Industry Update
Opinion Article18 January 2021

The Alila journey: In conversation with co-founder Mark Edleson

By Kimberly Yoong, Analyst, Capital Markets at Cushman & Wakefield Hospitality - Central & Eastern, South-Eastern Europe

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Alila - meaning 'surprise' in Sanskrit - was founded in 2001 on the back of personalized hospitality, private spaces and bespoke journeys. Today, Alila is one of the most well-known luxury brands in Asia and has 16 hotels globally, each in unique locations across 6 countries. In a webinar with EHL, Co-Founder Mark Edleson shared with us the story of how the brand came to be - beginning from his ardour for the Southeast Asian region, to his adventures scouring for new hotel sites with Aman - and how the Alila brand has risen to the prominence it enjoys today.

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Early beginnings - The journey before the founding of Alila

Learning about Southeast Asian culture

My long journey that culminated with Alila began in the United States. I attended Stanford University around the time of the Vietnam War. After graduation, I joined the American Peace Corps, which was a volunteer service working to bring technical skills to the developing countries. That was how I was offered a position in Malaysia and got to travel frequently throughout Southeast Asia. This experience and travels created a great passion in me and an interest in the region. After five years, I went back to graduate school at Ohio University, which had a very strong Southeast Asia international relations program, and did a fellowship in the Indonesian language and literature - but after that, I was desperate to go back to Southeast Asia.

'All roads lead to Southeast Asia' - A career start in banking

I was fortunate enough to get hired by Citibank, and after six months of training in New York, I was posted to Manila where I did corporate lending and treasury work. I was there for almost five years before I was offered to move to Colombia. After two and a half years there, I was anxious to go back to Southeast Asia; this time, to Jakarta. As soon as I got off the plane, I smelled the kretek cigarettes and Jakarta came alive - I knew it was going to be hard to get me out of there and indeed, I stayed there with Citibank as a Vice President in corporate lending until 1983 when I resigned to pursue other business interests in Indonesia. While I was in Indonesia, I felt that my language experience and understanding of the country gave me unique opportunities and skills in the bank, which led to my success there.

Gaining exposure to the hotel market - rubbing shoulders with Aman

I'd had a house in Bali since 1982, where I knew a couple of expatriates from Australia and Italy who had bought some land nearby in Ubud on the Ayung River and were building a boutique hotel. I helped them get bank financing to set up the corporate structure in Indonesia and to get the board of investment approvals. They were facing some expected difficulties of development and I knew of Adrian Zecha, who had just opened Amanpuri in Phuket. They got him interested in investing in their hotel and when it opened in 1989, it became Amandari - the second of the Aman resorts. From there, Adrian and I got to know each other well and eventually, I helped to put together the legal and financial foundations for Amankila, Amannusa, Amanwana and Amanjiwo.

This is what formed my hotel experience - working with Adrian. I was a third-party consultant for Amanresorts, but by 1993, I was having so much fun with Adrian, scouring the remote areas of Indonesia to find the next sites, that I decided to leave the consulting business and set up an Indonesian hotel development company with two Indonesian partners who had also been working on Aman in Indonesia. We also formed a joint venture with Adrian, who had started GHM (General Hotel Management) by then.

From founding Mandara Spa to the beginnings of Alila

In 1996, we opened the first Mandara Spa in the Chedi Ubud. I think we were the first spa company that was set up with the intention of operating multiple outlets in multiple hotels, and we grew quickly to about 45 hotels from Bali to Japan to Honolulu in about six years. We successfully sold the company in July 2001, just before 9/11. At that time, a partner's brother was opening a hotel and needed someone to manage it. My partner and I had essentially been watching GHM [manage hotels] silently, so we thought, well, "we have some experience" and so we said to him, "why don't you let us open the hotel?"

And that's what I did - the creation of Alila. In 2001, we opened Alila Jakarta with Frederic Simon, who became the general manager of that hotel and Managing Director of Alila Hotels & Resorts.

After about a year, we spoke with GHM and said, "Look, we have three hotels under management in Bali: Ubud, Manggis, and Legian; but Legian was owned by a third party, and Ubud and Manggis are owned by us. Why don't we split up GHM Indonesia? You keep the Legian, which is, by far, the biggest economic entity within the group and let us take back Chedi and Serai and rebrand them as Alila?" We came to that agreement in 2002 and had quite a tumultuous start in Bali, with the Bali bombing in 2002 and SARS in 2003, but we grew the brand from there - and so that was where Alila began.

The Alila Story

Creating the Alila brand

Alila was inspired by Aman. We wanted to bring a little more flexibility in matters such as pricing and marketing, as well as cash-flow management; but their design, spirit, soul, personalized service, architecture and choice of locations - we wanted to try to emulate that.

[At first,] I wasn't sure whether Alila was going to grow beyond these first three hotels. But as that process developed, I decided that we should move to Singapore and establish the headquarters of Alila. By that time, we had developed regional and perhaps global aspirations and having grown Mandara Spa from Bali, I knew how difficult it was to grow an international brand from Bali, so we moved to Singapore.

We created some values of sustainability, culture, community and nature. These are all things that had appealed to me and why I originally got into hospitality - because I'm interested in design and the cultures, and lived with the cultures of Southeast Asia. The properties that we were developing in places like Ubud and Manggis were very much dependent on their location and the support of the local community. In Bali, many hotels have conflicts with their local communities, and it's hard to survive under those circumstances. Our business' sustainability is dependent on the sustainability of the villages and the beautiful environments in which we operate. This belief developed the foundations of Alila from the Bali core, which was very critical to us, especially when our flagship Alila Villas in Uluwatu, as well as Alila SCBD Jakarta were developed.

We did have setbacks along the way; we had gained a few, we lost a few. We had to be opportunistic. Not every hotel in the portfolio was ideal or perfectly suited to our core values. But whatever it was, we were able to impose our values on it and I think our customer base appreciated that. Our repeat guests could see that in each hotel, there was something of the spirit of the destination. It was about the attention to detail and good hospitality, so the brand continued to prosper.

Setting greater sights beyond Alila

Back in 2014, we thought that we needed to expand the ownership. We brought in an old friend who was working with John Pritzker, from the Pritzker family that founded Hyatt. They were buying hotel management companies - the Joie de Vivre and Thompson brand, which they consolidated into the Commune Hotels & Resorts. They wanted to build the largest independent brand of boutique lifestyle hotels in the world. With Joie de Vivre and Thompson, they had about 45 hotels under management and they wanted to grow in Asia. Eventually, we sold 51% of Alila to Commune.

Commune saw the difficulties very quickly - as a mid-sized hotel management company with 55 or 60 hotels, they weren't making much money. That was about the time when Marriott acquired Starwood and they thought, "We're kind of caught in between. We'd better do something." And they quickly moved to merge with Destination Hotels, which had about 50 properties in the US. We all merged and created Two Roads Hospitality.

With this merger, we wanted to take advantage of the additional brands that we could try to market in Asia, so we tried to bring Joie de Vivre - there is now one in Beijing. We tried to bring Thompson, but it wasn't successful. We got access to more brands and we thought it would give us access to deeper pockets, which would help us to seed those brands in Asia, but it didn't happen. I think it was because both of our partners in the States were more comfortable investing their own equity into North America rather than Asia. As it turned out, Alila was the most viable brand [in Asia], because we were best known in Asia.

The acquisition of Alila

Early in 2018, we were approached by one of the major hotel brands to sell Alila. I said to Two Roads, "We'd like to sell in Asia because it's growing slowly, we're not making that much money. It's a great brand. We think we can get good value for it, but we don't have the ability. It's going to take too long." We shopped it to a number of companies and eventually sold to Hyatt, who was the highest invest-bidder; probably not surprisingly, since John Pritzker was one of the major shareholders and his brother Tom Pritzker is still the chairman of Hyatt Hotels Corporation. I stayed on for six months to oversee the transition of Alila in Asia - and that almost brings us to the journey of Alila up to the current times.

Lessons for Hospitality

Building independent brands

More than ever, I think there are opportunities to do creative things, particularly in the resort business. Resorts are unique because when people travel to cities, often it's on business and you look for convenience, location etc. When you travel on leisure, you tend to look for something that is unique in each destination - you want to immerse yourself in it. I still believe strongly in the spirit of what we did [with Alila] and I encourage people to do that.

But I can see it being done by people who have the financial resources, maybe to develop three to five hotels and put their own brand with a small, dedicated team for that in-house brand and eliminate third-party fees. I see that even with KP Ho in Banyan Tree, who started with a good base of land and properties; or with Sonia Cheng in Rosewood or the Kwee family growing the Capella brand - big families with large resource bases that don't have to be too opportunistic. I believe that the financial returns in hospitality are in the real estate more than the management. I think it's very difficult [to build your own brand] unless you have the resources to really build out the brand yourself.

The impact of COVID-19 on hospitality, health and wellness

I think it's anybody's guess these days how the industry is going to adapt to COVID. Smaller, more villa-style hotels, for those who can afford it, give people social distancing opportunities. But [beyond that,] I think that wellness will continue to grow - and not just the cleanliness or spa treatments, but into various holistic aspects of wellness: cuisine, eating, diet, exercise, sleep; all of these elements of wellness.

I'm hoping that COVID is another wake-up call from nature that if you don't take heed of nature, COVID will seem like nothing when New York is flooded, or when the Maldives is gone. COVID is just a reminder of how powerful nature is. When you see the reactions to COVID, the people who have respected nature and science seem to be doing better in dealing with it - so that's my argument for hotels moving not only into wellness, but also to sustainability in their operations.

Further reading: https://hospitalityinsights.ehl.edu/sustainability-tourism-socio-cultural-lens.

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Alila

The hallmark of Alila hotels is the combination of innovative design and luxury in unique locations, set apart by an unprecedented level of private space, crafted artisanship, personalized hospitality, and bespoke journeys.
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Kimberly Yoong

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