CEO Interview: Dr Badr Al Badr, Dur Hospitality

A brand relaunch is underway, a master franchise agreement has been entered into for the first time, and a US $400 million investment in new projects has been announced. Dur Hospitality’s CEO Dr Badr Al Badr explains why he is working full steam ahead to meet a target of 20 hotels in Saudi Arabia over the next seven years

In November 2014, former Saudi Hotels & Resorts (Sharaco) began trading as Dur Hospitality, having been on the Saudi stock market since 1976. The company announced it will invest SAR 1.5 billion (US $400 million) in developing three- and four-star hotels and luxury residential complexes, to achieve a planned portfolio of 20 hotels and six residential properties in the next seven years in KSA.

BeBehind the company’s major overhaul, is chief executive officer Dr Badr Al Badr, who joined Dur Hospitality three years ago, in January 2012, from his role as managing director at Cisco Systems Saudi Arabia, where he was responsible for expansion of the company in the Kingdom and the development of Cisco’s Smart Connected Communities practice in the Middle East and Africa.

“The market has undergone a whole transformation during these years,” said Al Badr, explaining the firm’s rebrand. “When we started 40 years ago we were the pioneers and the demand was not comparable to today. Things today are totally different. We needed to evolve to catch up with the market from one side. From the other side we saw an opportunity to beat the market, not just catch up.”

While previously, Saudi Hotels and Resorts had a recreational arm, which dealt in the development and operation of amusment parks, this shut down last year because “there isn’t much synergy between hotel development, hotel operations and recreational parks”.

Al Badr goes on to explain that even the name Saudi Hotels & Resorts “had connotations of things we don’t do any more”. Dur Hospitality on the other hand, will have a more streamlined approach with the focus firmly on hotel development and operations, as well as residential properties.

“We were looking for [a name] that was more indicative of our new culture, our new spirit and new direction so we chose a short, remarkable name with vibrant colours and that is ‘Dur’, which is Arabic for ‘homes’, so it gives the meaning of a place to live, very friendly, and it works for hospitality guests or for people staying in our residential compounds.”

With 20 hotels targeted, the company’s operational strategy will focus on “three different categories”.
One of these are the Dur-owned hotels operated by international brands — a model to be implemented where “very exclusive expertise is required”.

“I’m talking about five-star ultra-luxury hotels such as the Riyadh Marriott Hotel we are developing in the Diplomatic Quarter of Riyadh. These kinds of projects rely on traditional management agreements with international operators,” says Al Badr.

In another category are hotels operated by Dur Hospitality under its 10-year-old operational brand, Makarim, which will undergo a re-launch.

It will re-emerge as a brand purely targeting the religious tourism segment, with hotels — owned both by Dur Hospitality and other owning companies — to be situated in the holy cities of Makkah and Madinah.

While the name remains the same, Makarim will be upgraded and the guest experience is to be modified.

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“It will strive to help the guest at every step of their journey. We’ll be changing the look and feel and the service standards, we’re rewriting the operations manual and retraining the staff,” explains Al Badr, adding that the key USP of Makarim will be that the brand “understands more about what the traveller wants and expects on their religious journey” than international brands.

“When you want to go for a religious experience, we would assume that the traveller wants to have this experience extended to their place of residence.

“If you go to a new destination you want to be totally immersed in the culture and the experience rather than being in a bland, international hotel with unidentifiable features — one that you could find in any city.” Details of the Makarim rebrand are still being finalised, however Al Badr hints that the focus will be on “the colours, spirit and communication”.

Understanding that religious tourists often book through tour operators, and sometimes only make one pilgrimage in their lives, Al Badr believes the key is to offer assistance, make the journey pleasant, and become a brand synonymous with religious tourism.

To this end, Al Badr suggests that the Makarim hotels in other cities — those in Riyadh, Jeddah and Tabuk — may be rebranded these under franchise agreements — the third category of the company’s operational strategy.

Dur Hospitality recently entered into a master development agreement with InterContinental Hotels Group (IHG) for the franchise of a number of Holiday Inn & Suites across the Kingdom.

Additionally the company has negotiations with other operators, however Al Badr asserts that Dur will only work with a maximum of three, and with IHG already enlisted, there is room for just two more, with Marriott hinted at as a potential.

Since the rebrand, the competition has been fierce, with many well-known brands the firm has never worked with before getting in touch. “We’ve seen interest from international operators in working with us. I believe our rebranding was successful enough in attracting their attention,” claims Al Badr.Franchising is something the company has never done before in its 39 years of existence and the reason for the introduction of this model is “two-fold”, he goes on to explain.

“One, is that we are successful in operating hotels,” comments Al Badr.

“Given our rapid expansion into new markets we identified areas we need to develop further, areas of know-how for targeting business travellers; the need for HR development, the need for resources for scaling and expansion.

“We thought that this would happen better by going along with a partner. That’s something a franchise agreement would offer. We don’t really need all the support you get from management agreements, so we found that franchise agreements give us the right balance between the assistance we need, while still retaining the control and relying on our own strength.”

Franchise agreements with international brands also have the advantage of drawing in international travellers, who may not be familiar with Dur Hospitality’s own Makarim brand.

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Additionally, the company will benefit from attracting the customers under InterContinental Hotel Group’s loyalty scheme, which Al Badr says “is definitely a reason we went into franchise”.

However, Dur Hospitality is also developing its own loyalty scheme under the Makarim brand, and this will be rolled out as part of its relaunch later in the year.

The company’s focus on corporate social responsibility will also be enhanced following the relaunch, and this function will be regrouped under a specific team, to help staff be “more accountable” — a cultural shift Al Badr brings from the IT world.

“I tried to bring that culture with me to the company. I brought with me more empowerment of our individual managers and company leaders.

“They have more empowerment and more leeway in executing their individual strategies, but they are also accountable if they are not able to achieve what they should be achieving.”

Al Badr has also introduced a philosophy of “speed over perfection” to the company, claiming the development field is “extremely slow-paced” in the Kingdom of Saudi Arabia.

“We have looked into ways of speeding that up and this is one of our competitive advantages,” he says.

Much of this however, is having direct and honest conversations within the team, rather than those that are “complementary,” Al Badr explains. “Here, there was a culture that focused more on being on good terms rather than focusing on honesty and directness.

“So I try to keep a balance — keeping up with the culture but leaning more towards honesty, openness and communication. That’s the only way to expose mistakes and learn from them, and get things done.”

Another cultural challenge Al Badr is looking to address is the perception of the hospitality industry to Saudi nationals.

“We need to make sure we change the view of the public about work in the industry to make it more favourable for people to work in hospitality and to open up more opportunities to locals.

“Hospitality as we know it is relatively new to the Saudi culture.

“There is a high turnover of Saudi staff because of the opportunities that are evolving.”

With a crucial aspect of the Makarim brand a focus on customer service, Dur is looking to attract more Saudis into the business, and Al Badr says he “cannot over-emphasise the human capital component”.

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A campaign to recruit, train and retain local associates is currently in incubation and is soon to be launched, however efforts to draw in local talent are often undermined by strict quotas imposed on the hospitality industry by the Ministry of Labour.

“The labour regulations are changing very rapidly and that is causing a stir in the market. Some rules change two or three times a year because the commission is changing, salaries are changing and so on — everyone is suffering.

“We want to rely more on a Saudi workforce and the government also wants this, and they are imposing more and more regulations to facilitate this, but there are challenges that businesses and the government need to resolve together,” he states.

Nitaqat, a programme introduced in 2011, which classifies Saudi companies into four categories based on their percentage of Saudi employees and their total number of employees, is putting pressure on employers — particularly those in certain industries, such as hospitality, for instance.

The higher the percentage of Saudis in a firm, the more international workers they can hire from abroad.

The programme has changed rapidly with regards to the hospitality industry, with the bar being set higher each time, explains Al Badr.

“We feel as an industry that these changes need to be coordinated with us, and we need to set those limits together rather than the Ministry of Labour setting the numbers for us.

“We find it extremely challenging to fulfil, and not just us — our peers in the industry,” he says.
An additional challenge, is that for the market to expand, more foreign visitors need to be allowed into the country, Al Badr asserts.

“Definitely there’s a big component of local travellers, but once visa restrictions ease, we’ll have more MICE visitors. I think the demand is huge there, but it’s regulated by visas. If the government gives out more visas, our hotels will perform better.”

The fall in oil prices over the past few months is also a dark cloud on the horizon for many. However, Al Badr claims it has not impacted the company as of yet.

“It could be an issue if development projects slow down, and if there isn’t the same demand from business travellers.”

Despite the internal challenges with planning and constructing hotels at the right pace, and the external challenges of Saudi recruitment quotas, visas and the fluctuating oil market, Al Badr is working full-steam ahead on Dur Hospitality’s mission, which essentially, is a simple one.

“We want to be the partner of choice in hospitality and real estate development and hotel operations, adapting international standards with a local spirit,” Al Badr concludes.