Watch Video Reports From Recent
Arabian Investment Conference

-- Hotels, 5/23/2008 10:30:00 AM

The Arabian Hotel Investment Conference (AHIC) in Dubai has grown from about 400 attendees when it launched four years ago to more than 1,100 in early May 2008. This feature will serve as a wrapup of the conference and link you to an exciting video production of the conference created by ITN Consulting, the corporate arm of ITN News, the UK's largest commercial news maker.

The conference is held at the Medinat Jumeirah, a beautiful hotel, resort and conference center on the beach and shouting distance from the iconic Burj Al Arab. This year’s conference was outstanding—more so for the collection of its participants, as is the case with most hotel investment conferences.

The Dubai miracle is going strong, willed by the region’s leadership and marketed as professionally as I have ever seen anything marketed. The renderings, videos of what is to come and the simple inertia of Gulf development are brilliant. Whether it will grow too fast or whether development exceeds demand are questions starting to be asked a bit more often.

Certainly, labor issues are enormous and it is good to see the leadership start to engage nationals about a career in hospitality. There is going to be incredible competition for talent from eastern Europe, the Middle East, India, China and the rest of Asia Pacific. Those who best recruit, train and retain will certainly have a leg up in the long term.

One of the most interesting presentations at the Arabian Hotel Investment Conference was all about Saudi Arabia. The country is seriously devoted to reorganizing and growing its travel and tourism sector and you will start to hear more about the Kingdom and projects such as its Red Sea master plan more and more. The leadership calls it a “reawakening of the culture” as opposed to the “opening up” of the Kingdom.  Focus will be on the music, color and food of the country.

At least seven cities are being built from scratch, airports are being upgraded and expanded, 15 signature events are under development, new tour operators are being licensed, and much of the demand will be generated within the region. An airport city is being built in Jeddah with Riyadh next in line.

Pointing to the fact that the Middle East population was expected to reach more than 410 million by 2020, former U.S. ambassador and chairman of WPP, Philip Lader, said the region was likely to continue to attract more capital as investors sought higher yields.

Reams of statistics were presented to support the bullish view of growth potential: Executive Chairman for the Jumeirah group Gerald Lawless said that recent MasterCard research indicated around US$3.63 trillion was being invested in travel-related projects in the next 12 years. “Around 170 million arrivals are expected by 2020, and some 830 new hotels are under development to give an additional 750,000 rooms across the region,” he said.

HVS Managing Director Russell Kett supported these numbers saying more than 90,000 rooms were under development in Dubai alone – along with an expected 60,000 in the Bawadi project – while at least 10,000 were planned for Saudi Arabia and also Oman, another 11,000 in Qatar, some 7,000 in Jordanian hotel projects, 13,000 at sites on Egypt’s coasts and capital city, plus 6,000 in Bahrain and 3,000 in Kuwait. “Across the region, there has been an average 70 per cent occupancy while revenue per available room (RevPAR) has risen from $96 to $111, a rise of nearly 20 per cent in 2007 – and only Beirut and Kuwait have seen a drop here,” Kett said.

Kett’s optimistic scenario was supported by global CEO of Jones Lang LaSalle Hotels, Arthur de Haast, who emphasised that new supply already coming in to the market had not impacted on hotel performance. “RevPAR and average room rates are up, which is encouraging from a supply perspective,” he said.  “Cities such as Manama, Muscat and Riyadh are witnessing strong demand.”

Urging caution in the medium-term, de Haast pointed out that all markets did experience periods where supply and demand were out of sync: “With the supply pipeline building to reach a crescendo in 2009/2010, there may be a correction (in rates) if there is a coincident weakening on the consumer side,” he said.

Echoing this, CEO of Bawadi, Arif Mubarak, said return on investment had been very high in the region, and there would be a drop as more hotels opened and costs escalated: “Profitability has been driven by low labour costs and as these rise, it will affect ROI – but hotel development will still be profitable and new projects feasible.”

Meanwhile, as developers both regional and international continue to announce major expansion plans, figures from Global Futures and Foresights showed that 1.5 million staff would be required for the hospitality sector and the defining issue for operators in the Middle East will remain human capital, said speakers from all sides of the industry.

Chief operating officer for Accor and CEO of Sofitel, Yann Calliere, typically revealed that the group aimed to double its presence in the region to 150 hotels and become the leader in the economy and midscale range. “We feel this market has become mature in no time – it has real growth potential and we can expand our 10 brands around the Middle East.”

Accor is working with the government of Saudi Arabia to set up one of its training schools to address its needs for staff, enabling the group to give career training to nationals – a route endorsed by Jumeirah which is keen to employ more local labour both to address unemployment and to provide an authentic guest experience.

“As hotels become more and more similar, what will make the difference tomorrow will be the staff,” said Calliere.  “We need an a la carte way to manage people and have to invest in ‘going local’ – already there are 15 Accor academies worldwide.”

For Jumeirah, Lawless said it was in the best interests of hotel operators to develop vocational institutions and training facilities for all levels of staff in hospitality, and indicated the group was looking at also establishing satellite institutes in source labour markets.

The two industry leaders echoed the feeling of the conference regarding sustainability and green issues too. “There has been a lot of talk but not much action,” said Calliere, reporting that Accor was now taking measures to reduce water consumption, increase use of solar power and Plant the Planet, by reducing laundry costs and spending 50 per cent of this savings in planting trees.

“We all have to make sure we understand the implications of how we manage our environment – at Jumeirah we have employed consultants to help us measure our carbon footprint, as this is something the guests want to know about,” Lawless said.

But, while challenges were acknowledged, optimism remained the order of the day at AHIC, with operators pointing to vast untapped markets to provide the client base for the hundreds of new hotels and tourism attractions.

Roya International COO Gerhard Hardick said the slowdown in the US economy was likely to have minimal impact given the comparatively low rate of investment and visitors from that arena. “We have a unique location in Dubai considering the number of feeder markets – the Indian sub-continent, China, plus this part of the world itself,” he said.  “Our domestic market will soon number 400 million which is the equivalent size of Europe.”

In between interviews and off the record discussion, I did pick up a few other tidbits of news from the conference I can share:

• Virgin Hotels aspires to move “big time” into the hotel business with the goal of 100 hotels globally within five years. It likes major UK markets, not surprisingly, as well as Euro capitals and Australia.

• MGM Mirage Hospitality will launch a ultra-luxe brand called Emblem, as well as another brand called MX.

• Emaar Hotels & Resorts talked about its new lifestyle brand called The Address, “where life happens.” They want to take it global with 15 hotels initially and 100 in 10 to 15 years. Mikel Abrahim, director of sales, calls it where “cool meets warmth.” Hotels will have 200 to 250 rooms plus an additional 200 residences. They are starting in Dubai but have their eyes on the UK and Germany next, as well as Shanghai, Egypt, Indonesia, Morocco, Istanbul, Los Angeles and New York City.