Seen on ArabianBusiness.com, Dec 13, 2007
By Emma Davey, Editor
Historically, the hotel industry was backed by government entities and
powerful individuals investing in their country's future. These properties
attracted the major international hotel giants with brands such as
InterContinental, Sheraton and Hilton. Fast forward several decades and the
mushrooming of new hotels across the GCC region has presented hotel management
companies with overwhelming choice.
With the increasing investment opportunities, new owners have emerged seeking somewhat different arrangements that have now limited the availability of brands in some geographic markets. So who are they?
• Major real estate developers, particularly in Abu Dhabi, have been able to make multiple hotel deals that gives them the exclusive development rights across the entire Emirate for specific brands; for example Aldar Properties has recently announced strategic agreements with Oberoi and Mövenpick.
• Local investment companies have secured the rights to own and operate under
franchise an international brand across specific markets, for example Istithmaar
with easyhotels and Ishraq with Express by Holiday Inn.
• Joint ventures have emerged which see the owner's name incorporated into the brand across the region, for example Sharaf Protea Hotels - a partnership between UAE based Sharaf Group and South African hotel group Protea Hospitality Corporation. Other major joint ventures include the Emirates Group agreement with Whitbread for the Premier Inn brand of budget hotels.
Without doubt the changing dynamic of owner-operator relationships is driving the availability of hotel brands. In Dubai and Abu Dhabi, the future independent hotel owner is facing an increasingly difficult prospect as he tries to secure a hotel management company for his hotel.
Typically, independent hotel owners have sought comfort in attributes such as global reach and international success, along with personal knowledge and experience of the brand being offered. However as the better-known brands are either tied up in bigger deals or already have the representation they desire in the market, with some wanting to have only one property in the city, the independent hotel owner needs to take a more entrepreneurial stand.
He will not be alone in seeking out hotel management companies not yet represented in the region. This is the route now being taken by major companies looking at joint venture possibilities across multiple regional markets, as well as owners trying to find a suitable hotel brand for important properties aiming to be the lynchpin of major mixed-use developments.
In some instances the going is tough, as the hotel management companies need to be persuaded to divert their corporate strategy to enter a market not on their current expansion plan. The significantly powerful owners, such as Emaar, have taken the market in a new direction with branding specific to the hotel rather than the operator, such as Qamardeen and Al Manzil at Downtown Dubai - both operated by South African company Southern Sun.
Identifying what is important to the independent hotel owner - and understanding how contracts are put together, negotiated and what the potential costs and fee structures are - before setting out to find a potential operator are critical to a successful and smooth outcome. The guidance through the process in terms of understanding what new (or existing) brands can bring to the owner and his project are paramount to making an informed decision that can bind the owner to a hotel management company for the next couple of decades.
Whilst the technical aspects of striking a deal with such a company remain fairly similar across the regional markets, the shift in owner types has not impacted the independent hotel owners in other GCC countries yet, but the resulting efforts to secure management companies certainly will. Where owners have enticed new brands to the rapidly growing hotel markets in Dubai and Abu Dhabi, it provides a wealth of new options for hotel owners in surrounding countries looking for brands with regional experience and plans for a regional network from which they can benefit.
Aside from international brands with origins outside the region, the development schedule has also provided a breeding ground for regionally-founded hotel management companies with global ambitions. In 2004, the market was dominated by the global majors Starwood and InterContinental, with two locally driven brands, Jumeirah and Rotana. With current development schedules, Accor could emerge as the market-dominant hotel management company by 2010, increasing total room stock over four times that available in 2004, but with Jumeirah and Rotana still firmly in the top four.
Hotel management companies emerging by 2010, not represented in 2004, include Banyan Tree, Chelsea Group, Emaar Hospitality, Kempinski, Oberoi, Protea Sharaf, PTI Gulf, Southern Sun, Tiara and TUI.
TRI has assisted and advised on hotel management company selections for numerous hotels on behalf of independent hotel owners and institutional owners across the MENA region.