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.
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“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).
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