With forward bookings up by a third in the region, Hilton Hotels is riding high. Times are almost embarrassingly good for hoteliers in the Gulf. Owning a hotel these days is a license to print money with record occupancy and room rates.
Yet something will happen one day to upset this happy state of business. Geopolitics, war, terrorism, a global recession, over-expansion, too much competition, there are many possibilities.
But right now the region's hotel professionals, and almost all hotels are operated by expatriates drawn from the best in global practice, are on a roll. They are not, however, being too complacent. That is also a part of their professional make-up along with a modest and even humble approach that endears itself to guests and hotel owners.
Polite and unassuming Jean-Paul Herzog, who has spent the past 35 years with Hilton, is president of the newly formed Middle East and Africa area for Hilton Hotels. A Swiss-national Herzog is fluent in six languages: German, English, French, Spanish, Hungarian, and Turkish. He is responsible for 44 hotels in the Arabian Peninsula, Egypt, Africa and Indian Ocean, and new hotel developments in the region.
Hoteliers in the United States report that the financial crisis is hitting bookings and causing them real pain? Have you seen any sign of a downturn in the Middle East, or is this market an exception to the general rule?
Actually worldwide bookings are all very strong outside the United States. In the Middle East we have seen no downturn whatsoever, indeed there is not even any evidence of a slowdown in our recent rate of growth.
Over the past year we have seen 15 per cent plus growth in revenue per room in the Middle East, very much the same as the year before. However, Easter came early in the calendar this year and that has distorted the industry's figures in the first quarter, and we will really need data for the first four months to make a proper comparison. That might show a small weakness in Europe as well as the United States but we will have to wait for this month to end.
The Arabian Hotel & Investment Conference (AHIC) and the Arabian Travel Market (ATM) are coming up next month, bigger than ever, are these big events for Hilton?
These are both significant trade events for us where real business gets done. At the AHIC we are looking for hotel management contracts, and they do get signed at that event which is the biggest of its kind in the region. It is different at the ATM where we are selling rooms rather than management contracts. But at both events we meet new people from the hospitality sector and network and can explain our products. There are international trade shows that we attend to achieve a similar objective but the AHIC and ATM are the main forums in the Middle East for the hotel business.
The Conrad Abu Dhabi owned by Mazrui Holding will mark the Hilton top brand's entry into the capital and is set to open in 2010. This will be Hilton's fourth property in Abu Dhabi. How important is this opening? And how is the Conrad Dubai progressing?
We already have a fine Conrad in Cairo, and we are very proud of our top brand in the luxury segment. With 500-rooms in each hotel, Abu Dhabi and Dubai will be the next stage of this expansion. The Conrad Dubai, next to the existing Fairmont Hotel should start piling soon but the main construction contract has not been awarded yet. It will have 560 rooms and will be much taller than the Fairmont. The Burj Dubai is setting the standard for height in Dubai these days.
The newest Hilton is the Ras Al Khaimah Resort and Spa with 151 deluxe villa suites, and complements your established 227-room Hilton Ras Al Khaimah on the Creekside. How is business in that emirate?
So far we have opened the 151 beach villas, which have won great acceptance in the market place. The main building with 160 rooms will open in January and by the summer the property will be fully open with a third and final phase of 165 rooms.
At the moment the new hotel is serving the business and leisure market, and there is a lot of business in Ras Al Khaimah at the moment. What is missing is the Mice (meeting, incentives, conferences and exhibitions) guests for whom we just do not have the space until we are fully open.
You have a signed pipeline of 11 new properties in the Middle East, and a goal of an additional 20 new deals over the next five years. How confident are you in reaching this target?
Very confident indeed. This pipeline refers to projects which are signed and construction has commenced. As for the 20 signings we could well achieve that target in the next 12-18 months. The momentum for growth in this marketplace is still there both with existing clients, institutional investors and new individuals.
My challenge is that I can fill far more rooms than I have available. But as each new property opens in the region that appears to create additional demand rather than freeing up room supply. For example, in Dubai the Atlantis on The Palm is opening in the autumn but that has created its own demand with its unique water park attraction.
What do you specifically have planned for the Emirates, apart from the Conrads in Abu Dhabi and Dubai? What comes next in the Middle East region?
In Dubai as a part of the Jumeirah Beach Residence, the 44-storey Hilton JBR with 371 rooms and apartments will open in November. There will also be the Hilton Dubai Beach Club next to the existing Hilton on the beachfront which is not a hotel but a club under our management.
We will also open the 235-room Hilton Luxor Resort and Spa this winter, which will have Luxor's first spa. Then in January next year we will open in Doha for the first time with the 324-room Doha Hilton.
But how realistic is this construction programme given the shortages of labour and materials in the region? Are you concerned that these hotels will not open on time?
There is always some element of time delay in hotel construction. But we are more concerned that there is a very high demand out there for hotel rooms and that we are losing business because we do not have enough accommodation.
We are very confident that we could be selling these rooms. Forward bookings are up by more than a third on a year ago. That may partly reflect the fact that people have been disappointed recently by booking too late, and are now booking earlier. But it is a very healthy position for us, and improved forward bookings must be taken as a good sign for our business.
Do you not think the Middle East tourism market is in danger of overheating with so many new hotels, tourism attractions, airlines and new airports? Is this not an economic boom that is bound to end in a bust?
Well with occupancy levels around 100 per cent, I suppose you have to say that the market is overheating. But I don't support the idea that this boom is going to end in a dramatic bust, no.
This market is rather like Singapore where they have cleverly stimulated demand to meet new growth and repeated this cycle many times over the past few decades. Dubai also has the capacity to manage this process with its integrated strategy for tourism development.
It is a vertically integrated strategy with vision and clarity so that everybody knows their role from steering the destination marketing to filling the new A380s with visitors.
In addition, the worldwide tourism market has been growing at a steady three to five per cent through many ups and downs in the global economy. And there is a shift towards thinking of travel as a necessity and not a luxury. This background is very supportive of the development of a destination like the Emirates.
Can a hotel group such as Hilton maintain its reputation for service and the quality of the product in general in the face of such rapid expansion? Is this your greatest challenge?
Yes, absolutely. High levels of service are expected from the group and we have the means to provide it. But what you may see in the future is that there are less luxury segment hotels launched and more hotels with less facilities and services. I hate to say lower-quality, rather a different quality. And Hilton will be looking to introduce its mid-market brands into the region such as Hampton by Hilton, Hilton Garden Inn and DoubleTree by Hilton.
We would rather face this as a challenge rather than the alternative problem of operating hotels with 50 per cent occupancy.
PROFILE: Jean-Paul Herzog President, Hilton Hotels, Middle East & Africa
Hilton Corporation appointed Herzog as president for its new geographical area of operation, Middle East and Africa, in May 2007. He oversees a geographical area that comprises 44 properties in the Middle East and Africa covering the Arabian Peninsula, Egypt, Morocco, Algeria, Nigeria, Ethiopia, Kenya, Cameroon, South Africa, Mauritius and Seychelles with its headquarters in Dubai.
Herzog started with Hilton in Zurich and did his management training at the London Hilton. He first came to the Gulf in 1977 to take on the role of executive assistant manager in Bahrain. And subsequent managerial posts took him to Hungary, Malta and Turkey, where he ran the Istanbul, Izmir and Ankara hotels.
He came back to the Middle East region in 1999, when he became regional vice-president and general manager of the Ramses Hilton in Cairo. In 2003 he became vice-president for Italy, Austria, Eastern Europe and Turkey for a short period, before taking on the senior vice-presidential and then the presidential role at Hilton and Scandic in the Nordic, which was recently sold for $1.1 billion (Dh4bn).