Interview: Marriott's Alex Kyriakidis

In 2014 Marriott became the largest hotel company in Africa, nearly doubling its presence in the Middle East and Africa region to 162 hotels and 23,000 rooms, as it completed the acquisition of the 116-hotel Protea Hospitality Group (PHG) based in South Africa.

Now, president, Middle East & Africa, Marriott International Alex Kyriakidis is looking to bring the Middle East back into focus, as he pursues a target of delivering 70,000 rooms by 2020

Alex Kyriakidis, president, Middle East & Africa, Marriott International sat opposite his ex-colleagues as he signed the historic Protea deal, which catapulted the US $13 billion company to number one position in terms of room numbers in Africa in April last year.

“It was interesting,” comments Kyriakidis, of the deal, for which the due diligence was carried out by Deloitte, the consulting company with whom Kyriakidis held the role of global managing director, tourism hospitality & leisure for nine years prior to joining Marriott International.

“This time I was on one side of the desk and my colleagues were on the other side. I’m not sure if that was good or bad because we could read each other’s minds, but it’s a different perspective.”

Kyriakidis transferred to Deloitte in 2002, taking his 4500-strong team with him from former ‘Big Five’ accounting firm Arthur Andersen, where he had held a 28-year tenure. The company collapsed after voluntarily surrendering its licenses to practice as a Certified Public Accountants in the United States.

It was with Arthur Andersen that Kyriakidis “cut [his] teeth on the hotel industry” auditing his first property, Cairo Marriott in 1979 in its pre-opening phase.

“It was a challenging milestone, seeing a company that you’re with for 28 years disappear off the map, and all the uncertainty with people’s careers,” Kyriakidis comments, reflecting on the collapse of the firm. “I wouldn’t wish on my enemies to have gone through what we all went through.”

Kyriakidis’ first foray into the operational side of hotels was when he joined Marriott International around the age of 60. The firm had been one of Deloitte’s largest clients, and with the transition, Kyriakidis found “a win-win”, taking his knowledge of the hotel industry and carrying on the strong relationships he had built up over 38 years in the consultancy and auditing world.

“Interestingly my relationships with my former colleagues at Deloitte continue as strong as ever,” he says.

The Protea acquisition, which took place just two years after Kyriakidis joined Marriott in 2012, was a hugely important deal for bolstering the US operator’s African presence in terms of scale and distribution. Marriott acquired 116 hotels through the deal in 2014, a year Kyriakidis describes as “momentous for Marriott”.

Now there are 24,200 Marriott rooms in operation in the Middle East & Africa region, 14,200 of which are in Middle East and North Africa, and the remaining 10,000 of which are the Protea rooms based in Africa.

Article continues on next page ...

With the focus having been on Africa in 2014, Kyriakidis is keen that “we don’t take the limelight away from the Middle East and North Africa region”, which also saw successful performance last year, particularly owing to the partial recovery of Egypt following the election of President Abdel Fattah Saeed Hussein Khalil el-Sisi in June 2014.

“Almost the day after the elections, business started to react positively and occupancies have started to climb dramatically in Cairo, and also the Red Sea resorts. Egypt performance last year from about June was the star of the show,” he says.

Marriott International employs 4500 people in Egypt, and Kyriakidis is proud to say that during the Arab Spring, which peaked in 2011, the company didn’t let go of any of them. Now that Egypt is beginning to perform more positively, Marriott is looking to grow its business there.

“I’ve always been a huge believer in Egypt’s future of travel and tourism,” he admits.

“So many of our Gulf owners are very keen to invest back in Egypt and that’s very good news.”

Outside of Africa, in the GCC region, Saudi Arabia and the UAE are what Kyriakidis describes as the “super tier-one markets for us in terms of growth”, and he reveals plans to open 10,000 rooms in each by 2020.

The main focus for Marriott in terms of development is Saudi Arabia, where 3500 rooms are being built.
In the UAE, the pipeline stands at half of this, with 1750 rooms to come online.

Both destinations are investing in tourism infrastructure for different reasons, Kyriakidis explains, highlighting Saudi Arabia’s focus on religious tourism, which is fuelling investment in everything from transportation to hotels, to new cities.

“The Kingdom is a high priority and what we have signed to date and put in the pipeline is a clear demonstration of this.

Having started off in the major cities of Riyadh and Jeddah, Marriott will make its Makkah debut early this year
with the Makkah Marriot, set to add 540 rooms to the world’s religious tourism hub.

This will be followed by the opening of JW Marriott Hotel Makkah in 2016 and Courtyard by Marriott in 2017.

Kyriakidis says that the 10,000 room target can be split into 5000 rooms in the holy cities and 5000 across the rest of KSA.

“The holy cities do represent an unprecedented opportunity for us and for the industry as a whole to support the Kingdom’s vision for religious tourism.

Article continues on next page ...

“There are discussions in progress and at the moment we haven’t announced any to the market” he reveals.

There are nearly 2500 rooms confirmed to come online in Saudi Arabia over the next five years across Marriott’s Residence Inn, Marriott, Ritz-Carlton and JW Marriott brands, with nothing yet announced for the Autograph or Edition brands.

Four properties are scheduled for Riyadh, Jeddah and Damman in the coming years.

And aside from the key cities, as part of the 5000 room target outside of the holy cities, the firm is starting to turn its attention to the smaller markets of the Kingdom, and last year launched Courtyard Jazan alongside Residence Inn Jazan.

Saying this, Marriott is just 35% of the way toward meeting its 2020 target, yet Kyriakidis says this is “a good step toward that goal”.

And while he maintains that performance of short-stay brands, Marriott, Ritz-Carlton and Courtyard have been “doing fabulously”, the long-stay brands are coming to the fore, both in Saudi Arabia and elsewhere in the Gulf region.

There is particular demand for long-stay when combined with a short-stay hotel, as is the case with Marriott Executive Apartments in Riyadh and the Marriott Riyadh which have the same owners, allowing for long-stay guests to benefit from the hotel facilities and F&B.

The model has proved successful enough that a second duo was signed last month with Dur Hospitality, for Marriott Executive Apartments Riyadh Diplomatic Quarter, and Riyadh Marriott Hotel Diplomatic Quarter, set to open in 2017.

“Not many costs go with that except housekeeping and maintenance,” Kyriakidis explains.

“So the margin in that long-stay piece is very healthy, typically north of the 60% margin.”

Diversifying the hotel product will also help the firm attract customers outside of the traditional source markets — the GCC and Europe.

“We haven’t yet tapped the Indian market, we haven’t yet tapped the Asian market and I think the theme parks and the huge shopping malls that have been planned will start pulling those markets into Dubai.

“There’s no question we need to diversify into midscale and limited service segments, and this is where we’re heavily focused as Marriott; to bring in our Courtyard by Marriott and Residence Inn by Marriott to respond to that upcoming demand.”

In the UAE, with just 1750 rooms under construction, the company is even further away from its goal than it is in Saudi Arabia, however Kyriakidis sees “lots of potential to come, particularly in the capital and certainly in Dubai”.

Article continues on next page ...

Recent success has been seen already with the signing of the Bulgari Hotel, to be located just opposite the Four Seasons Resort Dubai at Jumeirah Beach on Jumeirah Bay Island, a six million ft2 mixed-use development, sculpted in the shape of a titanic seahorse off the coast of Jumeirah Beach Road.

Kyriakidis says it will be “one of the most special hotels in the world, not just in the Middle East & Africa”.

Additionally, the Autograph Collection, Marriott’s independent luxury hotels collection will make its regional debut. Located on Jumeirah Beach and adjacent to Dubai Marina, the 446-room Habtoor Grand Beach Resort & Spa will join the collection early this year.

The second Autograph Collection — The 503-key Lapita Hotel, a Polynesian-themed family property — will open in 2016 as part of a major theme park project in Dubai.

Kyriakidis is confident that with the ongoing development of such attractions, as well as the growing span of Emirates and other airlines, Dubai will continue to prosper despite burgeoning supply.

“Everyone is very concerned about the rate at which 20,000 rooms are coming on to the market for 2020 and I think we saw that last year, with RevPAR plateauing in Dubai. But it’s merely because you’ve got a really strong market growing.

You now have several thousand rooms and there has to be a period of gestation before it can grow again,” he comments.

Marriott sees neighbouring destination Abu Dhabi as another land of opportunity — albeit with a different market position to Dubai continuing to evolve. The Courtyard by Marriott World Trade Center, a 195-room hotel set to open this month, will leverage its proximity to Arabtec and ADNOC to attract corporate business.

“Abu Dhabi is going into a slightly different but complementary positioning to Dubai. The focus is still heavily on business. Dubai, interestingly, today is tipping away, it’s now more than 50% leisure whereas in the capital it’s 75% business, 25% leisure,” says Kyriakidis, explaining that this fits perfectly with Marriott’s DNA, which is “really business”.

“I can go to a beach location in Dubai but it will cost on average twice what it will cost in the capital. So it’s an opportunity to experience the capital, family business and Saadiyat Island but not be too far from Dubai. I would fully expect the capital to exploit this, as will we, and as will other hoteliers to drive business and drive demand. It ultimately makes the cake bigger for the whole of the UAE”, he adds.

Article continues on next page ...

Further afield, in Qatar, a three-hotel complex, which includes the Renaissance Doha, Courtyard Doha, and Marriott Executive Apartments Doha, will merge and be collectively rebranded as the Marriott Marquis City Center Doha Hotel, signalling the brand’s debut in Qatar this year.

The hotel, owned by Al Rayyan Tourism and Investment Company (ARTIC), is located in Doha’s West Bay district and comprises 580 guest rooms and 1200m2 of meeting space, and is directly connected to the City Center mall.

The rebrand follows a conversation between owner and operator which identified that “a more powerful proposition” was needed for the properties.

“It comes at a time of significant growth in Qatar,” explains Kyriakidis.

“We have 350 rooms in the pipeline under construction in Doha.”

And while a “firm believer” in concentrating on delivering the brand promise across the eight brands that are already in the market in the Middle East and Africa, Kyriakidis wouldn’t rule out another acquisition.

“Nothing is out, but we’ve got to concentrate on getting that business integrated successfully into the Marriott family,” he says, referring to the Protea hotels.

However, he does admit that there has been quite a significant amount of interest from existing owners in Protea and this is something that may make its way into the Middle East.

“They like the fact that [Protea] is a full service brand, but that it has more of a quality tier positioning rather than upscale. They like the flexibility that gives them. Our development team is in discussions with interested parties to bring Protea to the Middle East.”

“The Gulf carriers are increasing the frequency of their flights and penetration into Africa, particularly South Africa.

“If we can get the Protea name into the Middle East market it could be hugely synergistic for our customers of Africa, and the Middle East and Africa.”

Article continues on next page...

The first locations being considered for Middle East Proteas are not surprisingly two of the firm’s key regional markets: Dubai and Egypt.

“We have owners who we are speaking to about Proteas in Dubai and also Proteas in Egypt. These are two markets where we have a lot of interest. I’m certainly very pleased that already the name is out there and people know it.”

Even without another acquisition, Marriott’s signings have been strong in the region for the past year, with a cumulative annual growth rate of 25% in rooms from 2013 to 2018 (if the operating portfolio at year-end 2013 plus the pipeline announced since then is considered).

Additionally, the company expects its fees to grow from US $36 million to around $120 million in 2018.

“I think here in the Gulf we have had some phenomenal successes with regards to growth,” comments Kyriakidis.

“If you look at our pipeline today, we have 52 hotels, and nearly 11,000 rooms under construction in the region.

"When I joined, we did a strategic review called ‘Middle East & Africa 2020’. We set a goal to get to 70,000 rooms by 2020 operating and in the pipeline in the region.

"We were at the 20,000 level and it’s really my ambition with the team to deliver 70,000 rooms by 2020 and to develop a team that grows in terms of talent, seniority and learning to deliver that ambition to Marriott.”