Cheap re­turns

The Pak Banker - - Editorial - Shane McGin­ley

The Mid­dle East is known for its lux­ury and high end ho­tels. How­ever, HE Sheikh Mubarak Al Ab­dul­lah Al Mubarak Al Sabah, chair­man of Ac­tion Ho­tels in Kuwait, is chal­leng­ing the sta­tus quo by pi­o­neer­ing the mid­scale ho­tel model in the Gulf. Un­til the open­ing of the first Ibis ho­tel at Dubai's World Trade and Con­ven­tion Cen­tre in 2003, bud­get trav­ellers to Dubai ba­si­cally had two choices: take a gam­ble on an un­known ho­tel or stump up and pay above the line for a lux­ury suite.

In re­cent years, the ho­tel land­scape in the Gulf has changed dra­mat­i­cally and a plethora of bud­get hote­liers have en­tered the mar­ket.

The man who claims to have led the mid­scale march to the Mid­dle East and brought about change and choice for the con­sumer is HE Sheikh Mubarak Al Ab­dul­lah Al Mubarak Al Sabah, chair­man of Ac­tion Ho­tels in Kuwait.

"[Bud­get] has been a buzz­word for a few years. We at Ac­tion Ho­tels were one of the first in the re­gion to iden­tify this sec­tor be­fore many other peo­ple. We were es­tab­lished in the ma­jor­ity of the mar­kets in a very short pe­riod of time," Sheikh Mubarak says proudly.

As he stands in the Mad­i­nat Jumeirah ho­tel in Dubai for his photo shoot, the af­ter­noon sun catches the top of the Burj Al Arab ho­tel. While the seven-star lux­ury ho­tel has en­joyed ten years as Dubai's num­ber one iconic land­mark, he points out that the high end mar­ket is not to ev­ery­one's pal­let in the chang­ing global en­vi­ron­ment we now live in.

Ac­cord­ing to Sheikh Mubarak, the econ­omy ho­tel sec­tor led the global hos­pi­tal­ity sec­tor by six per­cent­age points last year. He cites World Tourism Or­gan­i­sa­tion data that the eco­nomic cli­mate drove de­mand for econ­omy ho­tels by as much as six­teen per­cent in 2009.

"Of course, it is a very large growth mar­ket and there is more in­tra-Gulf travel be­cause of the pro­lif­er­a­tion of more air­lines. More travel means cheaper travel and peo­ple want cheap ac­com­mo­da­tion, rel­a­tively speak­ing," he says.

But which comes first, the bud­get air­line or the bud­get ho­tel? Like any chicken and egg sce­nario, it is dif­fi­cult to pry apart the chronol­ogy. Ei­ther way, the Mid­dle East now has both and the in­di­ca­tors are that the mar­ket is still in the early stages and there is still a lot of po­ten­tial growth in both sec­tors.

Euromon­i­tor In­ter­na­tional's 2010 Mid­dle East ho­tel re­port stated that the Mid­dle East and North Africa was one of the best per­form­ing re­gions, reg­is­ter­ing a six per­cent rise in busi­ness travel, com­pared to a global de­cline of seven per­cent.

The re­port said a big fac­tor in the growth of mid­scale ho­tels in the re­gion was the suc­cess­ful in­tro­duc­tion of low cost air­lines, such as fly­dubai and Air Ara­bia. This mar­ket ac­counts for only around six per­cent of the mar­ket and is fore­cast to see strong growth over the next few years. The mid­scale mar­ket will be the ob­vi­ous big win­ner from this, be­lieves Sheikh Mubarak.

"Busi­ness class air travel has ex­pe­ri­enced at least a six per­cent down turn, in the past year. Mean­while, in­tra-re­gional travel is grow­ing, and this ac­counts for more than 70 per­cent of the room oc­cu­pancy in Dubai and Bahrain, for ex­am­ple.

"That means there is def­i­nitely go­ing to be a re­quire­ment for well lo­cated, af­ford­able ho­tels which are catered for the leisure and busi­ness mar­ket," he adds.

It was while he was study­ing in the UK that Sheikh Mubarak had his light bulb moment about the po­ten­tial for growth in the mid­scale mar­ket in the Mid­dle East.

"I have al­ways had a pas­sion for devel­op­ment. When I was do­ing my PhD in Cam­bridge I had some land in Kuwait and I de­cided I wanted to do some­thing dif­fer­ent. In the UK I saw the growth of Ryanair and Easyjet and the bud­get ho­tels and I thought this was an in­ter­est­ing area."

He got in con­tact with Ac­cor, which man­ages the Ibis and Novo­tel brands and In­ter­Con­ti­nen­tal Ho­tels Group (IHG), which man­ages the Hol­i­day Inn sta­ble of brands.

"Our re­gional strat­egy is to ce­ment a lead­ing po­si­tion in the econ­omy ho­tel seg­ment. We are ahead of the race. The Ibis, Hol­i­day Inn and Novo­tel flags sit per­fectly in this lodg­ing gap for busi­ness trav­ellers and tourists who ' travel dif­fer­ently' and want a com­fort­able room and per­son­able proac­tive ser­vice at true value rates."

by Shane McGin­leyThis email ad­dress is be­ing pro­tected from spam bots, you need Javascript en­abled to view it on Thurs­day, 26 Au­gust 2010 zoomzoom The group's first ho­tel open­ing was the Ibis Salmiya in Kuwait in March 2008 and in 2009 the Ibis Am­man in Jor­dan and Ibis Mus­cat Al Khuwayr in Oman fol­lowed. In Septem­ber the Ibis Sharq in Kuwait is due to come on stream and next year the Ibis Seef in Bahrain, Ibis Shar­jah in the UAE, Ibis So­har in Oman will open their doors.

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