Great expectations

Harriet Sinclair investigates what savvy consumers in the Middle East expect from budget hotels and how these properties manage to offer great value as well as a range of facilities.

Budget hotels have established quite a reputation in the Middle East over the past two or three years, moving quickly from being an emerging product to a market segment that is meeting increasing demand for lower-priced but quality accommodation.

Though the region is often associated with big-name luxury hotels and iconic five-star properties, the mid market section has brought diversity to a market which would otherwise have alienated a hefty proportion of business and leisure tourists.

Following the global economic downturn, the budget hotel segment truly came into its own, with both local and international midscale brands claiming a slice of the market, and existing upscale brands improving and developing their own three-star properties.

As well as offering the minimum of a reasonably priced, clean room, budget hotels — otherwise known as limited service or mid-scale properties — have spruced up their services over the last few years, offering internet access, F&B outlets, gyms, and in some cases even a swimming pool.

Middle East market
Budget hotels across the world do not necessarily offer such an impressive list of services and those global brands operating in the region admit that the Middle Eastern market is different, largely due to the fact that customers here — accustomed as they are to the luxuries of the upscale segment — expect more from their budget experience.

It stands to reason, therefore, that mid-scale properties must continue to reflect the destination they are in. And, particularly in a market such as Dubai, this means keeping up with the proverbial Joneses and has resulted in a spate of mid-scale hotels with ‘added extras’ entering the market.

“In the Middle East there is a little more expectation as there is service excellence in this part of the world,” explains Holiday Inn Express Dubai cluster general manager Ziad el Khoury.

“The guest would like to see this reflected in budget hotels as well. For example we offer three meals — breakfast, lunch and dinner — and you don’t see this in any Holiday Inn Express around the world, but we made an exception to match the market that we are in,” he adds.

The good news for consumers is that once one budget hotel has set the bar high, others have little choice but to follow if they want to compete in the market.

Landmark hospitality general manager — hotel division, Michael Weyland, who is responsible for mid-scale chain Citymax agrees: “The reason that Citymax hotel has a pool and a gym in Dubai is because it is a market expectation.

“On the other hand, over the years now, the quality of the build and the design can be affordable but look very appealing and high-end, and this again goes in line with the expectations guests in the region have.

Even if they are getting great value for money and a great bargain, there is still a pool for example — it is standard now and that is what’s expected in this market,” he adds.

But though market expectations are high now, introducing budget hotels to the Middle East market did take some getting used to, says Premier Inn Dubai Airport general manager Paul Bridger, as although customers were happy with the price, it took some time to educate guests about what a limited service hotel actually offered.

“It took people who weren’t familiar with budget hotels a while to understand why they couldn’t charge things back to their room and why they had to pay when they turned up,” he explains.

“But we do that because it makes it easier and it means we have less people so we ultimately have lower costs, and I think people are now familiar with that. When we first came out we had a lot of challenges with people saying I want to charge this to my room, but now they have realised they are getting great value,” Bridger adds.

The initial reluctance of the market to accept the mid-scale model can prove problematic, agrees Centro Barsha Dubai hotel manager Sherif Madkour, which is why added extras such as pools, gyms or F&B outlets are an important part of changing people’s perspectives.

“Dubai has been always seen as a very rich, unaffordable area,” explains Madkour.

“But now when you come to Dubai, you can stay in a lovely, trendy place and you pay US $100 or even $90, so it means it is affordable to lots of leisure people now. And I think Dubai realised that this segmentation was needed, so you can see three-star brands coming up heavily now in the market and Centro is one of these brands which has been created by our head office to match the needs of this demand.

“Of course there is some hesitation from the local market still; people are not used to the product. The local market, especially Arab customers, are used to valet parking and room service, but slowly people are getting used to what we offer, the feedback we are receiving now is that day by day, they are becoming more used to it,” he adds.

Great expectations
The quandary budget hotels in the region face is the challenge of meeting the high expectations of guests with the desire to provide rooms at rates which are ‘budget’ and can offer customers value for money.

But although a swimming pool and a gym have become de rigueur in many budget hotels in the region, along with complimentary breakfast and free Wi-Fi (something which many five-star properties do not offer),mid-scale operators say that they are managing to keep rates low through reducing staff costs and getting rid of services they perceive as unnecessary.

“Basically we offer the guests what they would like to have,” explains el Khoury.

“Guests coming and staying in a mid-market hotel would like to pay for the services they are utilising. For example, when it comes to offering a concierge — many of the guests, considering that we are around the airport and have lots of business travellers, come with small luggage and they come to the reception and go straight to the room, so they are not using the bellboy or the concierge or valet parking.

So there are some services that guests staying in the hotels do not utilise, so why would they pay for it? This is the concept of the mid-market segment — guests only want to pay for the services they use,” he adds.

Cutting out additional staff is something of a theme for budget hotels, who insist that given the choice, guests would rather have a swimming pool and a gym at a low price, than pay more and have additional staff (or forfeit the pool).

“We don’t have valet parking, luggage assistants or bellboys so guests can carry their own luggage but of course we can assist if it is required,” says Madkour.

“We are not so fancy, we don’t have extra bits and pieces because guests want to pay less and get quality. Three-star brands have always been seen as a lower quality… but now it is the opposite,” he adds.

“It’s important to focus on what really matters to the guest,” agrees Premier Inn Hotels managing director Darroch Crawford, “A really comfortable bed, a nice bathroom, a good TV and more and more importantly these days a good Wi-Fi connection.

Most budget hotels don’t offer valet parking or concierge services, but if they are like Premier Inn, they have fantastic receptionists instead, who are trained to fill any gaps that the lack of such services might create.”

Having a multi-tasking staff is, it seems, an essential element to running a mid-scale property , but although there are less staff at budget hotels, operators insist that this does not compromise on the service offered — merely that there are less services available.

Room service, for example, is something which most budget hotels have cut out altogether, along with the concierge, bellboy, and parking attendant.

The budget hotel model in the region knows its market well and fully understands the services it needs to provide to appeal to customers — who value their affordable rate as well as their comforts.

Bridger explains: “When we looked at what the expectations are, what stacks up for us is as soon as we put in porters, concierge, and 24-hour room service, we need a lot more people in operations, which obviously puts the rate up”.

Owners' expectations
In addition to ensuring that guests in the Middle East market have their demands met when staying in a mid-scale property, it is also important for operators to consider the expectations of owners in the budget segment.

“You will see a much quicker return on investment (ROI) [with a budget hotel] definitely because of the manpower. That is very expensive in the UAE, so by saving on manpower you will definitely have a better bottom line and your expenses will be less because you are not offering all of the additional services you need extra staff for,” explains Madkour.

In addition to seeing a faster ROI, Crawford explains that owners are also attracted to budget hotels due to the lower upfront costs of a mid-scale property.

“The investment [in a budget hotel] is considerably less than for a luxury hotel,” he says.

“Smaller standardised rooms mean that smaller plots are required, reducing both land and build costs. Public areas are limited and no space is wasted. Fountains in the foyer and beautiful gardens look great, but somebody has to pay for them. This is usually the guest,” Crawford adds.

Budget hotels have also proved their worth in the last few years, as they are far better placed than luxury hotels to retain business during a downturn.

“Budget hotels can make a breakeven point at anywhere between 30-45% occupancy depending on room rate, whereas when you’ve got a full service hotel the bill costs are higher,” explains Bridger.

“So the advantage is that budget hotels are more resilient in a downturn, and in a tough market. So Dubai is a tough market, and budget hotels seem to be holding up better,’ he concludes.

Regional overview
Dubai is often acknowledged as a trend setter in the region, and just as budget hotels have seen success in the Dubai market, the popularity of a mid-market product has spread across the rest of the Middle East market.

In Qatar, the success of the World Cup 2022 bid has seen a spate of budget hotel brands looking to establish a property in the country in anticipation of hoards of football fans attending the event and seeking out cheap accommodation.

Discussing plans to expand Dohaland’s offerings, Dohaland Hospitality CEO Abdul Aziz Al-Emadi comments: “We have to consider that the people who are coming to Qatar from different countries will not fly to watch the football and come for a short visit — they will really think about their total expense so it is very important to have something affordable.”
“This is the time for the budget hotel,” he adds.

International budget brands have recognised the potential for their model beyond the UAE, with Rotana last year announcing plans for Centro properties in Saudi Arabia and potentially in other destinations in the region.

Selim El Zyr, president and CEO of Rotana, confirmed that the hotel group, which plans for more than 70 properties by 2012, aims to expand its budget brand across the MENA region over the next four years.

“Rotana is currently working towards the opening of 25 ‘Centro Hotels by Rotana’ properties across the MENA Region by 2014, introducing a unique out-of-the-box solution for the mid-tier market,” says El Zyr.

The need for three-star brands is also being recognised by country leaders, who want the hotel market in the Middle East to be as diverse as possible to open up the region to a wider range of travellers.

In Yemen, the tourism authority last year announced plans to generate capital for up to 44 budget hotels across the country, while in other Middle Eastern countries without a well established budget market, such as Lebanon, there is great potential to exploit the limited service sector — making it an attractive prospect for international budget brands wanting to establish their presence in new markets.

From both ends of the scale — whether in markets where budget brands are already well established to locations with only a smattering of mid-scale hotels — there remains room for development and growth in what is now a significant, powerful and profit-generating sector.

How the prices match up
Hotelier compared the prices of the big name budget brands, to see what guests could expect to pay for a night’s stay in the modern mid-scale Dubai market.

All prices are based on a single person staying one night only, booked on February 16th for February 21st:

• Holiday Inn Express Dubai Airport — US $ 120 per night for a standard room
• Premier Inn Dubai Airport — US $ 149 per night for a standard room
• Citymax, Barsha — US $ 80 per night for a standard room
• Centro hotel, Barsha — US $ 95 per night for a classic queen size room
• Easyhotel, Jebel Ali — US $ 29 per night for a standard room (but customers can expect to pay an extra $ 8 for a TV remote which is valid for 24 hours)