Accor to target emerging markets amid slowdown

European hotel management company, Accor, is looking to new source markets such as China and India in order to boost its business in the Middle East at a time when the region is suffering from low tourist traffic, according to the company's top executive.

"New market segments such as China, India and Iran are coming into the Dubai market now. We were not interested in these markets earlier because they were less profitable for Accor as against Europe, for instance. But now since there is a slowdown, we are increasingly looking to attract guests from these markets," Christophe Landais, Managing Director for Accor Middle East Hospitality, told Emirates Business.

Hoteliers today are increasingly trying to cash in on the leisure markets in the East – not seen as the source of steady revenues earlier – to make up for the declining revenues as both leisure and corporate travellers restrain their travel plans owing to the global downturn.

Accor, with 25 of its budget Ibis hotels in China, plans to open 20 more properties globally this year and about 10 annually over the next few years. According to the International Monetary Fund (IMF) data, China's economy is projected to grow by 6.5 per cent this year.

The French company's current (as of April 23, 2009) network of hotels in the Middle East comprises 27 properties, with 6,540 keys, in seven countries including the UAE, Bahrain, Kuwait, Lebanon, Qatar, Saudi Arabia and Yemen. Accor Hospitality's secured developments by end-2011, meanwhile, include 19 hotels, with 5,053 keys, in six countries such as the UAE, Bahrain, Jordan, Kuwait, Oman and Saudi Arabia, Landais said.

Impact of global slowdown

Asked if all of Accor's properties under development were on schedule for completion amidst the slowdown, Landais said: "All of the 19 hotels in progress are on schedule, and in fact, extremely well advanced. We have faced no delays so far, and we do not face any delays for our next openings in the two years to come.

"Also consider that in the past six months building materials have become cheaper, and contractors are available more easily than before. So some of our projects are actually being accelerated."

By that count, the total network of Accor Hospitality in the Middle East is expected to touch 46 hotels, with 11,593 keys, by end-2011, in nine cities of the UAE, Bahrain, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia and Yemen, he said.

Giving the reasons for Accor projects being on track for completion as scheduled, Landais said: "Accor had anticipated the maturation of the Middle East hotel markets, such as Dubai, and largely positioned its developments on the economy and mid-scale segments, in addition to its upscale projects, while many operators continued to expand their network with only five-star projects.

"Now that there is a slowdown, everyone expects a better resilience of the economy business model, and investors remain adamant in developing such products and thus complete their projects with the support of their lenders," he said.

The company also has no plans to cancel any of its projects, said Landais.

Meanwhile, according to the Dubai Department of Tourism and Commerce Marketing (DTCM), Dubai's expanding hotel industry, in the first quarter of 2009, recorded a five per cent increase in guest numbers, 17 per cent rise in hotel room inventory and 30 per cent increase in hotel apartments.

DTCM said in 2008, Dubai hotels played host to 7.5 million guests, an increase of 8.3 per cent compared with 2007, with guest nights swelling by 9.2 per cent to touch 22.42 million.

At the same time, according to recent data released by IMF, growth in the Middle East and Central Asia could slow to 2.5 per cent in 2009 from six per cent in 2008.

Economy lodging still strong

The 'economy lodging' segment of the hotel market, which for Accor largely comprises brands such as Ibis and Novotel (mid-scale) in this region, has not been impacted much by the economic crisis, according to Landais.

"It is the high-end market brands that have taken a bigger hit due to the economic slowdown rather than the mid-scale or economy brands," he said.

The RevPAR (revenue per available room) for Dubai hotels dropped by 34.5 per cent from January until April 2009, as per the latest Deloitte-STR Global data.

"But even though RevPAR has dropped to this level, the economy lodging has not been touched so much in Dubai," said Landais.

Dubai hotels' RevPar for April rested at marginally above $200 (Dh734), down from a peak of about $350 in October last year, according to the Deloitte-STR Global report, with hotel revenues in Dubai plunging 41 per cent in March.

Abu Dhabi hotels, on the other hand, saw an increase of 10.5 per cent in RevPAR in the same period. "The biggest difference between Dubai and Abu Dhabi is that while Dubai caters to a much stronger leisure market segment, Abu Dhabi has more of a corporate market segment, and thus the difference in RevPAR," he said.

Landais said May and June could see an increase in the RevPAR for Dubai hotels.

"Starting from mid-June until September, it is going to be hard to pull the RevPAR up given the holy month of Ramadan in August and the holiday season," he said. "But overall, the RevPAR will improve as the year passes."

Reduction in tariff

Asked if Accor plans to reduce its room rates, like most other Dubai hotels have in the past couple of months, Landais said: "Most of the development we have in the UAE and the Middle East is, anyway, for our economy lodging brand, Ibis and, the mid-scale brand, Novotel."

He said challenges facing hoteliers in Dubai in light of the financial crisis are twofold – one, to develop the top line, ie revenue (RevPAR) and secondly, to adapt costs to maintain the bottom line (gross operating profit).

"Since the bargaining power of suppliers has shifted to buyers, hotels need to adopt a more tactical pricing policy by segment and distribution channels. Moreover, hotels should seek not what clients are capable of paying but what they are willing to pay, still keeping the overall pricing strategy in mind," Landais said. "As far as the Accor brands are concerned, our distribution channels allow a global wide and consistent generation of reservations v/s unbranded hotels."

Introducing upscale brands

With a strong hold on the mid-scale and economy segment of the market with Ibis and Novotel so far in the Middle East, Accor is gearing to bring some of its upscale, five-star brands to the region. These include Sofitel Hotels & Resorts and Pullman, among others.

Accor will introduce Sofitel Hotels & Resorts to the UAE market with the first property opening in Dubai's Jumeirah Beach Residence area in September.

It will be followed by three more Sofitel hotels, one in Abu Dubai and two in Dubai, said Landais.

"We also have a Sofitel coming up on The Palm Jumeirah, scheduled for beyond 2011. Besides, we have signed on two more Sofitels recently – one each in Dubai (next to Business Bay) and Abu Dhabi," he said

Landais said the Sofitel Zallaq Beach in Bahrain will open in 2010.

Pullman will be launched in the Middle East in 2010 and 2011 with two openings in Dubai: Pullman Mall of the Emirates and Pullman Jumeirah Lake Towers.

Adagio is the latest brand that Accor plans to bring to the Middle East from its global portfolio. This mid- and long-stay serviced apartment brand, targeted at the mid-scale segment of the market, will have a presence in Dubai and Abu Dhabi markets "no later than 2010", according to Landais.

The company also opens its first Suitehotel, a lifestyle city concept, in Dubai's Mall of the Emirates, today.

Strategies for the Middle East

Accor plans to further strengthen the development of its two core brands in the mid-scale segment of the market – Ibis and Novotel.

"Accor has always a clear strategy of leadership in these segments for which density and spread out are the rules of the game to outperform the market. By 2012, 18 Novotel, representing 4,709 rooms, and 19 Ibis representing 4,765 rooms, will be in operation in the Middle East," said Landais.

"In a hotel market set for catering to the high-end demand, the mid-scale positioning was quite revolutionary. This market test revealed highly positive, therefore, the group decided to move to a strategic development of the two brands, taking advantage of their already strong international presence."

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