Event Preview: AHIC

The polarisation of the Middle East hotel markets is just one of the topics on the agenda of the ninth Arabian Hotel Investment Conference (AHIC), which will again attract major names from the investment, development, consultancy and management sectors.

With a conservative estimate of 150 new hotels opening in the GCC alone in 2013 and some 500 in the pipeline according to STR Global figures, the region continues to attract investor interest as well as an ever growing band of international operators keen to grab a share of the lucrative market.

And, with relentless expansion by the big three airlines of the Arabian Gulf and new airport infrastructure open or under development in Abu Dhabi, Doha, Dubai and Muscat, new air routes are expanding source markets to feed traffic through these new hubs.

Add in the under-served hotel sector in Saudi Arabia, which is exciting interest across the entire gamut of the hospitality sector, Qatar’s sporty ambitions and the potential for exotic resort options in Oman and elsewhere, and the scene is set for an absorbing AHIC this May – with more than 550 top industry executives attending.

According to Jonathan Worsley, chairman of organiser Bench Events, one significant trend has been the rise in delegate numbers from Europe, as well as from the Gulf region itself: “During the past year, AHIC launched invitation-only briefings in Oman, Saudi Arabia and Qatar – bringing together investors and industry leaders to share insights into issues and opportunities in local markets,” he said.

“This has helped us to shape the content of the AHIC programme and it has been a valuable opportunity for us to engage directly with local players – and through these briefings, we saw an increase in attendance from these countries.”

In response to advice from the AHIC Advisory Board, Worsley said this year there was more focus on global travel trends, with input from the WTTC executive director Geoffrey Breeze and the UNWTO regional director for the Middle East, Amr Abdel Ghaffar.

“In addition, a big theme developed by the Advisory Board was ‘operating in the new normal’, so AHIC looks at country risk in the region and how to build this into a business plan, with a presentation by Rachel Ziemba, head of emerging markets at Roubini Global Economics, plus case studies from Libya, Iraq, Syria and Africa.

“Sessions also dive in to Oman and Qatar as rapidly developing markets, while the programme looks to Europe too as Middle East capital in 2013 has been the primary driver of hotel investment activity, particularly in the European capital markets,” said Worsley.

Other key topics include the active Saudi Arabian market, plus the contribution of F&B operations to the bottom line, moderated by Stefan Breg from Tribe, who will focus on the pros and cons of outsourcing, own concepts, third-party leasing and celebrity chefs.

“Although in this region, F&B is not only a key source of net profit, it is also a key strategic driver in the success of the hotel, but many organisations struggle with who decides and who drives these decisions,” said Breg.

“Some hotels have celebrity chefs or brands in a franchise format and have had mixed levels of success – and often this has little to do with the level of return and more to do with cache and image – while non-hotel concepts have taken market share, particularly in Dubai,” he observed.

Article continues on next page ...

Exclusive highlights for AHIC attendees also include the first reveal of results of the Visa Global Travel Trends Survey detailing travel and destination trends, travel spend and preferences of consumers; an address by Essameldeen Abdelhady Mohamed, chairman and managing director of the Egyptian General Company for Tourism and Hotels (EGOTH) outlining the future for hotel stock in that market; and the opportunity to hear from HE Helal Al Marri, new director general of the Dubai Department of Tourism & Commerce Marketing (DTCM) on Dubai’s vision for the future and the role of the DTCM within the hotel industry.

Talking points
Following from introductory roundtables and workshops focusing on diverse topics including customer loyalty, developer financing, rebranding strategies and transaction transparency, the first day of AHIC focuses heavily on the macro and micro state of travel and tourism with regional and international presentations.

In the wake of the recent World Travel & Tourism Council global summit in Abu Dhabi last month, executive director Geoffrey Breeze will brief delegates on conclusions and plans of action impacting on the hotel sector including the call for private and public sectors to work together to drive investment in infrastructure, visa facilitation and further airline deregulation.

As well as regional destination presentations and industry performance trends, another highlight of the opening day is the session on ‘What the Regional Leaders are Saying’, featuring a stellar cast including IHG regional COO Pascal Gauvin and IFA Hotel Investments president Joe Sita, as well as execs from Marriott and Hilton.

Hot trends for IHG include new traveller types, technology and further brand expansion, said Gauvin: “We can no longer define the traveller in our terms, and the new IHG Trends Report 2013 has focused on four new types: new global explorers from emerging markets; new family groups; laptop and latte travellers who mix business and play, and expansive mid-lifers.

“Mobile technology is enabling us to create new opportunities for service for those who make their bookings online, who use mobile check-in and do extensive research of the local area themselves,” he said.

Focusing down on the region, IFA’s Sita predicted that hotel product offering in the GCC region will have to widen to meet new demand: “I think we’ll see this achieved through branding and a shift in the segmentation ‘pyramid’ where five-star properties are currently over-represented… over time, the economy and mid-end segments will grow and hold a dominant position, essentially flipping back the segmentation pyramid to its more typical form,” he said.

However, Sita said markets remained highly polarised between over-performing cities such as Dubai, Makkah and Madinah and those such as Manama and Abu Dhabi that continued to face challenges: “I do think that owners are taking advantage of the supply and demand shift [in some areas] to reposition their properties, improve their product offerings and enhance customer experience,” he said.

Predicting a continued unsatisfied demand for two- and three-star hotels around the region, he added that IFA was in the process of finalising agreement for a city-centre Yotel in Dubai: “This is what Dubai is looking for – a luxury product with an affordable price tag achieved through a creative use of space”.

Article continues on next page ...

Hot spots
With average GOPPAR around the region varying between US $22 in Sharm-El-Sheikh and $186 in Dubai, several sessions at AHIC will address the topic of hotel hot spots with a Global Leaders’ Panel featuring Accor, Wyndham, Fairmont, Anantara and Rezidor top executives looking at the topic from an international perspective.

According to speaker Yann Caillère, president and COO of Accor, growth drivers are coming from Asia-Pacific, the Middle East, Africa and Latin America, offering many opportunities in terms of expansion.

“At Accor, we already have 77% of our pipeline in those key regions,” he said. “The sector is also facing two major challenges: the need for stronger brands, with a greater client segmentation, and the need for powerful distribution systems in a market with many actors.”

Focusing on the wider world, Jones Lang LaSalle chairman hotels & hospitality group Arthur de Haast will present an overview of hot markets: “In terms of fast developing markets, China still dominates with around 135,000 rooms in the pipeline, while Indonesia is coming to the fore because of its size and population and Brazil continues to attract global attention for the same reasons,” he said.

“Close to EMEA, two favourite regions are Russia – Moscow and St. Petersburg – and Turkey, while smaller countries where percentage growth has been phenomenal include Myanmar and Vietnam.”

Globally, he said that trading fundamentals and hotel operating performances were holding up and growing robustly in various markets, from Dubai to London, Paris and Munich as well as key gateway cities in the Asia Pacific.

“As an industry sector, we represent only a fraction of real estate investment which is a tiny part of investment globally, so it is key to demonstrate the consistency of the market and its profitability… we are well positioned at the present time, the outlook is encouraging and this is what attracts capital.”

Overall, real estate as an asset class is well placed, de Haast added: “Cash and bonds are showing very low returns, equities have been volatile and consequently real estate has demonstrated its potential for steady returns, especially for long-term users such as hotels.”

On a regional basis, JLL head of hotels for MEA Gabriel Matar stressed the role of hotels in adding value to real estate investment, a trend particularly prevalent in both Saudi Arabia and Dubai.

“Mixed-use properties are popular in new developments where the hotel is seen as a way of bringing value to the land, generating higher value than other uses,” he said. “With hotels the core of social activity, mixed-use developments create land value and a higher ROI and you can see this systematically happening in Saudi Arabia.”

Hinting at an evolution of the life-cycle of hotel investment in the region, with investors very slowly becoming interested in buying in to projects, Matar said control of land was likely to change in some parts of cities such as Dubai where freehold ownership is permitted.

Dominating the regional hotel sector, Dubai continues to go from strength to strength, and at a workshop that will close the 2013 AHIC event, location and the appropriate product will be on the agenda. Joining Gabriel Matar will be Russel Sharpe, COO of the Landmark Group’s Citymax Hotels, JA Resorts’ COO David Thomson and Ben Martin, principal and head of economics at Aecom.

“Location remains key – convenient and central, in prime business and shopping districts – and as part of our expansion we are looking at various business models to own and operate, through new-build, acquisitions, leases and management models,” said Sharpe.

Article continues on next page ...

Al Habtoor’s Lifetime Achievement Award
Chairman of the Al Habtoor Group, Khalaf Al Habtoor receives the Lifetime Achievement Award at this year’s AHIC in recognition of his accomplishments in the UAE hospitality and tourism industry, both in the past and looking towards the future.

Founder of the Al Habtoor Group, he began building his empire in the construction industry, later diversifying into a portfolio of sectors including hospitality with Habtoor Hotels.

Starting with the Metropolitan Hotel on the Sheikh Zayed Road and a beach club in Jumeirah (later expanded to become the Habtoor Grand Beach Resort & Spa), Habtoor Hotels now operates three properties in Dubai but has also become heavily involved in development.

To come is a new vision of the future on the site of the demolished Metropolitan that will become an integrated complex featuring St. Regis, W and Westin hotels operated by Starwood; plus Dubai’s first Waldorf Astoria on the Palm Jumeirah. (As part of the latter deal, Hilton Worldwide also took over management of Habtoor’s two Beirut hotels.)

Commenting on the award, Jonathan Worsley said: “Mr Al Habtoor has distinguished himself through outstanding projects, continued excellence, passion and commitment to be part of the rise of the UAE”.

Article continues on next page ...

Session highlights at AHIC 2013
Country Risk in the Region… What the Analysts are Saying and What Investors and Operators are Doing: Accor regional COO, Jean-Jacques Dessors; SVP hotel development of Corinthia, Paul Pisani, and Salman Haider, executive MD of Majid Al Futtaim Properties along with chairman of UB Holding, Hadi Nezir talk candidly about risks and challenges of operating in countries fraught with political uncertainty.

Why does the Mid-Market Make Such Sense?: With luxury and budget brands taking the limelight in recent years, a panel with speakers including Dinesh Chadha, GM of Citymax Hotels; Alain Debare, GM of Action Hotels; Taras Etti, regional VP development for IHG and David Vely, SVP for Middle East and Africa development for Whitbread Hotels & Restaurants International look at the middle ground to reveal potential ROI, partner relationships and more.

Refurbs and Rebrands: WHEN IS THE RIGHT TIME? Case studies and input from development and engineering experts including regional VP architecture & construction for Hilton, Andrew Forte; Starwood’s regional VP development, Neil George; Salman Haider, executive MD for hotels at Majid Al Futtaim Properties; Margaret McMahon, MD of Wimberley Interiors and Brian Rafferty, vice president engineering at Jumeirah put the case for keeping older properties looking fresh and staying in competition with newbuilds.

Saudi Symposium: An in-depth look at the region’s brightest star with a focus on extended stay potential, infrastructure development, finance and portfolio development with input from international operators — Marriott, Accor and Wyndham — as well as Dr Badr Al Badry, CEO of the Saudi Hotels & Resorts Company (SHARACO); Dr Salah Al-Bukayyet, deputy secretary general of the Saudi Commission for Tourism and Antiquities (SCTA); and Muhammad Al Amir, managing director of Riyada International Hotels & Resorts.