“Here, the GCC markets will be another segment for us and our challenge is to create awareness at grassroots levels.”
Promising accessible rates that still reflect the positioning of Dubai as a high-value destination, Brown says these will reflect the overall experience of service delivery and quality.
“Dubai has to price itself sensibly and we have realigned our thinking in the wake of events last year to offer competitive leisure and corporate packages,” adds Brown.
Managing expectations
It is this realignment of commercial expectations that is key too for developer/investor/operator relations in the brave new world of Dubai hospitality, where ROI has plummeted from dizzy heights to reach more standard global levels.
According to Sami al-Ansari, CEO of Ishraq Gulf which holds franchise rights for Holiday Inn Express, the challenge now is to align operator vs. owner interests following a situation when many owners sustained losses on investments while operators continued to make money.
“I believe a new world order will emerge in hospitality that will lead to operators only making money when owners do, a much more sustainable equation for the industry,” he says.
“However, gone are the days when investors expected to make a three to four year payback and we are seeing a more realistic approach of 10-12% ROI, which is still higher than returns elsewhere.”
Joe Sita’s IFA Hotels & Resorts concurs that the risk premium is now higher and there is a lack of liquidity, but stresses that Dubai remains an emerging market which has a great deal of potential.
“The market has seen a decline in revPAR and investors have to be extremely selective about projects ... these need to have premium locations, strong partners and good sponsors,” says Sita.
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Operators with a track record in the emirate say it is now a question of hand-holding to walk owners through the bad times.
“Everything was driven by real estate in the past with ROI better for hotels in the boom years, but these returns were not market standard and owners have to understand it is a long term business, not a quick buck, and the location needs to make sense and the brand needs to make sense,” says Starwood’s de Wilde.
“In the old days, we were overwhelmed with offers in new areas such as Jebel Ali Airport, Business Bay, Dubailand – these have gone quiet now but it will come back.”
CEO of Hospitality Management Holdings, Michel Noblet, concurs on this upbeat note, and stresses that what is happening is a rebalancing of the destination portfolio.
“It is a logical move for any metropolitan city to sustain the appeal it has by widening the product offering,” he says.
“Here, recession has made the market less complacent, more professional, and hotel investors are now less dependent on the operator as they come in with ideas of what they want, what is working internationally ... and this means they are in it for the long term.”
Hospitality consultant Rmal, which is currently working on bringing to market brands such as Bellagio, Baccarat and MGM Grand at the Dubai Pearl, stresses the need to import appropriate brands to suit market demand.
“The key is to work the inventory effectively and match customer needs with the product and while market conditions have an influence on rate decision, it is up to operators to decide where they draw the line and build their own strategies, rather than tamely follow what the rest of the herd is doing,” says CEO Anthony Liddiard.
Bringing in new ideas is key, according to Michael Scully, MD of Seven Tides as well as First & Foremost Hotels, the latter having recently signed up to develop two new brands in the GCC region.
“First & Foremost will bring in a major apartment operator, as well as a family hotel brand (see page 6) that will help extend Dubai as a destination and Seven Tides also has the rights to use the name of Dukes Hotel in London in order to develop five-star boutique hotels which have character,” says Scully.
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