Suppliers Speak Out
Find out what the region’s suppliers really think of your hotel in the first-ever Hotelier Middle East Supplier Survey
The Hotelier Middle East Supplier Survey is the first-ever report into the region’s hotel industry from the hotel suppliers perspective.
Carried out via HotelierMiddleEast.com and by email to a supplier database, the survey targeted companies supplying a vast range of hotel needs – from food and beverage (F&B) to design to technology.
In total, 66 respondents completed the survey during the month of February, 2010.
Just over half (51.4%) of respondents supplied products or services in the F&B, kitchen equipment and restaurant equipment sectors.
Of the rest, 19.6% supplied the recreation, pools and spa sectors; 10% were involved in architecture, design and interior fit-out; and 9.1% supplied the housekeeping department.
Each company was allowed to select up to three sectors and many said they offered a range of products, such as soft furnishings and amenities, lighting and design, or even reservations and laundry.
The majority of the respondents (63.6%) said their business was located in the UAE. There were also respondents with companies based in Germany (four), Lebanon (two), UK (four), US (three), Western Europe (two) and one each in Italy, Spain, France and Turkey, plus one ‘other’ location.
All of the 66 suppliers said they did business with hotels in the Middle East and North Africa region.
As expected, the vast majority (92.4%) did business in the UAE. The most popular countries for doing business after the UAE were Qatar, Oman, Kingdom of Saudi Arabia, Bahrain and Kuwait.
Some suppliers said they had secured business in countries beyond the GCC, such as Jordan (45.5%), Egypt (43.9%) and Lebanon (39.4%).
Emerging markets appeared to be Algeria, Iran, Iraq, Tunisia and Yemen, with between 15% and 22% of respondents saying that they did business in these countries.
And almost two thirds of the sample (63.3%) said that more than 50% of their business came from hotels.
For 12.1% of respondents, 100% of their business was in partnership with the hotel sector.
With the sample analysed, read on to find out what the suppliers had to say about their financial performance, redundancies and recruitment, industry trends, business challenges — and your hotel company.
FINANCIAL PERFORMANCE
In order to assess the impact of the economic downturn on companies’ financial performance, Hotelier asked suppliers to reveal their business’ annual turnover and net profit for both 2008 and 2009 within selected brackets.
More than half of the sample answered the questions regarding turnover (40 respondents) and half (33 respondents) answered the questions regarding profit.
The results were positive; 84.4% of suppliers reported making a profit in 2008 and 87.8% of respondents made a profit in 2009.
The median profit in both years was in the bracket US $1 million to $5 million.
Only one company reported a loss in 2008 and another company reported a loss in 2009.
Three companies broke even in each of 2008 and 2009.
In 2010, more than three quarters of (77.4% of 53) respondents expect annual turnover to exceed their 2009 turnover and the same number expect net profit to go up as well. However, 7.5% predict less net profit in 2010 than in 2009.
INDUSTRY OPINIONS
The Hotelier Middle East Supplier Survey gauged suppliers’ views of hotel operations in the region — and found that the responses were far from positive.
The suppliers were asked to agree or disagree with a variety of statements on the state of the industry and 48 answered this question.
Of these, 75% said they “strongly agreed” or “agreed” that “reduced budgets mean hotels are scrimping on quality”. Only 2.1% “strongly disagreed” with this statement.
And less than half (45.8%) said they “strongly agreed” or “agreed” that “hotels in the Middle East are improving their services”.
Even more challenging, however, is that not only do the suppliers face issues when dealing with hotels, but 90% said they “strongly agreed” or “agreed” with the statement that “suppliers are undercutting each other to get the deals”.
MONEY MATTERS
Putting the pressure on the hotels even more, almost 80% of respondents “strongly agreed” or “agreed” that “it is taking longer than ever to receive payment from hotels for suppliers services”.
For 22.9% of respondents, outstanding debts owed to their company was the biggest challenge facing their business as a result of the economic downturn.
In total, 70.4% of respondents (out of a sample of 34) said they were owned money from hotel companies that have not yet paid for services rendered. The fees varied dramatically but for 8.8% of respondents, it exceeded US $1 million.
For 35.2% of companies, they were owed in excess of $100,000.
So, how confident are the suppliers of being paid this money?
Fortunately, the majority do expect to receive payment.
Three quarters (75.8%) said they believed they would “definitely” get the payment or that they were “very confident” of receiving payment.
Of the remainder, 15.2% said they thought they “might receive payment”, 3% said they were “not very confident of receiving payment”, and 6.1% said they “do not expect to receive payment”.
If they do not receive outstanding payments, 13.9% of 36 respondents said that they faced the risk of having to close their company.
STAFF SIZE
Despite the broad geographical stretch of the 66 supplier companies that responded to the survey, hotel suppliers tend to operate as small to medium-sized businesses, according to the sample.
Almost two thirds (62.1%) of the respondents said there were less than 50 people in their company, with one fifth (19.7%) of businesses having five members of staff or less.
Only six of the 66 respondents reported head counts of 1000-plus.
The survey found that hotel suppliers, just like some hotel operators, had to make redundancies in 2009.
In total, 41.7% of companies made some redundancies in 2009.
A further 12.5% reported a recruitment freeze and 45.8% said they did not have to make any redundancies.
Of the 48 suppliers that responded to the question ‘do you plan to recruit in 2010’ the results were positive, with 77.1% of companies saying they did intend to recruit.
HOTEL PREFERENCES
Just as Hotelier asks general managers which hotel companies they would most and least like to work with in the annual Hotelier Middle East GM Survey, it was only fair for suppliers to have their say on the same topic.
Suppliers were asked to select up to three hotel companies they would least like to work with based on prior experience or reputation, and also asked which companies they would most like to work with. The full results are displayed on these pages.
The companies that suppliers said they would least like to work with were very varied.
The company with the highest number of votes was Nakheel Hotels, with 30.2% of respondents saying they would not like to work with the firm.
Companies also receiving nominations were Banyan Tree Hotels & Resorts, Dusit International, Habtoor Hotels, Jumeirah Group and Starwood Hotels and Resorts.
Reasons cited for not wanting to work with hotel companies varied. For some, it was because they were seen as too difficult to access because of pre-existing supplier relationships.
For others, the suppliers cited “low budgets”, “delayed payments”, “choices made for the wrong reasons or kickbacks to consultants”, “no scale”, “having to chase payments” and an “unprofessional” manner.
On the other hand, the hotel firms that suppliers were the most keen to work with were Aldar Hotels and Hospitality and Jumeirah Group.Also popular were Accor, Hyatt, Marriott, Mövenpick Hotels and Resorts, Rotana, Starwood and The Address Hotels and Resorts.
This reflects a split between large multi-nationals, home-grown companies and very new brands.
Suppliers were attracted to their preferred companies for a variety of reasons. For several, it was simply because these companies had “more projects”, that they had been working with them worldwide, or conversely, that they had not yet worked with them and wanted to!
Others cited “good market standing and reputation”, “payment guarantee”, “no compromise on inferior products to save costs”, and the fact they were “strong new hotel chains with capital that wish to grow” as their reasons for wanting to do business with these companies.
FUTURE OPPORTUNITIES
Although the hotel market in the Middle East has showed signs of diversification recently, as a result in part due to the economic crisis, the majority of suppliers responding to the Hotelier Middle East Supplier Survey identified the luxury market as the hospitality sector which provided the most opportunity for their company to grow.
More than a third of suppliers identified the luxury market; 12.5% identified standalone F&B outlets as a growth area; and 14.6% said the economy market was the sector in which they predicted most growth.
BOOM TIME
Thirty-nine of the respondents to the Hotelier Middle East Supplier Survey answered the question ‘What city in the Middle East do you think we will see the next hotel boom in?’. The most popular responses were Abu Dhabi and Doha/Qatar. Only two respondents said Dubai and one said Beirut.