CNBC Transcript: Bill Heinecke, Chairman, Minor International
Below is the transcript of an interview with Minor International Chairman Bill Heinecke. The interview will play out in CNBC’s latest episode of Managing Asia on 24 August 2018, 5.30PM SG/HK (in APAC) and 11.00PM BST time (in EMEA). If you choose to use anything, please attribute to CNBC and Christine Tan.
Christine Tan (CT): Okay Bill, no foreigner has placed a bigger bet on this country, Thailand, than you. You gave up your US passport, raised your entire family here, and built Minor into a multi-million, multi-billion dollar business. Did you ever think you would be this successful in Thailand?
Bill Heinecke (BH): Not a chance. Having gone to school here and finished school here, having not gone off to university, I was probably as surprised as anyone at the success we’ve been able to achieve.
CT: You spent the last 5 decades growing Minor here in Thailand in Asia and overseas, did you have a vision right from the start? On what you wanted to create and build?
BH: When I was 17 and started this company, my only vision was trying to survive for the next month and trying to ensure that we could make the payroll. I’d never would have expected that we’d become one of the largest hotel companies in the world. I’d never expected that we’d be one of the largest food companies.
CT: So Bill do you remember the day in 1991 when you decided to give up your US passport to become a Thai citizen? What made you do it?
BH: Well I remember the time very well. I had to go to the embassy. You have to renounce your citizenship and at that time, I remember the counselor who said to me, “I think you have to rethink this, I’ve never seen or heard of anyone who wanted to give back their citizenship.” I said well I’ve made up my mind and I don’t need to wait.
CT: You know Bill, to some you’re an enigma, how is it that someone with no Thai roots like yourself, has managed to succeed in such a traditionally Thai business environment? How did you do it? What’s your secret?
B: I’m not sure it was my secret. I think really Thailand adopted me, we’ve had so much good support from whether the Thai banks or Thai business people or the community in general, they’ve embraced us and embraced our company and you know we’re proud to be a Thai company. I’d like to hope that some of my Thai friends are proud that I’m Thai. Even if I’m only Thai by citizenship.
CT: From very early on, you have developed a relationship with the Crown Property bureau which is the business arm of the Thai royal family. Now that relationship became valuable as it helped you later on to thwart a hostile takeover of this particular hotel the Anantara Siam. Tell us in your own words what happened and how you managed to win the bid in 1999.
BH: Well I think we were only a very small shareholder and Goldman Sachs decided that this would be a trophy asset to have and decided to make a bid for it. They offered a very high price – a much higher price than we could offer. So I wasn’t about to let it slip through our hands, so in fighting them back we set out to get negative control over the company and we managed to build our share holding up to something like 25 percent which gave us negative control. We didn’t have positive control… Goldman would have nearly accomplished that. But we did thwart their takeover bid. But in any event, I think it struck a chord with many Thais, and I was pleased to be on the other side, that foreigners were slowly trying to acquire some of the prime assets following the 1997 crisis.
CT: To me it’s an irony, because it took a foreigner like you to make sure that this particular asset, this particular property, a Thai asset, did not fall into foreign hands.
BH: That’s correct. Perhaps we were looking at it more from the perspective of the history of this hotel and all of the unique features of it. Goldman was looking at it purely from a money play. You know something they could buy and flip and wouldn’t care where it went. For us, I think it was very much that we wanted to retain this hotel in Thai hands, and it was owned by his majesty’s pretty purse. So it was very important.
CT: These days you’re spending a lot of time growing overseas, a couple of months ago you made your biggest acquisition yet, by buying Spanish hospitality operator, NH hotel group for 2.9 billion dollars, instantly tripling the size of your overall hotel group. What made you do it? How did you spot the opportunity?
BH: We’d been looking at this opportunity for about a year and we were really strategizing how we could be successful with it because we’re really, generally a small player. We’re number 60 in the ranks of hotel companies in the world today. We realized that if we got into a bidding war with anybody – any of the bigger boys then, we were sure to lose. Our resources are limited, our capital is limited. So we set about with a strategy to slowly accumulate a significant position and in order to thwart any other attempts to try to come in and try to wrestle NH away from us. So in this respect we managed to build our stake up to 29.5 when we had to declare a voluntary take-over of NH which we did. But we managed to secure commitments totaling 44 percent. When Hyatt threw their hat in the ring, to announce that they wanted to make a bid, I think they were forced to withdraw once they realized that we were going to get our share-holders approval and we already had commitments for 44 percent. So it makes it virtually impossible for anybody else to take control.
CT: Is this this deal ultimately what you need to become a sizable player in Europe?
BH: Certainly, it makes us a sizable player in the world. I think it catapults us into the top 20 hotel companies in the world. It gives us a very, very strong presence in Europe, stronger than many of our competitors. We’ve already got a very strong presence in Asia, so uh yes I think it positions us very well for the next five years.
CT: Any plans to eventually rebrand the NH group of hotels?
BH: Certainly we think that they would benefit from having use of our brands like Avani and Anantara. We’ve already demonstrated what Avani and Anantara can do with a successful launch already in Portugal, they’re performing extremely well since we rebranded two of the Tivoli hotels. We believe that NH will also have a very good opportunity given the use of our brands which carry an interesting indigenous history and which could adapt very well to Europe.
CT: Are you done with hotel acquisitions for now?
BH: I think for this year, for sure we’re certainly going to try and digest this. Certainly we’ve had to look at increasing our capital. We’re going to be raising some bonds and some other debt equity. So yeah, I think our shareholders will be very relieved as will our bankers if we don’t do anything further this year.
CT: What made you focus on Europe? Were you trying to spot a trend in business where you were trying to figure out where you could make the most money?
BH: I think there were two things. First, we made a number of acquisitions in the U.K. just after Brexit, so we saw that as an opportunity to acquire Corbin & King. We’ve been associated with a lot of restaurant brands, including a joint venture with Zuma here in Thailand. But we certainly like the Wolseley restaurant, we liked everything that Corbin & King had done, and we saw opportunities not only in the UK, but then in Europe and even in Asia. So frankly, the U.K. was really the first move, followed by the NH move, but we look at Europe as an interesting opportunity right now because of the tremendous strength that we’re seeing with the Chinese travelling. With only 8 to 10 percent of the Chinese having a passport, we’ve already seen the impact that’s had on Asia. Imagine that as the Chinese traveler begin to want to travel a little bit further afield. You know, it is Paris, it is Spain, and it is many of the European countries that they want to see. So, we think we’re getting in at the right time.
CT: Looking at your global ambitions, the only thing missing is the United States. Is that going to be next on your acquisition list?
BH: We did acquire with an H1 hotel in New York — a very nice hotel. It’s under renovation right now and we certainly will look at plugging in more hotels.
CT: Are the Chinese going there as well?
BH: Well they are as a matter of fact, so obviously the Chinese are going to lead everything when it comes to travel…
CT: What are you looking to buy in the US?
BH: Well for us to really make it fit, we need to buy several hotels. So a single hotel really won’t cut it for us. So we need a small group or an individual company that has a portfolio of hotels.
CT: Where do you see tourism in this country?
BH: Thailand is one of the largest markets in the world, and China has helped put it there. What few people realize is that while Chinese tourists have been moving so rapidly into nearby Asian markets like Thailand, the European markets which is one of the reasons why we also favored NH, has still remained very strong. You know the Germans have been the Mainstay of Thailand. They’re big spenders. They come every year, and their numbers have remained stable even though they haven’t climbed the way the Chinese have climbed.
CT: We have a military government in place now, is that holding back the development and growth of Thailand?
BH: I don’t think so. The thing you know that’s really important to all Asian countries is stability, and what we’ve had a lot of is stability in recent days. And this government was particularly instrumental in bringing a level of stability to Thailand which has allowed us to grow our tourism, to grow our economy.
CT: Today the biggest source of your revenue comes from the hospitality side, followed by the restaurants, you’ve also got your own corporate jets business, and you’ve also gone into real estate development developing luxury residences. What’s next for Bill Heinecke? Anything new out there you want to get your hands on?
BH: One reason why I think we’ve been so successful is we’ve stayed very focused on our roots, and our roots really are the hospitality field and the restaurants. Everything sort of revolves around that. You know all the real estate development that we’ve done really is linked in one form or another to our hotels, and to the destinations where we operate. Our jet business is really just a way of allowing us to travel and get to these markets quickly and work on them.
CT: Well here in Asia, it took you some time to crack the China market and become profitable, have you finally gotten your formula right for the Chinese market?
BH: We think so but I think the Chinese market is a market that you have to continually learn at and we are. We are there in the hotel field now. We have several hotels that we’re managing. We don’t own any hotels in China, but we do own a lot of restaurants and it took us a long time to get it right. What we’ve got right is finding Chinese food. We’re in seafood, in fresh water fish. We have one of the largest chains of restaurants there, and it took a while to realize that not all of China is interested in Western food.
CT: One of the problems you’ve mentioned to me in the past was that you were having trouble finding real estate in China at the right price. Have you found evidence that the recent cooling measures are working to bring down property prices in China?
BH: We haven’t seen it yet, and nor have we seen it in the Middle East or in many other markets. So those markets where we haven’t invested in real estate are usually the markets that we don’t seem to comprehend how the real estate prices remain where they are. We do understand smaller markets – Vietnam, Maldives, Sri Lanka, and we’re very eager to go in there. We’re also in Indonesia. So we’re not afraid to invest our money when we can understand that real estate market, when we can get our hands around it, and that’s part of our whole strategy which is an asset-right strategy. We’re not asset-light, we’re not afraid to invest in these larger real estate assets but it’s really very much focused on making sure that we get it asset-right and generate the profits that do come in real estate which is what we do have in many parts of the world.
CT: Is that limiting your growth in China as a result?
BH: Possibly, but I think that we feel strong enough in our food business that we can own real estate, so we have no hesitations about owning real estate in that area. But in terms of building and investing in hotels, I think we see greater opportunities investing in Europe. What we’re investing in Europe could probably only get us a handful of hotels in China. But what we’re getting in Europe is 380 odd hotels in some of the most important capitals in Europe. How else can we get into France, Madrid and Spain and be such a big player so quickly without one fell swoop of an acquisition?
CT: These days, we’re seeing an escalation of trade tensions with the U.S. and its trading partners like China and the EU. As a businessman, is this somehow impacting some of the decisions you’re making?
BH: You know I think we’re all a bit nervous about what’s happening in the world today, but I would have to say that it’s not impacting our decisions very much because we’re focused very much on the service industry. So we’re not worried about policies Trump is going to make short of not allowing Chinese visitors in, but even then, we’re not in the U.S. market. So for us, I think it’s very much a fact that in our industry, the services industry, we see very few hiccups on the horizon, and I don’t think that you would see travel disrupted no matter what the superpowers do to make it very difficult for each other in the area of trade and trade barriers.
CT: Last year in 2017, you pulled in global revenues of 1.7 billion dollars. What’s your ultimate ambition for Minor? Is there a revenue target you want to hit?
BH: No, we really don’t measure it by revenue targets. We measure it more by what we’re able to achieve with our people.
CT: There must be a personal target you would like to achieve.
BH: I think the personal target is really more like “Will I ever get a GTO?” you know those sorts of things. I think for the corporate targets I think we’ll achieve what we can. It’s really when you’re able to exceed a five-year plan in 12 months, you’re really hesitant to set goals, publicly especially. So it’s one thing to set them with our investors and with our board. Honestly, I think the world is our oyster right now.
CT: If you could make a guess, could you double, triple your revenue?
BH: We will pass the five billion mark, I’m sure.
CT: So looking back at the last fifteen years growing the company. What would you say is the biggest and the most valuable lesson you’ve learnt as an entrepreneur, as a business man?
BH: Certainly, I think a very difficult time was 1997. You know we saw the change in Hong Kong, I grew up in Hong Kong, so that was a big shock, I saw many people leave Hong Kong for other places when we had the economic collapse, the Tom Yum Kum crisis, so many entreprenuers got wiped out…
CT: You yourself almost came close to bankruptcy.
BH: We were technically bankrupt. We hung in there. We didn’t have to restructure our loans. We eventually caught up as we eventually overcame some of the challenges and I think that said a lot about not wanting to take risks and also about diversifying. Because up until that point in time, we were entirely dependent on Thailand and we had no overseas activities and it was from 1998 that we then moved to our very first hotel outside of Thailand which was in Vietnam.
CT: That was a big turning point for you?
BH: That was a big turning point. 1998 was a very big turning point.
CT: Diversify, diversify, diversify.
BH: In everything, not only in terms of risk, but in terms of geography also.
CT: You recently turned 69 years old. Are you thinking more about succession planning these days?
BH: I think as one gets a little older, one certainly has to think of succession planning and my board never lets me forget about the fact that we have to have succession planning. So certainly, that’s covered. We feel that we have good band strength. I think we can draw from within our ranks to succeed any of our key executives, you know there’s lots of speculation on whether it’s my son that’s going to be fitting in here or whom…
CT: Tell me more about that speculation. Could it be your son that could succeed you?
BH: No I don’t think so, I think he’s uh he’s you know very much involved in the food business, and that’s really been his inspiration you know the hotel side of things. He’s not really been very involved with… and our chief operating officer which is Dilip who’s led the NH acquisition has been very active in that. So I think we’ve got lots of people that are vying for the various positions but I don’t think I’m going to let go of the reigns for a while so nobody has to worry about that.
CT: But in terms of a successor, have you got an eye on one person?
BH: Not one person but we have several successors that are in line for leadership within our company.
CT: But in terms of the Heinecke family continuing the legacy. Could John ultimately take over you, if not now, but much later on?
BH: I’m sure he could if he wanted to. You got to remember that not all the young people today want to take over this sort of…
CT: He’s not keen?
BH: Well, I think he’s probably less keen than many people might think. You know there are a lot of headaches in this and when you achieved what we’ve achieved to date you know I think sometimes some people would rather leave that to professional managers. I think one of the reasons that we’re not considered a family enterprise is because we have a meritocracy. People will succeed in our company based on their capabilities, not what their last name is. That’s not the same in all Thai companies but it is in our company.
CT: But like you said you’re not ready to let go of the reigns just yet. You’re still driving around I heard in your fast cars and you have a huge collection of them. How many have you got now – fast cars in your collection around the world? Be honest.
BH: Okay. Probably approaching fifty but that includes a few motorcycles too.
CT: Are you addicted to the speed? What is it about racing that excites you?
BH: I used to race when I was young. I was one of the youngest people to ever have raced in the Macau Grand Prix, as my wife is proud to point out. I’m in the museum; they have a museum of all the old races. I was a young racer at the time, I had just turned eighteen and I was just married, so uh this year is very auspicious for us because it’s our fiftieth year, it’s not only the fiftieth year of the company, it’s the fiftieth year of my marriage.
BH: So uh there aren’t many people that can claim to be married to the same person for fifty years, especially in Thailand.
CT: So what is it about racing? What does it say about you as an entrepreneur?
BH: It’s a very personal sport. You know the sports that I enjoy the most are flying – those that you tend to do that alone – diving, racing and these are things where you challenge yourself. I took up helicopters when I was fifty, learned to fly a helicopter and these were all personal challenges. I’m not big on team sports. You won’t find me on the football field or the baseball field, but certainly anything that’s competitive and against the…
CT: The elements?
BH: The elements or someone else. Then I’m very keen.
CT: There are fifty of them so you actually have to buy real estate to actually house them. It’s a very expensive hobby!
BH: That’s correct. I have real estate both in the UK and the US. European cars are kept in the UK and US cars are kept in the US.
CT: And correct me if I’m wrong, you actually have Clint Eastwood’s Ferrari?
BH: I do indeed.
CT: And how does that drive?
BH: That was the only thing that was left after he was divorced.
CT: How does that drive as a result?
BH: It drives fantastic and it’s a great car. It doesn’t get you much slack with the California highway patrol when you get caught speeding. I can vouch for that. But it is a fabulous car to drive.
CT: And finally if you’re not speeding down the highway, what’s your next milestone you want to achieve for Minor? Where do you want to see the company 10 years from now?
BH: I certainly would like to believe that we will be a lot bigger, and we’ll still remain very focused. I don’t think we’re going to try and challenge the Marriot-Starwood position which is way up there, but I think we can be a tremendously successful hotel company. Being the biggest is not necessarily that important to me, I’d rather be the best.