Chain of the month: Kempinski

Within the next two years, Swiss luxury hotel chain Kempinski will extend its presence across the Middle East, with properties expected to be operating in every country bar Kuwait and Yemen. That’s no mean feat for a European chain that, until recently, only managed hotels in the UAE, Jordan, Qatar and Egypt, with Bahrain the latest to join the portfolio a matter of months ago.

Indeed, despite the turmoil experienced by many Middle East-based hotel operators in 2011, Kempinski has “managed to stay the course”, says Middle East and Africa president Ulrich Eckhardt, and opened three hotels in the regional portfolio.

Of the decision to launch Kempinski Grand & Ixir Hotel Bahrain City Centre back in September, Eckhardt comments: “You have to open, irrespective of any situation. A hotel wants to be open, a hotel never wants to be closed. And a closed hotel is not a good sign anyway. It opened with all the ‘oomph’ that is needed but business is quite slow. Traditional markets in Bahrain have stayed away completely this year”.

Also new is the Kempinski Hotel and Residences Palm Jumeirah, joining exisiting UAE hotels Kempinski Ajman, Kempinski Mall of the Emirates and Emirates Palace in Abu Dhabi. These properties benefitted from the fallout in destinations such as Jordan and Egypt — where Kempinski also operates.

“I said we managed to stay alive and stay the course, but we had some really good moments in the UAE. In fact, the UAE is booming and so is Qatar, so some type of compensation was there,” says Eckhardt.

Avsar Koc, regional director of sales Middle East and Africa, adds that while each of the four UAE hotels has different key source markets, 2011 “has been a good year for our hotels in the UAE”. Despite an increasing focus on travellers from the new emerging markets, Koc says the traditional European source markets have bounced back and supported the chain.

In addition, he says that against the odds, the hotel in Cairo, Kempinski Nile Hotel Garden City, has fared exceptionally well, despite only opening in June 2010 and being located less than a kilometre from Tahrir Square.

“In less than a year we gained in our CompSet and RevPAR number two and then for the last three months we have gained the number one position in downtown Cairo, which is really an achievement,” says Koc.

This is underscored by the fact that the rival for the top spot is Four Seasons. Currently the two are neck and neck when it comes to rates too — at Kempinski.com, room rates start at US $215 for a room on December 2, while at Four Seasons, it’s $210.

“It’s a small hotel and just opened practically in the middle of things happening and unfolding and if you go by the bird’s flight it’s probably 500 metres from where everything happened,” adds Eckhardt, adding that for the most part, “Egypt is somewhat in the doldrums”.

Both hoteliers expect a fairly similar picture to emerge in the Middle East in 2012, despite the impending Eurozone crisis, continuing uncertainty in the Middle East, and research suggesting that finally, people might start forgoing their holidays altogether (World Travel Market 2011 Industry Report).

Eckhardt says there is no reason why the success experienced in the UAE and Qatar shouldn’t continue.

“I think it might even improve next year because some of the sub-regional difficulties may have subsided. At least this is our assumption, expectation. We go into 2012 with much greater confidence.”

Development

Joining this confidence is a bucket load of ambition, a hint of determination and a smattering of pragmatism, as Kempinski prepares to drive forward a host of openings in 2012 and 2013. These include three hotels in Saudi Arabia, one in Oman, a very advanced project in Beirut, a second property in Qatar, a second in Cairo and even a boutique hotel in Damascus, Syria, that Eckhardt says is “absolutely underway, fast track”.

Every hotel already signed is under construction, says Eckhardt, though he acknowledges that the “regular delays which happen in this part of the world” have pushed most of the openings into 2013.

Perhaps the most exciting development will be the entry to Saudi Arabia, a strong outbound market for Kempinski’s hotels in European destinations such as Munich, Berlin and Istanbul.

“It’s really a market that’s an open market for us because Saudis know us from Europe,” observes Eckhardt.

“Al Khobar is under construction, we hope that will open in the fourth quarter of next year. Riyadh I would say the beginning of 2013 and Jeddah towards the end of 2013, beginning 2014,” he surmises.

The hotel in Oman, part of The Wave project, is “definitely late” continues Eckhardt.

“The entire Wave project has been undergoing some changes, they had asset sales, major shifts in ownership and whenever you have shifts like this, there are delays, because buyers want to do due diligence which adds on to the process. But the project is on good footing and well financed so it is going ahead. But we have lost a year. The year 2011 as far as The Wave is concerned is a wash out.”

In Qatar, a market Eckhardt is confident in, the current hotel “is not doing as well as we expected or as we had wished but nevertheless it’s not doing too bad”.

“We are a recent entrant, we only opened at the end of 2010, so we still are looking for our footing and our bearings. But I think next year will be good for us and of course we have a second hotel under construction.”

“We are in a unique situation because we are part of The Pearl. The Pearl like the Palm in Dubai, while grossly overbuilt is limited; there are only three hotels. That hotel will definitely open towards the end of 2013.”

Since the World Cup 2022 bid win, numerous hotel chains have announced flags in Qatar. However, Eckhardt is confident that the relocation of the United States Central Command head quarters to Doha — expected to attract 20,000 families to settle over the next 10 years — will help accommodate the new supply.
“Of course they’re not going to be all Kempinski customers but there will be a rub-off effect.”

The same is not true, however, in Kuwait, asserts Eckhardt, where the country has yet to sign a property, although it did previously have a location there.

“Kuwait is today overbuilt, it’s complicated as a market,” he says. “It doesn’t really have a touristic tradition and is depending largely on the corporate business and there are too many hotels planned. The last time I looked at the rosters they had something like 90 projects in Kuwait under consideration. I don’t think we need to be part of that.”

The number of upcoming hotels reflects a shift in Kempinski’s regional development strategy, which has moved from being opportunistic to aggressive.

“Today we selectively go after certain markets and aggressively pursue them,” says Eckhardt. “Not in the Middle East anymore because… we are basically everywhere we want to be. If we ever go into Yemen will depend on the opportunities definitely; we will not aggressively pursue to be there, but we will not say no to an opportunity.”

Focus on Africa

With plans for the Middle East sewn up, Kempinski is now aggressively targeting expansion in Africa — all 53 countries are on the table according to Eckhardt.

“We are heavily engaged in Africa and Africa is our main focus,” he asserts. The group has recently opened in N’Djamena in Chad, with Accra in Ghana to follow. Construction is beginning on hotels in Abuja and Lagos in Nigeria, while two projects are planned for Morocco.

“We are very, very aggressively pursuing opportunities in the Ivory Coast and in Senegal,” adds Eckhardt. “We also have interests in the Central African Republic, in Angola, in Cameroon. We have a project going in Rwanda, we are very actively involved in Namibia.

“On the east coast moving forwards, Madagascar, Mauritius, we are looking at all the islands.”

And while he admits the hotels, such as Kempinski N’Djamena, have been affected by travel warnings and UN sanctions, he says “it doesn’t deter us from going there”.

Ultimately, “we want to have a clear differentiated brand awareness for Kempinski in Africa from all the other brands. There are of course the old timers, Hilton and InterContinental, but they’re all out, on the way out, and Kempinski is the new kid on the block,” Eckhardt asserts.

“It gives us a great advantage. We are completely and literally virgin to the old ailments of our competitors because they’re regarded as being part of the exploiting machine of the past so that gives us a lot of advantages. But everybody else is there and everybody else is becoming really aware, when you look at statistics and data it’s unbelievable, everybody seems to have woken up to Africa. It’s not easy to build a hotel there and it’s not easy to operate, if you want to do a good job,” he warns.

Hunt for innovation

With so many new hotels on the cards in the region and globally — Kempinski is targeting 121 hotels by 2015 — the company is also focused on refining the brand and delivering the luxury its guests demand.

However, finding that ‘new’ idea in order to really stand out is increasingly difficult, admits Eckhardt.

“It’s getting difficult, every day more difficult, to really innovate, or revolutionise parts of the industry. Somehow it always appears that somebody did it before so all you’re left with is doing it better. That’s essentially what it is,” he says.

“Of course, the iPad is becoming a tool rather than just a gadget and yes we are discussing these things and yes we are considering them and we are looking at equipping our hotels with ipod stations and music libraries and all sorts of things for the generation that goes with this. That’s not really innovation you know. That’s evolution. You simply follow and you try to do it better,” says Eckhardt.

At Kempinski, he says, they are “searching for real revolution in the industry”. According to Eckhardt the million-dollar question is, “Now how do you combine smartness with the traditional norms of luxury without becoming tacky?”

“Do luxury guests want to be preregistered, like they are with airlines? Where does the luxury start and where does it end you know?

“These all become very complex, they seem to be very easy subjects but I think there is a complexity to it. I certainly wouldn’t want it, but there are people that do.

“I wouldn’t want to be pre-registered, why would I? I’d rather talk to someone at the front desk. The whole sense of arrival goes down the drain and the adventure of meeting people when you check in the hotel is gone. And we are a people business, so where’s the gimmick?

“I personally don’t believe in it but I’m sure there are people who do, some probably even sitting around the table now,” he says, casting his eye over the team.

And with that, the senior management disperse, retracting back into their corporate and general managers meetings at Kempinski on The Palm Jumeirah. With clear development, staffing and sales strategies marked out, it seems that if Eckhardt can answer his question — and I heavily suspect he is withholding his own solution — then Kempinski will be onto a winning streak in the Middle East, as well as Africa over the next few years.