GM SUR­VEY 2018

In the an­nual GM sur­vey, hote­liers in the re­gion alk about the hos­pi­tal­ity mar­ket per­for­mance and what to ex­pect in the­com­ing year

Hotelier Middle East - - CONTENTS - By Shishira Sreeni­vas

The Mid­dle Eastern hos­pi­tal­ity mar­ket has def­i­nitely ex­pe­ri­enced a growth spurt in terms of ho­tel sup­ply, yet has con­tin­ued to bat­tle with the down­ward pres­sure on av­er­age daily rates (ADR) and rev­enue per avail­able room (REVPAR).

In 2018, the UAE alone opened 2,500 keys by Q3 with 98% of the open­ings in Dubai. Saudi Ara­bia, as of Q3, has a sup­ply of 49,760 keys, Egypt, which is ex­pe­ri­enc­ing a pos­i­tive turn­around in tourism, cur­rently has a sup­ply of 78,200 ho­tels keys. Other ma­jor cap­i­tal cities in the re­gion like Kuwait City, Mus­cat, Manama and Am­man now of­fer 23,700 keys com­bined as of Q3.

How­ever, with the chang­ing land­scape of the in­com­ing source mar­kets such as China and In­dia, prop­er­ties have had to con­tend with the grow­ing num­ber of price­sen­si­tive vis­i­tors and have had to con­tinue to face rate com­pres­sion in most mar­kets, ac­cord­ing to Col­liers In­ter­na­tional.

In the an­nual GM Sur­vey 2018, Hote­lier Mid­dle East reached out to gen­eral man­agers work­ing in the re­gion to ask their take on the cur­rent hos­pi­tal­ity sit­u­a­tion. While al­most all par­tic­i­pants agreed on the grow­ing con­cern re­gard­ing sup­ply, they re­main pos­i­tive on the out­comes in the com­ing years. As a mat­ter of fact, 44.74% of the re­spon­dents ex­pe­ri­enced a slightly higher oc­cu­pancy rate in 2018 than in 2017, 7.89% re­ported a sig­nif­i­cantly higher oc­cu­pancy statis­tics while 31.58% notes the same lev­els as last year with the rest ex­pe­ri­enc­ing slightly lower or sig­nif­i­cantly lower.

With room rates, on the other hand, gen­eral man­agers have had mixed ex­pe­ri­ences. 17.95% of the par­tic­i­pants ex­pe­ri­enced sig­nif­i­cantly lower rates com­pared to 2017, 28.21%, while 25.64% ex­pe­ri­enced no change, 23.08% re­ported slightly bet­ter per­for­mance from 2017 while only 5.13 stated sig­nif­i­cantly higher room rates in 2018.

Ac­cord­ing to Col­liers In­ter­na­tional head of ho­tels Christo­pher Lund, to suc­ceed in this com­pet­i­tive mar­ket, gen­eral man­agers have to think out of the box.

“The in­crease in com­pe­ti­tion with the con­tin­u­ous open­ing of new ho­tels is the pri­mary con­cern for GMS in the re­gion. They must en­sure their prop­erty stands out and de­liv­ers high-qual­ity ser­vice to se­cure book­ings and main­tain an ad­e­quate cash flow,” Lund says.

When asked what fac­tors gen­eral man­agers con­sider most im­por­tant for the suc­cess of the ho­tel, 70% of the re­spon­dents said brand­ing of the prop­erty was piv­otal for long-term pos­i­tive out­come. 62.55% stated lo­ca­tion as a ne­ces­sity for suc­cess. Gen­eral man­agers in the sur­vey

also pointed out loy­alty pro­grammes as a fac­tor fol­lowed by value for money for the guests, lux­ury or per­son­alised ser­vices as fo­cus points for ho­tels in the re­gion.

Al Bustan Cen­tre and Res­i­dence chief op­er­at­ing of­fi­cer Moussa El Hayek notes that gen­eral man­agers should also pay at­ten­tion to chang­ing trends in the re­gion: “In the hos­pi­tal­ity in­dus­try, GMS al­ways face a mul­ti­tude of chal­lenges, con­sid­er­ing busi­ness de­mand and strong com­pe­ti­tion as a lot of new ho­tels are be­ing opened from time to time. Cap­i­tal­is­ing on brand­ing alone will not suf­fice but main­tain­ing good cus­tomer ser­vice and up -to-stan­dards qual­ity is more im­por­tant. Trends are re­shap­ing the in­dus­try and so are the pref­er­ences of the clien­tele that’s why con­tin­u­ous de­vel­op­ment of prod­ucts and ser­vices is a must these days.”

Nayla Chowd­hury, gen­eral man­ager at the world’s largest Hamp­ton by Hilton Dubai Air­port, says it’s also im­por­tant for GMS to have a “sound strat­egy in place”. “Dubai is a very dy­namic mar­ket and as GMS the fo­cus is al­ways to en­sure that you max­imise the rev­enue po­ten­tial for your prop­erty. There­fore you need to con­sis­tently keep your eye on the ball and have a sound strat­egy in place to reach your tar­get.”

SOURCE MAR­KET

For ho­tel com­pa­nies and prop­er­ties in the re­gion, vis­i­tors from the GCC still make up the largest chunk of guests at 79.49%, with higher amounts of dis­pens­able money and ac­cess to travel in the Mid­dle East and North Africa re­gion. They are fol­lowed by Euro­pean trav­ellers, who make 76.92% of the ho­tel guests among the ho­tels op­er­ated by the re­spon­dents. Trav­ellers from the wider re­gion, such as Le­banon and Jor­dan, make up 46.15%. Grow­ing in­bound vis­i­tors from the Com­mon­wealth of In­de­pen­dent States (CIS) and Rus­sia ac­counted for 28.21% and as men­tioned ear­lier, vis­i­tors from China and In­dia are grow­ing year-on-year.

The num­ber of Chi­nese tourists trav­el­ling to the GCC is ex­pected to in­crease 81% from 1.6 mil­lion in 2018 to 2.9 mil­lion in 2022, ac­cord­ing to data pub­lished ahead of Ara­bian Travel Mar­ket (ATM) 2019.

The lat­est re­search from Col­liers In­ter­na­tional, in part­ner­ship with ATM 2019, re­veals that the GCC coun­tries cur­rently at­tract just 1% of China’s to­tal out­bound mar­ket. How­ever, pos­i­tive trends are ex­pected over the com­ing years as 400 mil­lion Chi­nese tourists are ex­pected to go abroad in 2030 – up from 154 mil­lion in 2018.

Premier Inn Ibn Bat­tuta Mall gen­eral man­ager John Raf­foul says his ho­tel is work­ing with Dubai Tourism (DTCM) to at­tract and tar­get the emi­rate’s top source mar­kets. “We work hand in hand with DTCM and sup­port their ini­tia­tives.

We fo­cus on what is rel­e­vant to each ho­tel’s busi­ness mo­d­ule and tar­get mar­kets ac­cord­ingly in­clud­ing Dubai’s top source mar­ket - In­dia, China, Saudi Ara­bia, and the Far East. We are also work­ing on at­tract­ing more fam­i­lies and leisure trav­ellers across the globe, as Dubai of­fers an in­cred­i­ble range of leisure at­trac­tions such as Dubai Parks & Re­sorts, IMG World of Ad­ven­ture, Ibn Bat­tuta Mall, Burj Khal­ifa, and many oth­ers which our guests can en­joy, and are in­cor­po­rated into our sales tac­tics,” he ex­plains.

Be­sides the ex­ist­ing source mar­kets in the re­gion, Chowd­hury re­veals she’s tar­get­ing other grow­ing mar­kets, too. “We are try­ing to tar­get the grow­ing num­bers of vis­i­tors from Africa and Latin Amer­ica, in ad­di­tion to all the other mar­kets that are well es­tab­lished in the area.”

CHAL­LENGES

In the sur­vey, when asked what gen­eral man­agers ex­pect in terms of the big­gest hur­dles af­fect­ing ho­tel per­for­mance in the next 12 months, re­spon­dents listed in­creased com­pe­ti­tion, po­lit­i­cal in­sta­bil­ity, ris­ing in­fla­tion, staff re­ten­tion, re­cruit­ment and train­ing, and taxes such as the re­cently im­ple­mented Value Added Tax (VAT) as the top con­cerns. Ris­ing util­ity costs, pos­si­ble ren­o­va­tions, se­cur­ing re­turn on in­vest­ment, and for some re­spon­dents, slow­ing econ­omy and lack of gov­ern­ment sup­port as well as po­lit­i­cal in­sta­bil­ity were ma­jor causes for con­cern.

“Find­ing, re­cruit­ing and re­tain­ing the right tal­ent is one of the chal­lenges we face every day, as well as de­vel­op­ing and grow­ing our tal­ent to en­sure the ul­ti­mate guest sat­is­fac­tion. The sec­ond chal­lenge is man­ag­ing over­all prop­erty ex­penses and rev­enue, and look­ing at how we can max­imise all re­sources for bet­ter, ef­fi­cient and more prof­itable out­comes,” Raf­foul ex­plains.

With pres­sure to show re­turn on in­vest­ment to own­ers and main­tain prof­its, Lund notes that gen­eral man­agers will have to fo­cus on cost sav­ing mea­sures to en­sure healthy fig­ures.

“It’s nat­u­ral for ex­ist­ing ho­tels to see a com­pres­sion in rev­enues over the next year due to new sup­ply, and GMS will there­fore have to be cre­ative with their cost sav­ing mea­sures to en­sure owner re­turns re­main stable while the guest ex­pe­ri­ence is not im­pacted,” he states.

Chowd­hury also notes that “trans­parency” is also key for healthy re­la­tions with own­ers. She says: “I think the most crit­i­cal as­pect is trust. As GM it’s very im­por­tant that we safe­guard the as­set that has been en­trusted to us and de­liver the ex­pected fi­nan­cial tar­gets. It is cru­cial to main­tain trans­parency and make de­ci­sions for the ho­tel that de­liv­ers best per­for­mance.”

LOOK­ING FOR­WARD

Ma­jor ho­tel com­pa­nies like Mar­riott In­ter­na­tional, In­tercon­ti­nen­tal Ho­tel Group and Ac­corho­tels are stead­fastly ex­pand­ing their re­spec­tive port­fo­lios.

Mar­riott has signed for more than 30 prop­er­ties and over 5,000 rooms in the re­gion in the last 12 months with in­tro­duc­tion of new brands like Edi­tion, AC Ho­tels and El­e­ment driv­ing in com­pe­ti­tion with dif­fer­ent ho­tel cat­e­gories in the re­gion.

IHG re­cently launched the first voco ho­tel in the MENA re­gion and will be re-flag­ging Nas­sima Royal Ho­tel and has also re­vealed plans to open sev­eral Hol­i­day Inn Ex­press prop­er­ties across Saudi Ara­bia.

Ac­corho­tels on the other hand, in Q2 2018, ac­quired Swiss-based Mövenpick for US$599 mil­lion and the deal in­te­grated Mövenpick’s 84 op­er­at­ing ho­tels into Ac­cor’s ex­ist­ing global port­fo­lio of more than 4,500 ho­tels.

As ev­i­denced by the statis­tics, the com­pe­ti­tion isn’t slow­ing down by any means. With big brands bring­ing in a va­ri­ety of op­tions for the in­bound trav­ellers. Lund ad­vises that gen­eral man­ager should make vis­i­bil­ity and rel­e­vance a pri­or­ity to en­sure con­tin­ued com­mer­cial suc­cess.

“Net profit is the most im­por­tant el­e­ment dur­ing a highly com­pet­i­tive mar­ket. As a re­sult, GMS will have to en­sure the con­tin­u­ous flow of rev­enues by main­tain­ing ad­e­quately staffed sales and mar­ket­ing de­part­ments to en­sure ho­tels main­tain their pres­ence and rel­e­vance to their con­sumers,” Lund ex­plains.

While Raf­foul ac­knowl­edges that key in­di­ca­tors are on a de­cline across the board in the re­gion, he ex­presses hope for a pos­i­tive turn out in Q4 2019 in the lead up to Expo 2020 in Dubai.

Raf­foul says dig­i­tal pres­ence is equally im­por­tant for prop­er­ties to drive sales and keep up chang­ing de­mo­graph­ics and mar­ket trends. Hayek also brings to at­ten­tion that build­ing a solid dig­i­tal pres­ence helps cope with de­mands as the “ma­jor­ity of busi­nesses are com­ing from on­line book­ings and reser­va­tions as such op­por­tu­ni­ties for ho­tel rev­enues are boosted.”

Ad­ding to Hayek’s point, Raf­fould ex­plains: “Over the last decade, we have seen a dras­tic con­sumer be­hav­iour change shift­ing from lap­top users to mo­biles users when mak­ing a ho­tel reser­va­tion. In ad­di­tion, through this dig­i­tal era, our guests cre­ate mem­o­ries and share feed­back in­stantly, al­low­ing faster and bet­ter en­gage­ment with other users, which im­pacts de­ci­sion mak­ing. We are also able to show­case our prod­ucts, team mem­bers, guests and what makes us dif­fer­ent with the help of im­proved dig­i­tal pres­ence.”

Sur­vey ques­tion: What fac­tors are most im­por­tant to your ho­tel?

Sur­vey ques­tion: How has your prop­erty been af­fected by the value added tax (VAT)?

Gen­der of the par­tic­i­pants in the sur­vey.

Sur­vey ques­tion: Which of the fac­tors is pos­ing a chal­lenge in the re­gion?

Nayla Chowd­hury, gen­eral man­ager, Hamp­ton by Hilton Dubai Air­port

Christo­pher Lund, head of ho­tels, Col­liers In­ter­na­tional MENA

John Raf­foul, gen­eral man­ager, Premier Inn Ibn Bat­tuta Mall

Moussa El Hayek, chief op­er­at­ing of­fi­cer, Al Bustan Cen­tre and Res­i­dence

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