This article first appeared in The Edge Malaysia Weekly on March 27, 2023 - April 2, 2023

PLAZA Premium Group (PPG) did very well for decades. Then along came Covid-19 and, like so many businesses across the aviation industry, the Hong Kong-based airport lounge operator took an unprecedented hit with the subsequent lockdowns.

Almost three years on, with the gradual lifting of restrictions, its CEO and founder Song Hoi-See reveals that the group has bounced back from losing US$100 million during the pandemic. On the back of an aggressive network expansion, its annual revenue has more than doubled from HK$3.5 billion before the pandemic to solidify its position as the world’s leading independent airport lounge operator.

According to Song, the group managed to weather the Covid-19 storm by approaching funders in Hong Kong and raising US$200 million in capital in 2021 for investment in the group and to pay down its debt. This was a remarkable feat in itself given the fact that most lenders and investors were shying away from investing in the aviation sector.

Without disclosing the funders, he says they were willing to provide PPG with funds as they saw the prospects. “We currently operate in more than 70 international airports, but there are thousands of international airports in the world. We only capture less than 5% of the market. The market [for private, independently operated airport lounges] is still huge,” he tells The Edge in an interview.

Apart from airport lounges, PPG has been expanding vertically to include operating third-party lounge services for airlines and financial institutions such as American Express, Mastercard and Visa in the US, Australia, Europe and Hong Kong.

“We have also expanded horizontally into providing other businesses like airport terminal hotels under the Aerotel brand, food and beverage (F&B), and meet-and-greet services from baggage handling, lounge stays, immigration-designated channel to limousine transfer,” says Song.

Song notes that business had started picking up towards the end of 2022 and PPG has since seen a turnaround in its results after three years of losses, although profit has yet to recover to pre-Covid-19 levels.

He recalls how the group suffered losses exceeding US$100 million during those 2½ years as lockdowns slashed demand for travel. He had never seen anything quite like it.

“It was the worst experience I ever had in my nearly 30 years of doing business. Why? Because I had no control of what was happening. You cannot plan because things keep on changing. You hear people say, ‘The virus is mutating again’ and you start wondering how long it will last.”

The industry had been further hamstrung by government travel policies, which differed across countries and changed by the day.

“That severely affected us because we couldn’t plan. We didn’t know what to do next. Also, this is a people business. But we couldn’t [afford to] keep our entire network of airport lounges open with no income — and we still had to pay expenses such as rental and staff costs.”

To keep afloat, some airport lounges during the height of the pandemic were temporarily suspended.

“I couldn’t retrench all of my colleagues, but I did ask them to review their salary,” says Song, who refers to his staff as colleagues. “I am deeply grateful to my team of people who have weathered the pandemic with me. I owe them a lot. It is the team of people that makes PPG successful. Without them, I am nobody.”

Before the pandemic, PPG operated a network of 160 airport lounges across the world, employing about 5,000 people. The number of airport lounges has since grown to nearly 300 with the US$200 million financial boost to help with expansion plans.

With the post-pandemic aviation growth, PPG now faces new challenges such as a shortage of workers who can fill the increasing number of roles. Song points out that the pandemic has resulted in a structural change in the aviation industry.

“You hear of a lack of workforce throughout the air travel industry. Why? During the pandemic, many people had left the industry after they were retrenched and they are not returning due to various factors such as the long distance to the airport and the perception that those working at the airport are subject to higher demands and longer work hours. Thus, for those who have adjusted to their new jobs, it is tough to get them back to the aviation industry. This is an issue that’s happening everywhere — not just in Malaysia,” he says.

It was not part of the plan, but the pandemic has also turned out to be a blessing in disguise for PPG because during that time, people were willing to spend on airport lounges to avoid being in public spaces. “Prior to the pandemic, we managed to capture only 2% to 2.5% of the passengers passing through the airport to use our Plaza Premium airport lounges. We now capture 7% to 8%. I hope that will continue,” says Song.

Launched in 1998, PPG is known to be the world’s first to introduce the independent airport lounge concept that is open to the general public. Since then, new players have continued to debut. Song is, however, unfazed by competition, noting that the business has a high barrier to entry.

“It is not easy for you to come into this area of business if you don’t have experience [as] airport authorities would not want to talk to you. That’s because the airport is a public facility. They cannot just open and close [as they like]. They are subject to scrutiny by the public. So they are very careful who they want to give [their spaces] to. Initially, this was a disadvantage to me because they would ask me, ‘Who are you, Mr Song? What are you doing? We’ve never heard anything like a third-party airport lounge before. Is it a viable business?’ It was a challenging period for me to penetrate the market,” he says.

“Certainly, after a while, when they see that you are doing well and airlines are supporting you, the airport authorities accept us. Also, why do airlines want to sign a contract with us? First, for airlines, airline lounges are a cost centre. If we can manage the lounges for them and use economies of scale to reduce their capital expenditure [capex], it saves them a lot of money and yet they know this company can deliver the services. All airlines need to do is just sign one contract with us that covers the world. This is the advantage that we have.”

Song concedes that it has been a “very long, hard journey” but there has never been a time that he considered throwing in the towel.

“This is an image business. Airlines have to trust you. Also, we are creating a first-of-its-kind business in the world. No one has ever done it before. Previously, airline business lounges were only for commercially important persons (CIP), that is, either you are a first-class or business-class passenger or you are a frequent traveller.

“I must say, things are a bit easier after going through more than 15 years,” he says, pointing out that the group’s Heathrow lounge has been voted “best independent airport lounge” by Skytrax for six consecutive years.

Like other companies, PPG has taken advantage of the pandemic downtime to pivot to technology during the last 2½ years.

“We have developed two major technologies. One is a loyalty programme where we can white label our loyalty programme to any airports. It is a worldwide programme — using points within our network. We are the first loyalty programme that allows you to do instant redemption and instant burning. We are also in talks with banks to convert credit card points into our loyalty programme. We will first start this programme with HSBC in Hong Kong next month. Hopefully, other banks and airlines will follow suit. We want to try to create that kind of ecosystem,” says Song.

”The second technology, which we developed with Tata Consultancy Services, is a unicorn product called TECO, or travel experience ecosystem. If you go to the airport, every airport passenger service from limousine and baggage service to parking is currently operating in a silo.

“We are going to provide a single platform that includes an omnichannel booking engine that enables worldwide sales and distribution, a customer engagement centre with customer profiling and personalisation capabilities and service delivery platform for dispatch. It is a platform that I can apply to any airport. We are pioneering this technology in two airports — Bangalore International Airport and Hong Kong International Airport. Give me another six to nine months for the technology to mature.”

Song, who wholly-owns PPG with his wife, has no plans for an initial public offering.

“I don’t need to cash out,” he declares. “Rather, I am hungry to build a legacy. Today, I am here not to do business just for the money. I am 66 years old. I am building a legacy, having founded the first third-party airport lounge [concept] in the world. When I wake up in the morning and I look at the mirror, I say to myself, ‘You have created something for humankind.’

“I feel that [even though] I am a kampung boy from Sungai Udang, Melaka, I have created something for people to enjoy. I don’t want to just wake up in the morning, make money, enjoy myself and then die.”

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