Millennium Hotels Middle East has plans to build 19 new hotels in the UAE over the next three years, with total cost between $2.5 billion (Dh9.17bn) and $3.75bn, its CEO told Emirates Business in a wide-ranging interview. Speaking on the sidelines of the opening of Millennium’s Kingsgate Hotel in the Al Nadi Al Seyahi area of Abu Dhabi, Ali H Lakhraim, President and CEO of Millennium Hotels Middle East, said the return on the hospitality sector in Abu Dhabi is bigger than any other sector. The addition of the new projects will bring the firm’s holdings in the country up to 25 hotels.
Millennium opened the three-star Kingsgate Hotel in Abu Dhabi on Saturday. Why is the hotel three-stars? Do you have plans to open other hotels of this kind in the UAE?
Kingsgate Abu Dhabi Hotel opened by Lakhraim Business Group on Saturday is the first Kingsgate Hotel in the Middle East. There are 18 Kingsgate hotels around the world. The largest number of this brand of hotels is in England and New Zealand. The group will open another Kingsgate hotel in Al Barsha area of Dubai by the end of 2008, with a capacity of 170 rooms and an investment cost of Dh200 million. The Kingsgate Abu Dhabi Hotel is a budget hotel. Its prices are within the reach of all people. That makes it the first choice for tourists and businessmen. The hotel is rated in the three-star category.
The group also has four- and five-star hotels in the UAE. The number of its hotels is six, including three in Dubai with a total capacity of 700 rooms, one in Sharjah with a capacity of 250 rooms and two in Abu Dhabi with 428 rooms. The Kingsgate Abu Dhabi Hotel has 108 rooms and is equipped with state-of-the-art equipment and internet facilities. Investment totalled Dh100 million. Last February, we opened a new hotel in Dubai, called the Copthorne.
What is the group’s plan for hotel expansion in the UAE, especially with the growing investment and business opportunities in the UAE?
The group’s plan over the next three years, until 2010, includes the construction and management of 25 hotels in the UAE, with cost ranging between $2.5bn and $3.75bn. Each hotel’s cost ranges between $100 million and $150m. We recently drew up the design of Millennium Ras Al Khaimah Hotel at a cost of Dh400 million. The majority of the group’s new hotels will be located in Abu Dhabi and Dubai and this future plan is based on intensive studies in terms of demand for hotels in the UAE and occupancy rates. The occupancy rate in the group’s hotels in Abu Dhabi, Dubai and Sharjah ranges between 85 to 87 per cent.
Research showed the rate will rise between 92 and 95 per cent in 2008. We also expect the number of tourists and business visitors to Abu Dhabi to increase by at least 15 per cent in 2008.
I think Abu Dhabi will become a top business destination in the Middle East over the next three years due to its current economic boom, as well as giant projects launched in the past two years. The emirate is also actively involved in the organisation of local and international conferences. The Abu Dhabi National Exhibition Company and Abu Dhabi Tourism Authority currently play a big role in promoting the emirate locally and internationally. So, our group plans to concentrate on our portfolio in Abu Dhabi.
According to accurate statistics, the current number of hotel rooms in Abu Dhabi, whether in hotels or furnished apartments, is not more than 12,000 rooms. We firmly believe the current economic, financial and tourist activity in Abu Dhabi will need at least 50,000 or 70,000 rooms. We also believe returns in the hospitality sector is currently better than the returns in any other sector.
In your point of view, is the high price of Abu Dhabi hotels – more than Dh1,200 per night, exclusive of service charges – due to the low number of available hotel rooms?
The low supply and big demand for hotel rooms and apartments in Abu Dhabi are one of the reasons, but it is not the main reason. The increasing cost of residence in hotels is not a local issue, but a global one. The cost per night in Mumbai, India goes up to $500 and in Sri Lanka to $300, while in Abu Dhabi and Dubai, the cost is Dh1,200, which I think is low. The reason behind this is the falling value of the dirham due to its dollar peg. That has made the investment cost for foreign investors low compared to other countries.
This is one of the benefits of the linkage between the two currencies. The dollar’s falling value pushed big foreign firms and Western businessmen, in particular, to come to Abu Dhabi and Dubai for investment. Statistics recorded by our group of hotels along with other groups confirm the growing number of European visitors, especially businessmen. This category of visitors formed between 40 to 50 per cent.
In the past, our guests were nationals and foreign tourists, and the number of businessmen was low, and they were sometimes scarce.
Definitely, the security and political stability available in the UAE attracts investors, businessmen and tourists from across the world to region. And I think the depression period that the hospitality industry in the UAE went through due to war in Iraq in 2002 and 2003 – when the room rates per night fell to Dh150 will not return.
Unlike other groups, such as the Rotana Group, there have not been reports that Lakhraim Business Group will construct or run hotels in Yas, Al Reem or Saadiyat Islands. Do you have plans for projects on the islands?
Our group is currently in intensive negotiations to construct and run a group of hotels in the islands being developed. We will shortly announce the signing of contracts to develop hotels on Al Reem, Saadiyat and other islands as well as Al Raha Beach development project. In addition, we will announce the management of three new hotels in Abu Dhabi and Dubai at a cost of $300m.
We highly appreciate the achievements of Rotana Group locally. But I should say that this group was set up locally, and it should not be compared to Millennium International Group, which runs 114 hotels in 18 countries.
The most prominent of these countries are the United States, England, France, New Zealand, Germany, China, South Korea, Philippines, Malaysia, Thailand, Egypt and the UAE.
Millennium’s business is not only restricted to the management of hotels. It also owns 91 per cent of the hotels it runs across the world. This is what distinguishes Millennium at the global level. Our group is Singaporean in origin and listed on the London Stock Market. It is owned by Hong Leading Group and headquartered in Singapore. We currently have nine hotels in the Middle East region, including one in Sharm Al Sheikh, Egypt; one in Doha; one in Kuwait and six in the UAE.
We plan to increase the number of Middle East and North Africa hotels to 50 by 2010 with a cost of more than $5bn. We are currently studying the viability of three hotel projects in Cairo and two in Saudi Arabia along with other hotels in Kuwait, Qatar, Oman, Bahrain and Morocco. We have a giant hotel, the biggest of its kind in the world, due to be open in China before the next Olympic Games, as well as another hotel in Shanghai.
Many hotels have had to employ unqualified workers to meet the demands of the rising number of visitors to the country.
Do you think this has lead to a decline in the standards of hotels in
Qualified employment in the hotel sector is a big problem. With the increasing demand by visitors for hotels and unprecedented increase in hotels, some hotels are obliged to appoint unqualified employment. This forms a big danger to hotel work. Managements should pay attention to this. They should enroll their employees in continual intensive training courses to raise their abilities in dealing with clients.
PROFILE: Ali H Lakhraim, President and CEO of Millennium Hotels Middle East
At 38 years of age, Lakhraim is also head of Lakhraim Business Group. He graduated with an engineering degree from the Pacific University in California and then went on to work in the real estate management department at the Abu Dhabi Investment Authority.
Later he worked with the Abu Dhabi National Hotels Company. He set up Lakhraim Business Group in 2006. The group has diverse subsidiaries under its portfolio including contracting, real estate, hospitality, logistics and the service sector.
Millennium plans 19 hotels in UAE over three years