ADNH's assets

Following just three years at the helm of Abu Dhabi National Hotels, CEO Richard Riley is set to open two highly anticipated hotels worth AED 2.5 billion by the end of this year. Here he tells Louise Oakley about his journey to date…

It has been a little over a year since Hotelier Middle East met up with Abu Dhabi National Hotels (ADNH) CEO Richard Riley, who joined the hotel owner and operator at the end of 2008, tasked with developing, strengthening and building the company’s portfolio in the region.

As we are about to enter the fourth quarter, Riley is set to display his achievements over the past three years with bricks and mortar — AED 2.5 billion (US $680 million)worth of buildings to be precise.

When we last spoke in the middle of 2010, Riley said the group would have two major openings a year from now. True to his word, ADNH is now gearing up to open arguably two of the most iconic luxury hotels to enter Abu Dhabi since the launch of Emirates Palace; Park Hyatt Abu Dhabi Hotel and Villas on Saadiyat Island and The Ritz-Carlton Abu Dhabi Grand Canal.

“[The Park Hyatt] will open on October 15 for sure. I will give the operator their notification on the 14th as per the contract that we will open on October 15,” Riley tells Hotelier.

He says the resort, which is located on a nine-kilometre stretch of environmentally protected, natural sand beach will be the largest Park Hyatt property in the world with 306 keys. Designed by Perkins Eastmen with interiors by Wilson Associates, it will also be the first hotel to open on Saadiyat Island, the new destination in Abu Dhabi being created by Tourism Development and Investment Company (TDIC).

Selecting an operator for the landmark Saadiyat property was one of Riley’s first challenges.

“I came to the board with a series of operators and I pushed them in a certain direction and obviously they listened to a certain level and argued to another, but at the end of the day we all agreed that if Hyatt would bring a Park Hyatt to Saadiyat Island for us it would be a good thing, so that’s how we did it.

“Even when I was younger, I always was crazy about the Park Hyatt in Tokyo so it was easy for me when I joined ADNH to push in the direction of Park Hyatt and looking at that site on the beach, we just thought it was a natural fit and it has been and they’ve been very, very good to work with,” says Riley.

ADNH is investing AED 1 billion ($272 million) in the Park Hyatt property, which will offer a minimum room size of 54m², four private villas and 11 secluded ryads, four F&B outlets, an Atarmia Spa and 1220m² of events and meeting space.

It will be the first of two hotels to be opened by ADNH this year, with the AED 1.5 billion ($408 million) Ritz-Carlton Abu Dhabi Grand Canal also expected to open by the end of 2011.

“I will be pushing very hard to get it open before the end of the year, that’s what we’re doing, I’m not going to nail it down but the bottom line is we feel we’re very, very close and we just hope if everything will stay on schedule that we’ll be able to pull it off,” says Riley.

He has already been on quite a journey with the Grand Canal hotel, which was originally signed as a JW Marriott. It was Riley who saw the potential in the property — which features 532 rooms of a minimum of 52m², a 2200m² ESPA spa, an 1700m² ballroom and an 1800m² swimming pool — to sit in the highest tier segment and pushed through the management change, although this took the best part of last year.

“It was a natural migration but it was very difficult to do because of the fact that it was signed as a JW Marriott,” recalls Riley. “To migrate a management agreement, although it’s partner companies, is a very different approach and it took us seven months to go through every detail of the management agreement and make the adjustments and do the deal and work back and forth and it was a very big challenge. But they wanted it, we wanted to, they love the property, they believe in it and because of that we were able to get to it, but it took seven months.”

What is now the first Ritz-Carlton in the UAE capital is located on a site spanning 230,000m² with the architecture created by Otak, interiors by SFA Design and restaurants by Super Potato. The hotel features 395 guest rooms, 85 villas and 52 Venetian Village Suites, which sit above a retail and restaurant complex — The Venetian Village.

There are eight F&B outlets at Ritz-Carlton Abu Dhabi, plus two pool bars, but in addition, ADNH will run eight restaurants in The Venetian Village — marking the start of a new operation for the company.

“We’re in the negotiation stage of the tenanting for the brands that will go and join us there and we’ll have some big names; that’s a big facility, there will be about 16 restaurants between the hotel itself and The Venetian Village,” says Riley.

“We have actually started a restaurant division, just to really lure some brands to Abu Dhabi and we have some other locations where we’ll be adding restaurants as well,” he explains. “We’re looking at master franchise agreements and developing our own stable that we can then generate, we have many locations where we can work with branded restaurants.”

The finances
Considering the number of projects that have been put on hold since 2010 (58 across the GCC according to Viability’s research on pages 20-23), the fact that ADNH is nearing the completion of two such grand-scale properties is commendable. Especially when Riley reveals that only AED 1.5 billion of the investment across the two hotels has been financed; the rest he says has been generated from international and local shares owned by the company.

“When I arrived we were sitting on top of a lot of international and local shares, which is not our core business, but we made good money and we’d been investing. It’s too volatile and this was about the time the crash was happening in the markets and we were lucky to get out of most of our international stuff which was mainly based in New York or London before it went too far south and then we continued to hold on to some of the shares, we even had some hedge funds that came around in the end, so we continued to sell over a two-year period under a mandate from the board.

We had a lot of local shares as well, high value, and what we were doing is generating a billion dirhams in cash that we could invest in to these products,” explains Riley.

“We needed one to get out of the share business because our core business is hotel investment and two, we needed to invest that money into our core business which was the two new hotels we were building.

How many hotels can finance a billion from their own profit? How many companies are able to do that? We have a very strong company and many companies are very challenged but we go from strength to strength and we’re having a very good year this year and we’re ahead again,” he says, referring to Q2 financial results that were recently announced (see box on page 110).

Riley is confident that the differentiation of product achieved by Park Hyatt and Ritz-Carlton will ensure return on this investment.

“In general, if you’re me, you say ‘I need to repay this site within seven to 10 years’, that’s the reality of it, that’s a general guideline, whether for these two particular properties I expect maybe we’ll do better, but if it’s a seven- to 10-year pay back, in general that’s an acceptable level within the industry,” he says.

Other Assets
However, not everything is shiny and new at ADNH; the company operates several older hotels in the capital including Hilton Abu Dhabi, Hilton Al Ain and Sheraton Abu Dhabi. With new inventory in Abu Dhabi expected to reach up to 7000 new rooms by the end of 2011 alone, Riley says focusing on these existing assets is a priority now.

“With our other hotels, effectively we’ve realised we need to go back and do something with these hotels or they’re going to get trampled on in the future.”

Currently consultants are conducting best-use studies on the properties, which Riley will feed back to the ADNH board.

“We have fantastic sites, the Hilton has a great location, it’s right in the middle of everything, [with] the Sheraton, we haven’t decided yet, but I’d love to bring it down, reduce the inventory, leave it small and turn it into something really luxury and boutique, because there’s so many large hotels in Abu Dhabi coming so this is what we are looking at.

We’ve already commissioned studies and before the end of the year we’ll already have our strategy in place for the next three years, which is where we’re moving first and what we’re doing with these properties to bring them to the present.”

On the issue of whether some of the hotels will get rebranded, Riley says that’s “always a possibility”.

“We’ve been partners with these companies for a long time so it’s probably not a strong possibility but if they were reading this I would love to tell them yes, there’s always that possibility,” reveals Riley.

“We’re with Hilton in Al Ain, Hilton in Abu Dhabi, we’ve been with Sheraton for many years and Starwood with Le Méridian as well, and they’ve been good partners and they’ve done well for us. We’ll do everything we can to continue to work with them and those brands aren’t really represented well in Abu Dhabi beyond our properties,” says Riley.

Future expansion for ADNH outside of Abu Dhabi and Dubai — where the company owns Sofitel Dubai Jumeirah Beach — will also become important going forward.

To date, discussions are underway with partners in Saudi Arabia and Qatar, both of which Riley is confident will come to fruition, with it being more likely ADNH will venture into KSA first. Expansion will not necessarily be in the luxury segment, clarifies Riley: “There’s no tie here and nobody on our board that says it has to be luxury, it’s not like that at all, it’s about commerciality”.

For now though, most of Riley and ADNH’s energies are being invested into the existing portfolio, which, by the end of the year should have increased by two properties and more than 800 rooms. That’s enough to keep anyone busy…

ADNH’s Q2 2011 RESULTS
ADNH’s net profits increased by 7.75% in Q2 2011 compared to the same period in 2010, rising AED 4.08 million (US $1.1 million) to AED 56.75 million ($15.4 million).
Year-on-year revenue surged 6.25% to AED 452 million ($123.1 million) for the same period and the group’s hotel division accounted for one third — AED 150.56 million ($41 million) — of Q2 total revenue, boasting an average occupancy rate of 71%.

Other divisions of ADNH include ADNH Compass, the world’s largest catering company operating in 94 countries, which posted revenue of AED 205.54 million ($56 million).