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29 March 2024

Stronger fundamentals for Mideast hospitality

The slowdown had a relatively mild impact on the Mideast hospitality sector. (EB FILE)

Published
By Nina Varghese

Though it has become clear that no region or industry is completely immune to the present financial crisis, the Middle East would be one of the regions, which continues to exhibit stronger fundamentals than other markets, according to a new global study.

The consulting firm Ernst & Young is a new study on the "Top 10 Hospitality Trends" said: "It is anticipated that regions that have recently achieved above-average growth, such as Asia-Pacific, the Middle East and North Africa (Mena) and Latin America, may also exhibit stronger lodging fundamentals during the current slowdown.

The study said: " As turmoil has erupted in many financial markets, the term 'decoupling' has come to the fore, referring to divergences in economic performance among regions."

In particular, countries with large and rapidly growing domestic economies and population, combined with a relative scarcity of quality hotel inventory, present the best opportunities for hotel developers. This is evident by the development pipelines of major international hotel operators in these places.

With three of the four fastest-growing destinations in the world, Asia-Pacific remains the international hotspot for global hotel developers. As of September 2008, Intercontinental Hotel Group (IHG) had 177 new properties in the regional pipeline while Marriott International has plans to open 75 properties by 2012.

International operators are in the hope of capturing demand from a growing wealthy domestic base and international, brand-sensitive travellers whereas local brands (and a few international players through joint venture agreements) are expected to stay focused on the budget segment catering to a growing middle-class base.

In Mena, especially in the UAE, the increasing demand and lack of supply in recent years have captured the attention of many international hotel brands. Pending a recovery in global tourism, IHG views the next few years as an era of growth and diversification, mainly in the UAE and Saudi Arabia, with a sustained focus on the company's mid-scale Holiday Inn and Express brands.

Marriott had 23 properties in the pipeline across the Middle East as of December 2008, and Hilton Hotels had a development pipeline of 17 properties across Mena.

Mid-scale, business-oriented products are the fastest-growing and the most needed as regional businesses join the global economy. Demand for mid-scale products can be seen in Courtyard by Marriott's strong growth over the past five years, 10 as well as Hilton Hotels' expansion plans around its Hilton Garden Inn and Hampton Inn brands.

"The Premier Inn, which has delayed four projects opening in 2009-2010, will have two hotels opening in 2009 bringing 611 rooms into the market. Three more will open in 2010 with 699 rooms. By 2014, we expect to have at least another 16 hotels with 3,500 rooms, making just over 5,000 in total," said Darroch Crawford, Managing Director, Premier Inn.

Talking about cost containment for this year and the next, he said, "No, only a reduction in capital investment covering the four hotels on-hold."

Asked if hotel companies are more likely to increase the use of technology this year for greater contact with their customers as well as to curtail cost, Crawford said: " Yes, the use of hotel blogs is growing as are bookings on the Internet. In the UK, more than 50 per cent of our bookings come through automated channels, but in the GCC, whilst growing, we are just around 15 per cent."

Imad Elias, Executive Vice President and Chief Operating Officer, Rotana, said: "We have recently announced the expansion of our portfolio to 67 properties to open by 2012. This came as a result of new management agreements signed by Rotana for new properties across the region, including Cairo, Jordan, Oman, Iraq, Qatar, UAE and Saudi Arabia.

"This is part of our strategic aim to have a property located in every key city in the Middle East and North Africa and this goal is being steadily achieved through careful long-term planning and timely action. The new properties will not only expand our portfolio in the UAE, Jordan and Qatar but will also introduce Rotana into new markets such as Cairo, Oman, Iraq and Saudi Arabia.

"Rotana has already signed management contracts and some of these properties are now under construction or development. For the next four years, Rotana will open 10 hotels per year. The plan is right. The strategy is there. The execution and know-how are there. The objective is clear. Rotana is positive that as long as the company is able to manage growth in an efficient way, there is the scope to take up further properties.

"None of our projects have been put on hold and our plans are in line. In fact, only in 2009, we will be opening 11 properties. Rotana is scheduled to open five new Centro properties in Cairo and across Egypt in the next few years; providing elegant and affordable accommodation for the modern business traveller.

"It is also scheduled to open 17 new four- and five-star properties including hotel apartments and resorts across the Kingdom of Saudi Arabia comprising 5,500 rooms.

"Despite the fact that the current world situation is unstable, tourism in the Middle East was less affected. The additional entertainment and leisure facilities will continue developing and hopefully continue growing. With tourism and business traveller in-flow on the increase Rotana is uniquely placed to meet their needs.

"2009 will be a challenging year and while the slowdown in some of the Middle Eastern countries has been relatively mild, companies in the region have hit hard times. In an environment like this, you have to be lean and agile.

"Businesses that understand the situation can navigate a downturn in a way that makes the most of the opportunities arising. We are fully alert to the current economic situation, however, we are confident while remaining realistic. We are aware of what our competitors are doing, we listen to our customers, and we are lean.

"Rotana has launched an internal action plan with the objective to exceed our fair market share in revenues and of course reduce costs and expenses (as appropriate) according to the level of business activity.

"We have also implemented different strategies and one of them is strengthening our sales and marketing team, more than ever, as this department will significantly contribute to generating new business as well as increasing the awareness and exposure of our properties.

"Following 15 successful years of operation and as a result of the company's growth, Rotana announced in March 2008 its exciting new brand structure, which was essential to ensure differentiation between the various products.

"This has resulted in an evolution of product brands to include, Rotana Hotels & Resorts, Rayhaan Hotels & Resorts by Rotana (alcohol-free hotels and resorts), Arjaan Hotel Apartments by Rotana (First-class hotel apartments with a personal touch) and Centro Hotels by Rotana (modern, stylish and affordable business hotel brand).

"The Rotana expansion plan illustrates the diversity of development and products that will be offered to the guest in the upcoming years.

"To our industry, our rebranding has clarified our portfolio of properties and identified our competitive set. To our clients and consumers, our diversity of brands has provided a comprehensive range of products that aim to meet all the requirements of our customers. It has clarified the request process depending on their needs whether it is a five-star hotel and resort they are looking for, a hotel apartment, an affordable hotel or an alcohol free hotel and resort.

"There was an article issued recently quoting a member of the US President Barack Obama's election campaign that, without Internet they would have not been able to win the elections.

"Such a strong statement is definitely applicable to the hospitality industry. More Internet reservations every day, more visits to websites to seek feedback from other guests, more rate comparison and surfing to find the best rate, etc.

"Internet has become an excellent tool for our clients and it has helped the hotel industry reach places that would have been almost impossible and very expensive to reach and in no time."

Michel Noblet, CEO, Hospitality Management Holdings (HMH) said: "The pace of new openings for Hospitality Management Holdings continues to be steady with almost 30 projects under development. At the moment, Coral has approximately 2,500 rooms and is expected to add 1,200 more by the end of the year. At HMH we are committed to our target of 100 hotels by 2012.

"There are a couple of properties that have been put on hold owing to recession and will need a little time to get back on track. We have about six to eight hotels opening this year.

"In terms of cost containment, we have have cut down on wastages like unnessary printing, wastage of water, electricity. This also helps us to be more friendly towards the environment, which is paramount to our group's philosophy.

"The website is the way forward. Most hotel bookings are being done online and consumer opinions count."

 

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