A test of trust

Ownership trends
As Al Nowais and Pisani observe, each relationship with an owner is unique. But while each owner/operator relationship is different and dynamics are likely to evolve throughout the hotel partnership, there are some general trends in the Middle East hotel investment market worth noting.

As owning company Action Hotels general manager Alain Debare notes: “Hotels in the region have traditionally been more of a single-asset, family-type investment. Owners enjoy the hotels they have invested in and more recently are getting involved as part of a natural cycle that has shifted from development to managing assets”.

Atlas Hospitality’s managing director Siegfried Nierhaus says that compared to international markets, Middle Eastern owners “play a larger role in running their hotels”.

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“It’s a lot about being proud of their hotel and the services that clients will experience in their hotel. The involvement of some owners could go very far and interfere sometimes in decisions that should be taken by the operators and it’s up to the GMs to communicate and coordinate best to satisfy all parties.

“The willingness of owners to learn from international operators is very high and it’s always better to have an owner who shows interest in their assets than having owners who don’t care,” says Nierhaus.

From the operator’s point of view, Pisani observes: “What I have seen in recent years is that many individual owners have become a lot more educated in the hotel business, even if this is not their core competency. Since the financial crisis in the last couple of years, demands are higher as a result of similar demands being made on them by funding institutions and such like”.

As a result, owners are becoming increasingly savvy and over recent years, new owning companies have been established that pride themselves on their operational know-how. These entities believe that owners should absolutely understand hotel operations.

“It is critical for us as hotel owners to have a multi-disciplinary team that understands all the facets of the business — finance, construction, real estate and hotel operations,” says Debare, who oversees five operational properties wholly owned by Action Hotels, established in 2008.

“Our in-depth knowledge of hotels ensures that we are able to deliver quality properties that comply to brand standards of our international operators. It is also important to understand that hotels are a local business and our understanding of the regional market allows us to have this first mover advantage and to truly align our interest with the operators,” he adds.

Sanjay Tanna, business development director at Abu Dhabi National Exhibition Centre, which owns three hotels, ensures he is up to speed on the assets’ operations.

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

Anil Bhardwaj, director, A.A. Al Moosa Enterprises, says all owners should have an operational understanding — which could be via a third party asset manager — but that increased communication between both was important.

“Hotel owners in the Middle East who have several hotels as opposed to one, are better informed about their business through in-house and/or external consultants. However, greater interaction between them would improve their collective lot,” asserts Bhardwaj.

Michael Scully, a former hotel operator and now managing director at owning company Seven Tides, agrees that some owners may be able to get more out of their hotel.

“I think the majority of the hotel owners know the business very well, some treat them purely as investments and in some cases are very happy with their ROI. Many hotels in Dubai are now free of mortgages and some owners may not push for or realise the full potential,” warns Scully.