Landmark plans Dh1bn hospitality investment

Retail giant Landmark Group plans to launch 12 mid-market hotels by October 2010, after unveiling its Citymax budget hospitality concept last week.

Signalling a Dh1 billion investment across these dozen properties, or an estimated 2,500 rooms, the group's Chairman also confirmed plans to launch new hotel brands in the near future.

"Our strategy is to open 12 mid-market properties in the UAE by October under our Citymax Hotels brand, combined with some joint ventures and acquisitions," Landmark Group Chairman, Micky Jagtiani, told Emirates Business exclusively. "We have four Citymax Hotels planned – one of which will be a joint-venture with the established Byblos Hotel.

"There is a similar deal with another Lebanese hospitality company, where we have taken equity. The remaining properties are still under negotiation.

"Once opened, these assets should add nearly 2,500 hotels rooms to the UAE market, totalling a Dh1bn venture," he said.

The investment is a significant increase from the Dh450 million and three mid-market hotels Landmark had earlier announced.

Michael A Weyland, General Manager of hotels division, Landmark Group, told Emirates Business: "The Dh450m was the initial cost of the first three Citymax Hotels projects. However, the economic climate worked in our favour, resulting in a cost reduction of nearly Dh1m.

"If you split this over 1,331 rooms across the three Citymax properties, the average per key room cost is Dh318,000."

Both Jagtiani and Weyland also confirmed new mid-market hospitality brands were on the horizon. Weyland said: "Yes, we are contemplating on creating new mid-market hospitality brands after successfully launching Citymax Hotels. That was always the plan when we decided to expand the business into the hospitality industry. However, everything is still in the planning stages."

When quizzed if the group would also diversify its portfolio to enter the four- and five-star hotels market, Weyland added: "Anything is possible at this stage. I cannot confirm if the new brand will have a higher rating than a three-star, but one thing is for sure, is that a luxury business model is not currently on the agenda."

Global expansion

Landmark is also heading towards international expansion in the hospitality sector with an acquisition of a European budget hotel chain.

Jagtiani said: "We are in this for the long-haul, which is why the group is also looking at overseas opportunities. Currently, we are in the midst of purchasing a chain of budget hotels in Europe. Details will be given later."

He revealed that the GCC expansion was also on the cards, with Saudi Arabia being the first target market. "Saudi is a logical expansion destination considering Landmark's retail arm is progressing there rapidly," Jagtiani pointed out.

Weyland elaborated: "We have already received an offer to manage five hotel properties in Saudi Arabia, but we stepped back from the deal to study the market further before venturing in." Emerging markets such as India and China were also being studied, said Jagtiani. "Our retail business in India grew by 40 per cent last year, so building hotel properties is a natural expansion plan," he said. However, Weyland, took a more cautious approach, saying: "India and China serve up enormous potential for the brand, but to enter both markets, we require a strong local partner.

"Real estate in India is very expensive, and a three-star model in downtown Mumbai could never survive the market demand structure. We would have to create a four-star brand category to gain footing."

He added that in China, mid-market success stories were homegrown hospitality models that catered to personalised demand. "Our expansion into China may have to be via a joint venture," he said.

Low-cost market

According to the March 2010 construction pipeline report by industry benchmark leader, STR Global, the total number of hotel rooms in active pipeline stood at 53,477, while those in the "under construction" phase encompassed 26,868 rooms.

Many experts believe this glut in hospitality sector could further erode the market, however, Jagtiani is confident the Citymax brand would prove successful. "The mid-market brand has proven itself in these economic times, and we expect a good return on profits once our hotels are fully operational," he said.

Weyland added that while the luxury hotels market in the UAE was cluttered, there was still scope for the budget brand to grow here. Counting competition in other mid-market budget brands such as Ibis, Holiday Inn Express and Premier Inn, Weyland added: "The country is now attracting the low-cost traveller with budget carriers such as flydubai and Sharjah's Air Arabia. We are simply creating a brand that caters to such a market."

When quizzed if the Landmark Group was in talks with low-cost carriers, Weyland revealed: "Yes, we are talking to Air Arabia and other Indian carriers for a possible partnership, but it is still too soon to comment further."

Founded in Bahrain in 1973, the Landmark Group will launch the first of three mid-market budget properties on May 3, under its flagship brand Citymax Hotels.

While the first property will open its doors in Dubai, another one is scheduled for an August opening. Landmark has also planned a June opening for a Citymax in Sharjah. The company operates retail brands such as Home Centre, Babyshop, Splash, Emax and Centrepoint. The group also recently announced $1bn investments across its portfolio over the period of next three years.

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