The owner's view: ADNEC's Sanjay Tanna

ADNEC business development director Sanjay Tanna discusses the company's two upcoming hotel openings and the current challenges facing hotel owners.

What is your philosophy as a hotel owner?
ADNEC (Abu Dhabi National Exhibitions Company) was established in 2005. Firstly, our hotel stock needs to effectively support ADNEC’s core business which is operating a portfolio of world class events venues around the world. Obviously, having the right accommodation options is instrumental to a venue’s success; we aim to provide a balanced portfolio for the full range of requirements.

As regards the actual hotels, our philosophy is simple — “the needs of all our guests and visitors have to come first and we aim for a satisfaction score of 100%”.

The service being provided must meet the expectations and needs of all the guests from the moment they walk onto the site. Services and assistance being provided by a trained and experienced on site team, with welcoming facilities, distinctive food and beverage offering and ultimately a good night’s sleep.

Can you explain your business model?
ADNEC’s strategy is to invest in the hardware (the buildings) as opposed to the software (the hotel brands). We own 100% of the buildings in which our hotels operate. However, one of ADNEC’s strengths is its ability to react quickly to evolving markets and we are always open to considering alternative business models, with the right partners.

How many hotels do you own?
At present we own three hotels; two in the Middle East (Abu Dhabi) and one in Europe (London)

Aloft Abu Dhabi, with 408 keys it is currently, the largest Aloft Hotel in the World. Hyatt Capital Gate (Abu Dhabi), will house 190 keys and is located with Capital Gate — the iconic tower of Abu Dhabi, with an 18 degree tilt! Aloft ExCeL (London), will be the first Aloft Hotel in United Kingdom.

Do you have any openings planned for 2011?
We are looking to open two hotels in 2011. Hyatt Capital Gate in Abu Dhabi and Aloft ExCeL London. In terms of adding to the portfolio, we are looking to increase our portfolio and are currently in discussion with hotel operators.

The relationship between owners and operators goes through cycles – many say that in 2011, the ball will be firmly in the owner’s court. What is your view on this?

The relationships between owners and operators have always been complicated and I’m sure that this will always be the case. These relationships have to be treated as a marriage between two families and, stretching the analogy, any agreement between the owner and operator should be seen as pre-nuptials.

If the terms are set out fairly and communication is good, then the marriage will be healthy and rewarding for both parties and will last throughout the agreed period, normally in excess of 15 years — that’s longer than many conventional marriages

There is some optimism in the air for 2011, but financing and finding the right debt / equity partners will continue to be a challenge for the owners. With operator development pipelines declining, there is an opportunity for operators to reconsider their “asset light strategy model” and recommence investment in bricks and mortar assets. Owners would be pleased to have operators as an investment partner…. now that is a wishful thinking!!

What are the challenges you face as hotel owners?

The sector has performed phenomenally well in the past 10 / 15 years and this in turn has raised expectations. These (expectations) have to be managed and it is important to consider that the execution of a hotel’s business plans is based on various factors including changing market dynamics, objectives of the owner and operator, as well as goals of other stakeholders such as tourism bodies and regulators.

Also, this is a very capital intensive sector and in current times this can present some owners a challenge in its own right; but this also provides an opportunity for owners, with the right strategic mind-set to thrive and expand.

Do you think it is important for hotel owners to understand hotel operations?

Absolutely! The general manager and their team are the guardians of the owner’s asset. To me it is equally critical to know and understand how the hotel’s back office operation interacts with the operator’s regional offices and in turn, how effective are the operator’s distribution channels and the sales and marketing engines, which ultimately are what the owner invests in and why it pays the fees to the operator!

<page-break>

Generally, do you think hotel owners in the Middle East know enough about the hotel business?

Hotel owners within the UAE and the Middle East are sophisticated and very savvy investors. They really do understand the business, the sector and how to maximize the value of the asset in providing the needs of its guests. The owners not only own regional hotels, but are hotel owners internationally.

The UAE and the Middle East in general, is home to several of the most beautiful and successful hotels and resorts in the world. The reputation of these unique projects has greatly contributed in developing not only the hospitality sector, but also, the region. Additionally, hotels in the Middle East have a huge success rate in maintaining business - now that must be saying something….

What do you look for in an operator?

In addition to the terms of the offer received from the operator, the other important elements we take in account when selecting a hotel operator, are the synergies between the location of the asset and “best brand fit”.

In an ideal world, how should the relationship between owners and operators work?

Ideally, the risks and rewards should be shared in an environment of mutual trust and communication. Too often though, this does not happen; owners are forced to take all the risks in investing in an hotel asset and the operators reap the rewards if the asset is successful, while having no exposure if the asset does not perform as expected.

As an owner, what is your biggest gripe about hotel operators?

I think the biggest concern is when hotel owners have to make capital investments that really do not increase occupancy nor provide any additional revenue opportunity in the short or long term.

What are your views on hotel classifications systems? How should they be updated? Or is it time they were abolished?

Abu Dhabi is at the forefront of the hospitality industry within the region and the classification system has evolved around this expansion. The regional government agencies have worked tirelessly to incorporate the latest industry standards and at the same time in capturing, creating and promoting the destination endorsing values such as innovation, enhanced visitors’ experience, promotion of local cultures and traditions and at the same time in providing an impeccable service and assistance to not only the inbound guests but to hotel owners too.

What do you think needs to be done to further develop the hotel industry in the markets that you operate ?

It does not matter where the hotel is located, there is always room for improvement.

As an international hotel investment company, we appreciate that the classification systems have to vary from region to region taking into consideration the local customs, values and legislations. It cannot be one size fits all.

I firmly believe the latest classification system introduced by ADTA in Abu Dhabi is very fair and will become a benchmark to which the rest of the world looks to emulate.