Makati, Ortigas, and Intramuros. "Sentiment has nothing to do with our looking for a place in Intramuros," Cogul said of the former "Walled City" that housed the Spanish colonial administration in the country for more than 300 years. "There’s a niche there for a hotel that Barcelo can either manage or build in a joint venture with a local partner."

Investment

Right now, Barcelo’s only direct investment is its Makati office, which serves as the regional headquarters. Aside from the Philippines, Barcelo is getting its feet wet in China, a long-term program that Cogul helped put together during his three-year stint as expansion and corporate development managing director of the Barcelona-based Barcelo Group which generated profits of $92 million in fiscal year 2000, ending in June 2001. Aside from hotels and resorts, which are located mainly in the Mediterranean and the Carribean, the Group is also involved in travel, operating a travel agency (Viajes Barcelo), tour operator (Turavia), and airline broker (Viajes Aurora).

"There are many ways to invest. Aside from putting in dollars, a company can bring in invisibles such as know-how and people. That’s the route Barcelo has chosen for the Philippines, " said Cogul, who is one of six expatriates based in the Philippines.

For Barcelo, the purpose of training is increased efficiency. In the local hotels/resorts it manages, the company has increased gross operating profit from 11% in 2001 to 43% this year. During the same period, food and beverage costs, which account for 50% of total costs industry-wide, have been brought down from 40% to 28%.

Better strategy

"In a competitive market, offering aggressive discounts to customers is a battle where the hotel always loses," said the former colonel in the Spanish Army. "A better strategy is to offer value for money such as giving extra services like a free message. At the end of the day, yield is more important than volume. I can have a high occupancy rate because I give huge discounted rates but that doesn’t mean I’m making as much money as another hotel with half the occupancy rate but charging normal rates.

Last year, Barcelo won the Kalakbay Secretary’s Award jointly given by the Department of Tourism and the Philippine Convention and Visitors Corporation. It was cited for pushing both local and foreign tourism.

"You don’t dictate to the market. You adapt to the market," said Cogul. "Right now, you can forget the American and European tourist. The Philippines is too far."

Barcelo’s marketing strategy is to concentrate on local tourists–the Filipino businessman selling his product and the Filipino executive attending a seminar. So as not to put everything in one basket, it is also selling its hotels/resorts to neighboring countries in Southeast Asia where the Philippines is familiar, yet different enough to visit without making too much of a dent on their bank accounts.

It is a strategy that co-presidents, Simon Barcelo Tous and Simon Pedro Barcelo Vadell, said best in the Barcelo Group’s 2000 annual report. "We will concentrate our energies on what we best know how to do."