Emaar Hospitality has The Address for expansion

Competing with the likes of Park Hyatt, Raffles, Kempinski, The Fairmont and Shangri-La, Emaar Hospitality is a young player in the field having launched itself in the crowded Dubai hotel market in May last year.

In a short time, the company has come a long way, bringing in the first boutique brand of hotels – The Armani Hotels & Resorts – to Dubai, among others such as The Address Hotels.

With an ambitious target of building a portfolio of up to 80 hotels over the next 10 years, Marc Dardenne, Chief Executive of Emaar Hospitality, talks to Emirates Business about the company's game plan to put itself on the global map.


How is Emaar Hospitality coping with the financial downturn?

On the leisure side of our business, we have been less affected. We have two golf courses besides the Yacht Club, the Hayya Club and the Polo Club. People still play golf, go out for dinner and still entertain. The only difference is that instead of going out three times a week, they only go twice now. But overall, the outlook seems pretty good.

What we have done is looked at synergies that we can create – and not downsize but rightsize. So on the leisure side, we are in a good shape.

We are also doing well in the Nuran Serviced Residences business, since there are more long-term contracts in this.

On the hotels side of our business, we are in a lucky situation that we are building up our portfolio versus being established and having to scale down. Our first hotel, The Address, has done really well since the opening and continues to do well. We have gained a good market share within the first three months.

We have adjusted all our operations according to our businesses, so we are in a slightly better situation. And with the two new (The Address) hotels that are going to open shortly – one close to Dubai Mall and another in Dubai Marina, we are ramping our operations up exactly according to the business that we feel is going to come forth for us.

Even though everybody is talking about the doom and gloom, I think the potential for Dubai is still very good. We are in a way very fortunate as all our hotels are close to major attractions. That helps us attract both leisure and corporate businesses. In the summer time, it will really help us attract a lot of business from the GCC countries.

What we are doing is using good business sense and adapting our operations and ramping up according to business needs.

Are all your projects on track or have you delayed some?

They all are on track. We are going to open two hotels in the first half of this year – The Address Dubai Mall in the first quarter of this year, followed in mid-year by The Address Dubai Marina.

How are you expanding your portfolio internationally?

We recently signed our first management contract in Marrakech, Morocco. We are pursuing opportunities in Istanbul. We are looking at potentially two hotels there – one each on the Asian and the European side. While one hotel would be owned and managed by us, the other would be a management contract. Both would be branded The Address.

These are under design at present, and we are looking to launch them around late 2011 to early 2012. One is confirmed and the other is still under discussion.

Globally, we are looking at North Africa, Asia and all of the Middle East. We are also in discussions for some opportunities in the US at the moment.

On the Asian side, we are looking at India, China and potentially also at Lombok in Indonesia. In Europe, we are looking at key gateway cities such as Paris and London.

Clearly, our ambition is to become a global player. And crisis or not, I think there are opportunities. We are still very bullish about the future and our international expansion will go on as planned.

How do you plan to finance your expansion in today's financially tight environment?

Our expansion plan will be mostly for management contracts so there is no finance required, as we would manage properties for owners.

Beyond that, all our projects are sound and viable so we are confident we can go ahead with fulfiling all financial needs even though the environment is tough. Plus, fundamentally, our business plan is quite strong.

What is the status with Armani Hotels? The project is rumoured to have experienced layoffs. Is that true?

It is scheduled to open in the third quarter of this year, as per the original plan. We have not done any layoffs in the project. What is being done is that some of the Armani teams are helping out overall on the hospitality side of our business. However, we are ramping up the teams since we are going to open our first Armani hotel later this year. So there are no layoffs.

Globally, we have about 10 to 15 Armani hotels planned over the next 10-odd years. But for now, we have four of them under construction, in Burj Dubai, Milan (projected to open in 2011), Marrakech (a resort under design), and Armani Residences, Egypt.

In a credit-starved environment when most hotel companies are scaling down their projects, how is Emaar Hospitality managing to open new hotels, especially at the top-end of the market, such as your boutique (Armani) hotel?

These hotels are built for the future. While they are going to open this year, they are not hotels that are going to be here for a year or two. They are going to be around for a long time.

So we clearly feel that there continues to be a market for people who are willing to pay for an exceptional experience. The boutique hotel market is such a niche one that we don't feel it will be highly influenced by the whole economic situation. A lot of people are willing to spend for that experience. So we feel confident about going forward with our projects.

What kind of investment is being made into such a large scale of expansion?

We cannot give out any investment figure. Our idea is really to grow the brand for management contracts: managing properties on behalf of owners, like we did in Marrakech, and like, hopefully, we would do in Abu Dhabi, Kuwait and Istanbul.

How is Emaar Hospitality's revenue going to be split between local and global portfolios?

Most of our hotels will be opening in 2011. So most of the revenue generation will be local for the next two to three years… until we start opening international hotels one after the other.

What are your key markets going to be this year and in the next?

 That would be North Africa and the Middle East. The idea is to solidify our base here and open hotels in Dubai and set a strong foundation for the future.

Afterwards, the significant locations would be key cities in Europe, the US and Asia. We are also looking at South America because it is a real emerging market, not only from the customers' point of view but also from the business point of view.

What are some of the biggest challenges you are facing at the moment in expanding your portfolio in the Middle East, as well as globally?

Attracting great talent and retaining it within the organisation is the main challenge for our industry today. The key in our business is people. We can build a lot of beautiful hotels but the key lies in delivering the service and the execution.

Are you planning to venture into other segments of the market, such as budget or mid-market?

We do not see ourselves operating hotels in the mid-market segment. At the moment, we are actually working with third party operators, such as Southern Sun Hotels, which operates Qamardeen and Al Manzil hotels in the Burj Dubai area.

That is not to say all our four-star hotels would be operated by them but we are looking at third party operators to do that – run our four-star properties. Also, we are not looking at anything below four-star at this stage.

And if we should look to develop a four-star property in any of our developments, we would look at third party operators.

What threat do you see from budget hotel brands that are mushrooming in Dubai today?

They are obviously always a threat. But when we look at the occupancy levels of our hotels, it is pretty encouraging. That tells us that there is definitely still a five-star market here, especially for people who are looking for an experience.

So while budget hotels will pose a threat, as long as we provide value for money for our customers, we will be fine.

Would you look to drop your tariffs in order to boost occupancy levels?

Like anybody else, we are also negotiating and trying to provide value to corporate companies who book with us. It's a partnership at the end of the day. We want to focus more on benefits than rates because rate is a commodity but benefits are difficult to duplicate.

It is very easy to cut rates but very difficult to bring them back up. If you cut your rates today, it would take you many years to get them back to the same levels.

Also, unfortunately, when you cut rates, sometimes the quality suffers. It is a dangerous phenomenon that could lead into a spiral. Thus, cutting tariffs is a very short-term approach.

What kind of alliances are you looking at in order to expand your reach?

Nothing is confirmed yet, but we are looking at tie-ups with credit card companies and airlines to provide value to our customers and create loyalty for them. We would like to form partnerships that are strong and long lasting.


PROFILE: Marc Dardenne, CEO, Emaar Hospitality

Dardenne joined the Emaar Hospitality Group in 2007. Before joining this firm, he was Vice-President and Area General Manager of the Ritz-Carlton Hotels, the Middle East. He also worked with the Hyatt Group, where he spent 11 years in Asia developing various properties in Bali, Jakarta and Manila. With over 28 years of experience in the hospitality industry, Dardenne's role at Emaar involves identifying, undertaking and developing world-class projects. He is also responsible for leading the development of the Armani branded hotels and resorts worldwide

Follow Emirates 24|7 on Google News.