2015 Forecast: Mark Willis, The Rezidor Group

Mark Willis, vice president Middle East and sub-Saharan Africa, The Rezidor Hotel Group reveals his expectations for the year ahead in the Middle East hospitality industry.

What is your hero hotel opening in 2015 and why?

We are particularly excited about the opening of the upper upscale Radisson Blu Resort Jizan. This is Carlson Rezidor’s first project in Jizan, one of Saudi Arabia’s major shipping ports on the Red Sea. The full service hotel will be located on the Jizan Waterfront, off the Makkah and Corniche Roads Roundabout.

It will be only 3km away from the city centre and 5km from Jizan’s regional airport. The area surrounding the hotel and the entire city are witnessing major developments, including an oil refinery development spear-headed by Aramco, Saudi Arabia’s national oil and gas company.

The Radisson Blu Resort Jizan will include 150 contemporary rooms with signature services such as free high-speed internet access, a 250m² all-day dining restaurant, a 100m² lobby cafe, almost 3,000m² of meeting and event facilities including two ballrooms, as well as wellness facilities with an outdoor pool.

How will the recruitment landscape evolve in the Middle East hotel industry in 2015?

We are seeing a trend towards the achievement of nationalisation targets, especially in the GCC. The biggest challenge we’ve encountered with this though is that job seekers are faced with so many options of work in other industries.

A national who is a fresh graduate will have the option to work in government or in finance among many other industries. What we really need to focus on is attracting national talent to Rezidor and the broader hospitality industry, in a way that will make them want to pursue this as a valid career choice above other industries.

With the UAE government so focused on hospitality and tourism, I think the next few years will be an interesting time for the industry here. Training colleges and institutes will be set up to develop the skills for the people who will then execute the plans for Expo 2020. Building hotels is necessary, but you also need talented people to run these hotels. The ideal situation would be to develop a home-grown talent base that can fulfil the demands of travellers into the UAE because educated, home-grown hospitality employees are the best way to sustain this industry.

In 2014, the onslaught of more competition, balancing stakeholder requirements, and the decline in traditional markets such as CIS were reported as major challenges for GMs. What will be the major challenges for GMs in 2015?

The downturn of the CIS market has been felt very strongly throughout the UAE as it has always been a major producer for the region. The seasonality and stay pattern of these guests is quite unique, and so a key focus moving forward is to maximise all other segments and source markets to cover this deficiency and to explore new markets.

Interview continues on next page...

What markets will be most important to target next year and how will Carlson Rezidor do this?

With the extensive expansion of Emirates Airlines in the Scandinavian markets where Carlson Rezidor is the leading hotel operator, and with direct flights from Oslo, Stockholm and Copenhagen we will focus our attention on growing these markets.

While there has been steady business from the corporate sector, particularly in the areas of telecoms, oil and gas we expect to see a greater number of leisure visitors to the UAE and Oman in the coming year. In addition, Scandinavians like to travel to the Far East and we can expect to see an increase in stopover business for Dubai. They are like to travel as extended families, often with three generations travelling together as this is often the only time they get to spend together.

Diversification of the hotel landscape was a big topic in 2014. How will this trend develop in 2015 and beyond and how do you plan to target price-conscious customers?

The recent statistics on the number and diversity of Dubai’s tourists perfectly illustrate how the shift from luxury and high-end hospitality to a more affordable offering for visitors, is transforming the market in the Emirate.

One of the emerging trends in the global hospitality industry is the growth of the midscale segment for city hotels. Brands like the Park Inn by Radisson have become increasingly popular, showing that despite times of economic instability and investor caution, consumers are still looking for options that can cater to their budget.

And this is an emerging trend across the Gulf. We plan to launch a number of Park Inn by Radisson properties in Oman, Saudi Arabia, Bahrain and Dubai over the next few years. As centres of trade and industry, the growth of this mid-market brand will serve these destinations well as they seek to transform their hospitality industry into one that is diverse, dynamic and inclusive.

How will the trend for more independent-style hotels evolve in the Middle East in 2015 and beyond?

I believe we have reached a level of maturity in Dubai whereby there is not always the demand by guests for branded hotels.

The success of boutique and independent hotels here has been slow compared to other markets - Europe for example - but I think we are now coming to this same level of maturity in certain markets such as Dubai, Abu Dhabi and to some extent Cairo. It will take a lot longer for some of the other markets in this region to be able to sustain independent hotels but I think it will come.

How do you see average rates, RevPAR and other key indicators in 2015 as more supply comes on to the market?

It is not just additional inventory that will affect average rates and RevPAR but more a combination of an increase in supply coupled with a major drop in business from the CIS market and the rise in Egypt as it starts to chip away at its fair market share.

With all that in mind, our aim is very simple, and that is to outgrow our competitive set for each property in terms of Revenue Generated Index (RGI).

Interview continues on next page...

Will the emergence of holiday homes, airbnb, etc., continue to disrupt the industry?

The realisation that the forecasted supply will probably not be sufficient to cater to the demand as we get closer to Expo 2020 has meant that options such as holiday homes and central rental options are inevitable. Will the growth of these alternative options be a direct competition and thus a threat for us? Yes of course.

What trends will we see in the serviced apartment sector?

The appetite for serviced apartments will continue to grow. This product is extremely well positioned for corporate clientele because of the space they offer.

Usually 40 - 50% of our guests will be long-stay residents who will be here for one month; some of them will stay for a year, and the majority will be with us for three to six months. Many of these people will be working on projects. Similarly serviced apartments also appeal to families who prefer to stay five to seven nights during school holidays simply because of the convenience this type of accommodation offers. One of the trends we expect to see is the incorporation of serviced apartments into hotel operations to some extent. We have a few developments where are going to have part of the inventory as the hotel with the serviced apartments next door, and then we start combining the two.

The trend for standalone-style restaurants in hotels was a big trend for 2013/2014. Will this continue to evolve, or are third-party managed outlets the future for hotels?

There is no doubt that standalone-style restaurants continue to be a big trend, particularly in such a highly competitive lively buoyant market as Dubai. It is probably less of a trend in other markets for the time being though.

Let’s not forget that one of the reasons why this is such a prevalent trend here is that if restaurants want to have a liquor license they need to be located within a hotel, with one or two exceptions. There are, of course, many other options but most of the big names are located within hotels for that reason.

What is going to be interesting to watch is the new Canal Project as that will be made up of many restaurants which may or may not be licensed. There will also be hotels so I think we can expect to see standalone restaurants within or linked to the hotels.

What further support do you require from the tourism board in your region/country? How do you see classification systems evolving in 2015?

Hotel classification is generally designed to provide clarity and distinction between the various hotel offerings to help people categorise hotels into different star ratings.

However, through this we often miss the impact the classification system may have on both the investment and development cost of a hotel.

Dubai has always had a superior classification system, which partially justified the growth of the luxury category because the budget and mid-scale properties were often not sustainable. Because of this, DTCM (Dubai Department of tourism and Commerce Marketing) recently reduced the room size and other requirements in all categories in order to promote further diversification and investment into the midscale and budget segments.

While this could be seen as a positive move for investors, one should not forget the importance of the operator’s standards. While each government might have its regulation, hotel chains also have theirs which dictate similar standard requirements. If the two are conflicting or misaligned, this creates further need to clarify what is truly needed and then provides further confusion and complexity rather than simplification.

The real issue behind hotel classification remains the same, which is complexity and ambiguity, and an international organisation such as WTO (World Trade Organisation) should take steps to homogenise this globally. The various and numerous classifications in every country and sometimes city, create more confusion and often drive additional costs which could be avoided. Furthermore, while the system is used to help reassure guests, the end user chooses where to stay less on the start rating and more on the location, price and reviews.

Interview continues on next page...

What are the major trends in sustainability and CSR in the Middle East hotel industry for 2015?

I believe that all organisations should run their business responsibly. For a hospitality company, and particularly for Carlson Rezidor, it is essential to give back. We become stronger if our local communities become stronger. As a hospitality organisation we are fortunate that we can do this through local employment, through long lasting contributions, through charitable giving all of which we practice through our employment and people development programmes and through successful campaigns such as the Box Appeal.

The hotel industry is already taking measures to reduce the consumption of water and the generation of waste very day and I see this as a key focus for 2015, particularly in areas where water scarcity is a big issue. We are launching a company-wide Think Planet Water campaign. Earlier this year we joined the United Nations led UN CEO Water Mandate and have set up a new water task force that, going forward, will look at ways to maximise water sustainability from room and building design, to bathroom fixtures, kitchen, pumps and maintenance of the systems.

What is your company doing to maintain profit levels with pressure on rates as higher booking volumes pass through intermediaries and how do you see this evolving in 2015?

We can see a softening of the Middle East markets, especially Saudi Arabia and UAE, mainly due to the increased supply over the demand level. The other key countries are going strong.

We secure the base business through committed segments and follow the market pricing through our rate optimisation tool. Our focus is to drive business to our own brand website and directly to our hotels, although we still continue to work through third parties.

How do you see loyalty programmes evolving in 2015?

There are a number of trends that are expected to impact loyalty programmes in the year ahead. The biggest one, I believe, is big data which is definitely a big trend moving forward. 

Companies are looking for more customer engagement, which means a deeper emotional connection with the brand and so data that allows us to understand customers better, will in turn allow us to provide a more meaningful experience.

It is only by managing customer interaction better and arming ourselves with in-depth knowledge of our guests that we are in turn able to communicate with them better. Data such as that from online communications, social media and email correspondence is all vital in building a picture of the guest to enable us to determine the needs of that guest to drive loyalty.

The gamification of loyalty programmes is also going to be another big trend for 2015. Giving guests goals to work towards, the ability to earn badges as they progress and a community of people to compete with or collaborate with, can all help drive and motivate loyalty and purchasing behaviour.

Interview continues on next page...

What are the trends in procurement in the Middle East hotel industry for 2015?

One of the key trends in procurement is the move towards a paperless technology with more web-based purchasing and online procurement. However, while procurement software such as Market Boomer will streamline the process, I believe this will encourage more of a focus on price rather than quality with buyers opting for the best price rather than the best quality.

Also known as green or sustainable procurement the idea of responsible purchasing is one that is going to be a major consideration in the years ahead.

As we all become more environmentally aware we need to look beyond the traditional factors of quality, price and stock availability and buy products that are environmentally green with a lower carbon footprint.

Procurement is considered the backbone of the hotel, and it is becoming more efficient with the use of the right technology accompanied by a well-thought out strategy and centralised standards. The challenges ahead lie in the increased supply of hotels in Dubai as this will make it challenging to negotiate better rates. In addition increasing costs in the supply chain in general will be reflected in the cost of items. Since 90% of food and drink goods are imported Horeca, is obliged to buy imported goods that are more expensive and often lacking in taste of locally grown items.

Will any new locations emerge within the destinations in which you operate in 2015 and beyond?

Dubai is currently expanding beyond the existing boundaries and we see further opportunities coming up around the new TECOM developments and around the Jumeirah Village and the Jebel Ali area because of the port, free zone and expansion of Dubai World Central. Other areas to watch are the rejuvenation of the Deira waterfront and the key areas of Abu Dhabi: Saadiyat, Yas Island and Reem Island. 

We see the same in Muscat where there has been a positive growth in hotel performance, further promoting hotel investment across the city particularly along the coast and inland towards the airport and the proposed new airport. Likewise, the same trend has been supported by the government and ministry’s initiatives in ensuring the infrastructure and the ease of doing business. Saudi Arabia has taken a similar direction, not only within its key cities but also in secondary cities where we see the conversion of small airports into national and regional airports, further allowing transportation and accessibility to various future offerings.

Our Park Inn by Radisson brand has been able to respond positively to this trend and we are now taking advantage of this momentum to strengthen our presence in key markets and secondary areas. Of particular interest is the northern expansion of Riyadh and Jeddah’s eastward expansion inland, and northward expansion towards the expanding airport.