AHIC strikes positive note

8th May 2008

The fourth Arabian Hotel Investment Conference (AHIC) ended on a positive note with speakers and delegates unanimous on the strength of the regional hospitality sector, and potential for future growth.Along with India and China, the Middle East was confirmed as one of the global hotspots for the industry while developed markets are stagnating in the wake of the credit crunch and weakening consumer confidence.

Around 1,100 senior industry professionals attended the conference at the Madinat Jumeirah, Dubai, where a line-up of local and international experts repeatedly announced expansion plans, new brand launches, soaring revenues and rates, mega projects and more.


Pointing to the fact that the Middle East population was expected to reach more than 410 million by 2020, former US 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 $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.


Hospitality consultancy, 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,” he said.


His 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 conclusion, conference organisers said AHIC 2008 endorsed the industry’s optimism that dynamic investment in infrastructure, new markets, imaginative new entertainment and leisure projects would support the visitor boom for the foreseeable future.


“Not only did we set records in number of attendees, but we also saw major increase in the number of sponsors and partners,” said Jonathan Worsley.


“We had a diversified group of delegates from the region and the conference programme mirrored in terms of diverse but complementary content and coverage.


“The sessions and ample networking opportunities focused on industry investment. The great ambiance and atmosphere in the whole conference was very dynamic and we certainly hope all our delegates had a very positive experience,” he concluded.





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