Kwek Leng Beng: Winning at the Hotel Game

When Kwek Leng Beng met Donald Trump for the first time it was like pouring oil into a cup of water. The two simply did not mix. 

The Singaporean tycoon was passing through London, in the midst of a deal to buy the legendary Plaza Hotel in New York. Trump, the Plaza’s previous owner, wasn’t exactly relevant — the hotel had already been possessed by Trump’s creditors. But he was still angling for a way back in.

In Peh Shing Huei’s biography of Kwek, Strictly Business, the Singaporean was warned by his principal banker ahead the meeting: 

• Trump was a wounded animal. Don’t antagonise him further;

• Trump remained very well-connected in New York. Don’t make an enemy out of him;

• Trump had a big ego. Let him save face. Pacify him.

Peh documents what happens next:

When [Kwek] arrived at London’s Lanesborough Hotel for their breakfast meeting, Trump was already waiting for him at the lobby. He tried to impress the Singaporean immediately. “I just signed an autograph for supermodel Elle MacPherson,” said Trump. Kwek was hardly excited. He recalled years later, in the most uninterested deadpan manner: “Heard of her.” Trump continued his charm offensive, giving Kwek an autographed copy of his bestselling book Trump: The Art of the Deal, and when deciding on breakfast, smiled at Kwek and said: “I’ll have whatever you are having!” 

Their similarities end with their breakfast choices. While both were, and still are, big players in global real estate and hospitality, they could not be more different in their approaches to life and work. 

(…) Kwek’s first impression of Trump in London? “He talks a lot,” he said. The pair did not hit it off. They were too far apart in temperament and style. Trump kept pushing Kwek to make him his partner in the Plaza. But knowing the American’s empire was falling apart and almost broke, Kwek politely declined. Trump changed tack, and asked whether Kwek could let him continue to manage the hotel. Kwek turned him down again, saying that the job was going to [Saudi Prince] Alwaleed’s Fairmont Hotels chain. But mindful of [his banker] Aziz’s advice, he gave Trump a face-saving way out. He offered Trump the role of an advisor to the Plaza, with a token fee every year. “It was to pacify him,” said Kwek.

In addition, Trump asked to be involved if the Plaza’s top floors were converted into penthouses. He told Kwek he knew the New York City authorities and could pave the way for the change. Kwek responded: “Well, it’s a good idea.” Trump would also get a cut of the profits if the condominium penthouses were realised (they weren’t), and a small fee if Kwek should sell the hotel within seven years (it wasn’t). “I was a good listener when negotiating with Trump,” Kwek told [Julie] Satow [who wrote the book The Plaza]. “He wanted to continue managing the hotel and be part of the venture. We eventually narrowed down his role.” No drama, no games. Like a kung fu master, he expertly neutralised his opponent’s moves without hurting him.

Well that was all well and good, but it begs an obvious question. How did a Singaporean businessman find himself buying one of the most storied hotels in the world?

And how did he end up buying it from a distressed Donald Trump?

Choosing the Hotel Game

In August 1990, Kwek Leng Beng took over from his father as chairman of Hong Leong Group. He was 49 years old. Four years later, his father — the legendary Singaporean businessman Kwek Hong Png — passed away. The baton of family patriarch had passed firmly into the younger Kwek’s hands. 

Kwek had already been gunning for a big move into hotels. In 1989, a year before he formally took over, Hong Leong Group formed a new subsidiary named CDL Hotels. They parked it under City Development Limited, its real estate arm. 

This move was partially a response to Hong Leong’s inability to get a long-coveted banking license in Singapore. But it was also a logical move, given the other Hong Leong businesses. Kwek’s father had long stressed the importance of expanding into businesses they were familiar with; to not stray into whatever was in vogue. “He said that if you do things which you do not know, you could get swallowed up,” Kwek recalled. As a result, unlike many other Asian conglomerates, Hong Leong expanded logically: first building materials, then real estate, then finance, and now hotels. 

Kwek had cut his teeth in real estate and finance. He had his first experience of the hotel business with King’s Hotel, at the age of 29. 19 years later, in 1989, the group placed all six of its hotel properties into CDL Hotels: the aforementioned King’s Hotel, their first; Orchid Inn and Orchard Hotel in Singapore, the Grand Hyatt Taipei in Taiwan, the Manila Plaza Hotel in the Philippines, and Orchid Hotel Penang in Malaysia. 

The Kweks then listed CDL Hotels on the Hong Kong stock exchange with an initial market capitalisation of HK$3 billion. CDL maintained ownership of 51% of the company; with this listing it raised a war chest of about HK$1.47 billion (around US$188 million).

Thus equipped with capital, Kwek set out to build a hotel empire.

It’s a little difficult to remember this today, but the early 90s saw a recession that engulfed much of the Western World. (The late 90s dotcom boom and bust has since eclipsed this downturn, at least in popular memory). The United States’ recession experience started in 1990 and lasted eight months, relatively benign except for the fact that unemployment persisted at stubbornly high levels throughout the recovery; the UK entered a recession for two years. Finland was hit particularly hard, so much so that its experience was later described as a depression: 15% of all companies closed, and unemployment went from 4% to 20% in four years. Alone in Asia, Japan was hit with a ‘lost decade’ starting from 1990.

It was in this environment that Kwek began his campaign. He started with a bang — purchasing the Gloucester in London for US$109 million. This put the hotel world on notice. In 1992, the economy in the UK was so bad and the London hotel market so depressed that the news hit all the large hotel players as a surprise. No major hotel had been sold in London since 1989. Kwek had actually had the choice of three good hotels in London; he picked the 548-room Gloucester because it was on freehold land — in the affluent Kensington district, to boot.

At the start of 1993, Kwek bought the Nikko Hotel in Hong Kong, and then a month later bought the Regent Hotel in Kuala Lumpur. In the space of four short months, starting with his Gloucester purchase in late 1992, Kwek had increased his hotel holdings to nine, an increase of 50%. He wasn’t done.

In July 1993, he bought 70% of QINZ Holdings, the holding company of Quality Hotels in New Zealand. This was a chain of 13 low-price travellers lodges — not exactly sexy properties. But: “the owner was desperate to offload, and I was curious,” Kwek recalled, “I asked him a lot of questions about his hotels and New Zealand and I decided to go take a look. People laughed at me. They said the country has more sheep than people, who would stay in your hotels?” But the properties had positive cash flow, and the land they sat on was freehold. Kwek closed quickly.

A month later, CDL Hotels acquired Kiwi company Kingsgate International, which owned five hotels in the country. The company came with a land bank: several parcels in key tourism areas. The same month the Kingsgate acquisition closed, Kwek bought another hotel in New Zealand and started construction of a new property. At this point, CDL Hotels had become the largest hotel operator in NZ.

In 1995, a Singaporean tabloid ...

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