Brand Update: On the double with Carlson Rezidor

Following a busy 2016, this year is set to be equally packed for the Carlson Rezidor Hotel Group across the Middle East. The group is set to open 17 hotels this year across the region, bringing to fruition signings announced over the last few years. The openings are concentrated across the UAE and Saudi Arabia, markets which The Rezidor Hotel Group’s vice president business development MEA, Elie Milky, and senior director business development MEA, Ramsay Rankoussi assert are high growth areas.

The hotel openings in the UAE will see Carlson Rezidor add almost 1,000 rooms to its operating portfolio, bringing it to a total of 13 hotels and 3,000 rooms in operation by the end of 2017. This includes: the Radisson Blu Hotel, Dubai Waterfront; the Park Inn by Radisson Hotel, Motor City; the Radisson Blu Residence, Silicon Oasis; and, Radisson Blu Hotel, Ajman. And then the Radisson Blu Hotel, Dubai Canal View is scheduled to open in Q1 of 2018.

In Saudi Arabia, the operator has 30 hotels and over 6,000 rooms in operation and in development, with this year seeing the company’s first hotel opening in Makkah, with Park Inn by Radisson Hotel, Makkah Al Naseem. Added to this, a total of six openings are scheduled for the Radisson Blu brand, including the Radisson Blu Residence, Dhahran and five openings for the Park Inn by Radisson brand. The Group will also introduce the Park Inn by Radisson brand to Jeddah later this year.

Rankoussi agrees with these figures and says: “We cannot ignore the fact that those two countries have been the leading growth engine for us, and for the region, in terms of hospitality.” He attributes the UAE’s growth to the looming Expo 2020 and Dubai Tourism’s Vision 2020, and KSA’s to the government’s drive to diversify the economy. With the latter, he reveals that while there was previously a growth in secondary cities, the company is now seeing a pickup in capital cities like Riyadh and Jeddah, along with the Holy Cities.

Milky adds: “The drop in oil prices has accelerated the Kingdom’s vision to diversify — which has always been there —but in the last couple of years they have moved faster and that’s why you’ve got all these industrial cities, economic cities and financial districts, which we are entering with several hotels under development and several hotels to design.”

He adds that while corporate demand in Saudi Arabia has generally always been impacted by turmoil — financial or economic or security-related — it’s domestic leisure demand and religious tourism that are strong and more resilient to fluctuations in the economy.

On the African continent, it was announced towards the end of last year that by the end of 2020, the hotel group will achieve its target of more than 23,000 rooms open or under development. Egypt, for example, is a busy country, and the group will see the opening of Radisson Blu Hotel, Cairo Nasr City, a 298-room property, in Q4 2017. Rankoussi notes: “Where we see an acceleration is Egypt. That has been purely related to the cycle of events — but the confidence remains because it was probably one of the strongest economies in the region, and has the strongest potential. We see Egypt picking up from an investment perspective and the sentiment remains positive.” Milky agrees and adds: “The security situation in Egypt has improved; with Egypt you’re talking about a major market that is bound to rebound sooner or later.”

Other developments in Africa include the signing of the first Quorvus Collection to be built in Lagos, Nigeria, expected to open in 2019, along with five Park Inn by Radisson hotels in Angola, and expansion with Radisson Blu into Zimbabwe and Cape Verde. Milky comments: “With Africa, we have got the largest pipeline by far because of our early entry into this emerging market, so we are leading the market by far.”

Rankoussi comments that the areas of growth are correlated to government activity. “If you look at the UAE, there’s been a lot of talk about initiatives in relation to visas. So the Chinese market was one that opened last year with visa on arrival. Saudi Arabia is doing the same in terms of leisure demand and domestic travel. Oman is building its infrastructure but you need to look at it from the key elements that you require for infrastructure such as the Muscat airport, which is not ready yet. Oman has the largest coastline in the GCC so the leisure potential is there, but it’s linked to the government initiative and infrastructure in place, which will probably take another 24 months to come.”

Both also mention Lebanon as being in recovery mode. Milky notes: “The political situation in Lebanon is improving and the investor sentiment is coming back. If we get to do any more hotels in Beirut, it will be one or two more.”

From an investment perspective, the duo say that the demand for mid-scale hotel accommodation is increasing, with investors seeing the attractiveness of the model, including serviced apartments ranging from mid-scale to upper upscale. Milky says: “Lifestyle-select demand is picking up and that’s why we have signed our first two Radisson Reds in the region, in Dubai and in Jeddah.” He adds that the operator could potentially see more than one Radisson Red in Dubai, with cities like Abu Dhabi and Beirut as potential entry points for the new brand, while Rankoussi comments that even Riyadh and Doha would be of interest for the lifestyle-select concept.

Rankoussi adds that Qatar will probably see the “highest acceleration in mid-scale development” as the country comes closer to 2022.

Furthermore, the company’s Park Inn by Radisson brand is the operator’s highest growth brand. Rankoussi continues: “If we look at the active pipeline, at least 50% is translated through Park Inn by Radisson, although existing operation is probably 15%.”

Rankoussi says that mid-scale options have been “justified from an investment perspective” as it is financially more efficient. He adds: “There was a gap in the market where there was real demand for that kind of accommodation at that price.”

Milky says there’s been a fundamental shift in the thinking of investors in this region. He explains: “Traditionally, investors focused on the luxury segment regardless of whether it was the feasible option or not. Today more and more investors are telling us that they need to make money. That’s why we launched Radisson Red — we didn’t launch a luxury lifestyle product, we launched an efficient lifestyle select product in the four-star segment. With Park Inn by Radisson, we made the mid-scale product more efficient by answering to the needs of the investor — by delivering higher returns on investment.

“The point here is, we lead the investor to value-engineer the investment that she or he is doing. For instance if a developer wants five or 10 food & beverage outlets, the advice is that maybe they should stick to three or four outlets. That would reduce their risk and their development costs, and that’s just an example of how we do it. It’s all location-related as well. If a location deserves an upper-upscale product like Radisson Blu, we will encourage the investor to go for Radisson Blu and then validate it by a third-party study.”

Rankoussi jumps in and adds: “That’s one side of the equation in what makes an owner choose an operator — the expertise and know-how in delivering a project and building it, and making it financially viable. But what we truly believe in at Rezidor is creating a relationship of comfort and trust.”

He says normally the hotel group signs up for long-term relationships with owners for approximately 20-30 years.

Milky notes: “We have been in the region for almost 40 years now with Radisson Blu Kuwait, and with most of our owners, we’ve got more than one property. This is where we have a track record.” And with this track record, the aim is to have 100 hotels and 20,000 rooms in operation by 2020 across Middle East and Turkey. Rankoussi says: “That [number] is almost existing today because we already have 80 hotels and 20,000 rooms in operation and under development. We have approximately 8,000 rooms in operation and approximately 12,000 rooms under construction, so the translation of this objective is the maturing of our openings.”

He continues: “It’s in line with the philosophy and the DNA of the group; we’ve always been focusing on emerging markets. Rezidor has the most diversified presence in terms of the amount of countries that we are present in and do business in, especially in this region. We are taking the advantage of first-entry mover in certain countries, and we see the potential in emerging markets. And that’s why we see Middle East and Africa as a key growth journey for us; we took the same journey 10 years ago when we entered CIS and Russia and today we are the largest operator there.”

Rankoussi re-asserts that 2017 is going to be a stellar year for the group. He expands: “This is a critical year that determines how we will create an impact in this region. We are almost doubling our portfolio over the next 18 months, with openings this year and the next.

“In terms of development activity, we are concentrating on what is missing, and on the UAE and Saudi Arabia; that’s not going to change. The rest is opportunistic: where we can find the relevance of bringing a hotel in this current environment, especially as the trading environment has not always been the most positive — so it’s also a matter of timing.”

Milky adds: “We are looking forward to the opening of many flagship properties, be it the Radisson Blu Hotel & serviced apartments in Riyadh’s Diplomatic Quarter, Park Inn by Radisson Dubai Motor City, Radisson Blu Waterfront, and more.”

Moving forward, he would like to see a mid-scale Park Inn by Radisson in Doha and a Radisson Blu Beach resort in Dubai, and establish a presence in Amman, Jordan, which is one of the capital cities where the group does not have a hotel. Milky concludes: “This year is an opportunity, not only to double within 18-24 months, but also improve our product offering and increase our brand awareness in the GCC and the Middle East. We’re focusing on what’s missing — we are being more selective and looking at where we need to be.”