New heights for Hilton
Hilton Worldwide operates 47 hotels in the Middle East and Africa and has another 30 properties in the pipeline. The trio of hoteliers leading this growth talk to Louise Oakley about their strategy, the company’s upcoming developments and its current operations.
Hilton Worldwide has been operating hotels in the Middle East since 1959, when it became the first international hotel brand to open a property in Egypt — the Nile Hilton. It was also the first international hotel brand to open a property in the UAE — the Hilton Al Ain in 1971.
Since then, the company has brought five of its 10 brands to the region and has earmarked the Middle East as a target market for growth — with 30 properties set to join the 47 already operational.
To get the lowdown on the growth strategy, development plans and operational trends, Hotelier sat down with the three gentlemen heading up Hilton Worldwide’s Middle East domination.
The expansion plans are ambitious, but according to regional president Rudi Jagersbacher, development expert Carlos Khneisser and operations leader Essam Abouda, there is yet more to come.
Strategy leader
Hilton Worldwide’s Middle East strategy is dictated by Rudi Jagersbacher, the company’s president in charge of the Arabian Peninsula and Indian Ocean, who took up his role at the helm in January.
The position may be a new one, but Jagersbacher started out in the industry as a Hilton management trainee and, barring a few years working for the Savoy and Claridges in London, he has remained with Hilton to date.
As president, Jagersbacher’s goal is simple, but ambitious.
“I look forward to having a landmark hotel in every key city across the Middle East and Africa,” he says. “And by landmark hotel, I mean one that is an integral part of the community as well a hotel that epitomises our brands and is recognised for delivering great service.
“We would like to have a hotel in every key city across the Middle East — and we’re doing pretty well against that goal,” asserts Jagersbacher, referring to the 30-strong property pipeline.
Building up the development pipeline is of critical importance to Jagersbacher, who has already made his mark with one major deal — the signing of the first Waldorf Astoria hotel in the UAE.
Hilton will manage Al Hamra Group’s luxury ‘Palace’ hotel, which will be branded Waldorf Astoria Ras Al Khaimah and open in Q4 of 2011.
The contract was signed at the Palace of His Highness Sheikh Saud bin Saqr Al Qasimi at the end of March and cements Hilton’s offering in RAK, where it already runs Hilton Ras Al Khaimah and Hilton Ras Al Khaimah Resort & Spa and introduced the DoubleTree by Hilton brand on April 1, 2011.
The entrance of DoubleTree to the region — which began with the opening of DoubleTree by Hilton, Aqaba in Jordan on March 31 — is another important step for the company. DoubleTree offers full-service, upscale hotels and suites and is the fifth of Hilton Worldwide’s 10 brands to enter the Middle East.
“So far this year we have already signed a Hilton, a Waldorf Astoria and DoubleTree by Hilton — all in the UAE. Having this variety in brands we are introducing in the region, especially the UAE, is a great help.
It is one of our key markets and signings like Hilton Sharjah [the first Hilton Worldwide property in Sharjah, due to open in 2011] and Waldorf Astoria RAK emphasise our presence here as well as the versatility of our offerings,” Jagersbacher says.
“The Waldorf Astoria Ras Al Khaimah is the second Waldorf Astoria property in the MEA region and has laid the foundation for showcasing the luxury aspect of our offerings here,” he adds.
The DoubleTree in Aqaba also marks Hilton Worldwide’s entrance to Jordan (the company took over management of the King Hussein Bin Talal Convention Centre in Jordan last year, but DoubleTree is its first hotel) and later this year, the company will open its first hotel in Qatar, the Hilton Doha.
“I’m looking forward to us opening up in Doha as there has definitely been a gap for us there,” says Jagersbacher. “Ahead of the World Cup in 2022, our hotel opening up there later this year is going to be one of the landmark hotels that I mentioned before.”
Focus on development
Of the 30 properties in the pipeline, the Hilton Doha is the one Hilton Worldwide vice president of development for the Middle East, Carlos Khneisser, singles out when I ask about the most significant openings.
“It would be difficult to choose just three significant properties as each new property lends more traction to our expansion strategy,” explains Khneisser.
“However, Hilton Doha marks our entry into Qatar, which is significant. Our pipeline in the KSA is noteworthy as well as it will develop our brand footprint in one of our key markets in a major way.
“Hilton Sharjah will mark our presence in five of the seven emirates and Conrad Dubai will be the first instance of the luxury brand in the Middle East,” he adds.
Hilton Sharjah — which is being converted from a former Millennium hotel — and Hilton Doha are two of 11 properties scheduled to open in 2011 (see page 48), while the long-awaited Conrad Dubai is scheduled to open early in 2012.
In terms of seeking further signings, Khneisser says there are three main goals.
“Our overall expansion strategy in the Middle East is three-fold — entry into new markets, introduction of new brands from the Hilton Worldwide brand portfolio and building stronger relations with our existing partners while fostering new ones.
“We believe that our clients and partners all around the world should be able to choose from a variety of hospitality propositions, from luxury (Conrad and Waldorf Astoria) and upper upscale (Hilton Hotels & Resorts) through to mid-market (Hilton Garden Inn) and timeshare (Hilton Grand Vacations).
We have 10 brands under the Hilton Worldwide umbrella and have five of them here, offering our owners and guests a good spectrum of choices,” says Khneisser.
He is non-committal as to whether any of Hilton’s other brands will enter the region, but says: “We take the merits of each opportunity as they come and will fit the right brand to each one”.
However, Khneisser says there are plenty of opportunities at present and that he doesn’t expect development to be impacted by the current unrest in the Middle East.
“We look for development opportunities across the Middle East and Africa and there are plenty of opportunities out there. The hotels in our development pipeline in Egypt — Hilton Zamalek Residence Cairo and the first phase of the Hilton Marsa Alam Resort — are still planned to open this year and as always, we look forward to playing our part in supporting Egypt’s vital tourism industry.”
As already demonstrated this year, “the signings pace is definitely picking up” for Hilton Worldwide and Khneisser attributes this to Hilton’s appeal to owners and the fact “it is actively prospecting new-build and conversion properties around the region for various brands”.
“We are seeing a good number of conversion opportunities at the moment. Owners can see the benefits of partnering with a big brand because big brands bring with them amongst other things, the brand name guests can trust, the powerful reservations systems and loyalty programmes like Hilton HHonors.
“DoubleTree by Hilton is a brand that lends itself well to conversion properties, but there are a lot of factors to take into consideration, including consumer choice and owner preference, while re-flagging an existing property into a Hilton Worldwide brand,” says Khneisser.
When it comes to ensuring all the upcoming properties materialise, Kneisser is confident, alluding to the 600,000-room portfolio operated by Hilton Worldwide globally.
“There have been some minor delays to a few of our projects in the upper-upscale segment, but no cancellations,” he comments. “And some of our hotel owners found that their construction costs were reduced during the downturn, giving their project a boost.
“What we have seen over the past couple of years is an increased demand for mid-market hotels like Hilton Garden Inn as well as upscale hotels like DoubleTree by Hilton and we took the opportunity to introduce these two brands into the market,” he adds.
Operational Whizz
With Jagersbacher and Khneisser heavily focused on growing Hilton’s portfolio in the region, the operations team is set to have its work cut out. Once a hotel is handed over, it falls to Essam Abouda, vice president — operations, Hilton Worldwide, Arabian Peninsula and Indian Ocean to ensure it is ready to enter the market.
To do this, he has to get the right team in place and Abouda says this is the most challenging aspect of business in 2011.
“We have a substantial pipeline of 30 properties in the region, including Conrad, Waldorf Astoria and DoubleTree by Hilton properties. We will need another 13,000 team members over the next few years to launch and operate these hotels,” reports Abouda.
“That is a big task we’ve got ahead of us, because not only do we need to recruit our new team members but we also have to train them. And retention is just as, if not more, important. Within this recruitment drive we also need to take into account localisation policies.”
To assist in this, Hilton is launching a company-centric training course in partnership with The Prince Sultan College for Tourism and Business (PSCJ) in KSA.
“The course has been designed to promote the hospitality industry as a viable career amongst young Saudis and will ensure quality vocational training from one of the world’s pre-eminent hospitality companies,” explains Abouda.
When it comes to hotel performance, Abouda acknowledges rate increases will be another issue.
“Stabilising rates is also a challenge that the industry will have to tackle as a whole,” he asserts. “Occupancy will continue to strengthen across the region but bringing back rates will take concerted efforts by all major hospitality companies operating here.
“Yield management is becoming ever more important and is something that is now done in real time, not on a monthly, weekly or even daily basis,” asserts Abouda.
“As with any product or business, there needs to be a ceiling and a floor price set for a particular category of product. An Aston Martin cannot be sold at the price of a Toyota Yaris just because there is a lull in demand — it is bad for the brand and it is detrimental to the industry.
“Clichéd as it sounds, hotels need to believe in the quality and value of their product and stick to it. Indiscriminately slashing or hiking rates just to attract guests will not help business in the long run and just devalues the quality of the industry,” he says.
The industry also needs to realise that guests are booking hotel stays in different ways, adds Abouda.
“In 2010, a large number of our guests contacted us directly, for information and for bookings, via our website, social media portals or CRS centres, rather than going through travel agents,” he reveals.
“We first launched a series of iPhone applications in November 2009 that included a portfolio of chain-specific apps, and recently we launched our seventh app for our luxury Waldorf-Astoria brand.
There has been an impressive consumer response and revenue generated from room bookings across Hilton’s brands via the mobile apps soared 200% globally and have continued to increase.”
As a result, the vast majority of Hilton’s business comes directly.
“About three quarters of our business comes to us directly through either Hilton.com or reservations centres on or off property,” says Abouda.
“We work closely and successfully with a number of distribution partners, including online third parties such as Expedia and are seeing general growth in online activity, whether through our own brand websites or the third parties as consumers shift increasingly to the internet to make purchases.
“Our robust websites, investment in marketing, Hilton.com best rate guarantee and online optimisation techniques has meant that our growth in direct online business has kept pace with the growth in indirect online business over the past couple of years. Our strategy is to balance these third party relationships with ongoing investment in our own online capability,” he adds.
Guests may be booking travel in different ways, but they are still all looking for one thing, concludes Abouda — value for money.
“The new generation of travellers is choosier in terms of budget and value — they will invest in a luxury holiday if they know they are going to get an adequate ‘bang for your buck’.
Hotels have to build up offerings in terms of service extras, promotions, loyalty programmes as well as facilities like spas, restaurants, meeting rooms etc to keep attracting guests,” says Abouda.
“Lowering rates might lead to short-term benefits, but in the long term, it is the value-adding elements like this that guests will respond to,” he asserts.
A New President
Hilton Worldwide president Arabian Peninsula and Indian Ocean, Rudi Jagersbacher, started his career in 1974 with Hilton International, following hotel school training in Innsbruck, Austria.
His first role was as a management trainee at the London Hilton on Park Lane — Hilton’s flagship hotel in the United Kingdom.
Between 1974 and 1984 Jagersbacher worked for Hilton in a number of hotels including London, Munich, Basel, Düsseldorf and Lesotho.
In 1984 he left Hilton to become assistant manager of the Savoy Hotel, London and after that, assistant to the general manager of Claridges Hotel, London.
Jagersbacher returned to Hilton in 1989 as GM at Langham Hilton until 1992, then he became general manager of the London Hilton on Park Lane.
In 1994, Jagersbacher entered the corporate office as vice president of Hilton International for the UK and Ireland and was responsible for the expansion of the Hilton and Conrad brands.
In 2002, he took up the role of vice president of Hilton International for the Arabian Peninsula and that was followed by vice president of Benelux, Nordic and Italy, based in Brussels.
Jagersbacher was promoted to president of the Arabian Peninsula and Indian Ocean last year and started the position on January 1, 2011, following the retirement of his predecessor, Jean-Paul Herzog.
Hilton by numbers
Hilton founded: 93 years ago in 1919
Hilton entered ME: 52 years ago in 1959
Staff worldwide: 130,000
Staff in MEA: 16,000
Staff forecast MEA by 2014: 30,000
Total properties in MEA: 47
Upcoming properties in MEA: 30
Hilton worldwide brands
Luxury
• Waldorf Astoria
• Conrad
Full Service
• Hilton
• DoubleTree
• Embassy Suites
Focused Service
• Hilton Garden Inn
• Hampton
• Homewood Suites
• Home2 Suites
Timeshare
• Hilton Grand Vacations
The five brands that are currently operating in the MEA are:
Hilton
DoubleTree by Hilton
Hilton Garden Inn (the HGI Riyadh Olaya)
Waldorf Astoria (Qasr Al Sharq, Jeddah — operating; Waldorf Astoria RAK — signed and upcoming)
Conrad (Conrad Cairo — operating; Conrad Dubai — signed & upcoming)
11 New properties for 2011
Overall, Hilton Worldwide MEA has 11 properties scheduled to open in 2011; five in the Arabian Peninsula; three in Egypt and Levant; and three in Africa.
In the Arabian Peninsula, Hilton has just opened DoubleTree by Hilton, RAK; Hilton Dubai Jumeirah Residence; Hilton Sharjah and Waldorf Astoria Ras Al Khaimah in the UAE and Hilton Doha in Qatar.
DoubleTree by Hilton, Aqaba in Jordan has already opened, while in Egypt, Hilton will open the Hilton Zamalek Cairo and Hilton Marsa Alam Resort.
In Africa, it will open Hilton Windhoek in Namibia and Hilton Malabo in Equatorial Guinea, which will mark the group’s entry to both these countries, and the Hilton Cape Town in South Africa.
The first opening earlier this year was the Hilton Seychelles Labriz Resort and Spa.