Successful succession

Studies reveal that almost USD 1 trillion in assets will be transferred to the next generation of family-owned companies over the next decade in the Middle East. These macro figures are reflected in the hospitality industry, following a move by wealthy real estate developers to begin venturing into the segment to diversify their portfolios. In Saudi Arabia, most families have a sibling developing a hotel chain or a restaurant. These include the Al Sueilem, Al Amir, Al Moussa and Abdel Kader families. Al Hokair represents one of the most established of the group, with a network of 20 hotels in the Kingdom, in addition to its hospitality investments abroad. The Al Rajhi family, which comes from the banking industry, has also tapped the hospitality field with Naif Al Rajihi, and is eyeing a move into the restaurant business. Kuwaiti family businesses, such as the Al Nafissi, Al Ghanem, Bou Khamseen, Al Hissawi and Al Saleh families, have all taken the same path, shifting from real estate and trade towards hospitality. Though the hospitality return on investment is usually much lower than other trading activities, it boosts the family’s image and prestige.

Expanding abroad

Challenges and economic instability in the region have driven all Kuwaiti and Saudi hospitality investors to expand their portfolios farther afield, specifically in Europe, including the UK and Germany and, recently, also in Spain. Both GCC countries have traditionally preferred management contracts for hotels, although they also consider franchising for restaurants. The expansion of their own F&B concepts, meanwhile, is no longer considered taboo.

7 steps to effective succession planning

A considerable number of family businesses are in a critical situation due to a lack of a proper succession plan, especially when transitioning to the third generation, which is mainly driven by millennials. Maintaining success requires several key strategic steps to be put in place:

1. Develop a strategic mid-term plan, even if the family business is a long-lasting one.

2. Broaden the decision-making process: measure, monitor and adapt.

3. Strengthen the role of the board. Assign responsibilities to each member which will create a discipline to commit to deadlines and deliverables.

4. Clarify what the retiring generation will do.

5. Start the process as early as possible. Set a timescale to avoid any clashes among family members.

6. Become familiar with the legal and administrative steps.

7. Invest in higher education of the next generation.

Though the hospitality return on investment is usually much lower than other trading activities, it boosts the family’s image and prestige.