Kurt Ritter interview: Turnover and takeovers

Hotel CEO on the Arab Spring, takeovers, new markets and clashes with military dictators
Qatar presence Ritter plans to convert the existing 583-room Ramada Plaza Doha to the Radisson Blu brand.
By Shane McGinley
Wed 08 Feb 2012 04:41 PM

Having spent over three decades in the industry, hotel CEO Kurt Ritter is used to tackling the big issues, whether it’s the Arab Spring, takeovers, entering new markets or even clashes with military dictators

“Size matters,” says Kurt Ritter, the ever jovial CEO of Belgian hotelier the Rezidor Group. As we sit in the Royal Radisson Hotel in Dubai ahead of the start of a lavish party to celebrate the opening of his latest property, his words seem even more ironic as the Burj Khalifa — the world’s tallest building — hovers in the horizon over his shoulder.

Having just celebrated 35 years in the hotel business, he is, of course, taking about his career and developing Rezidor into one of the most respected hotel groups in the world. While many people have asked him why he has done the same job for so long, he corrects then that by saying the scale of the company has changed so dramatically since he became CEO of the Brussels-based firm 22 years ago that it is no longer the same job.

“The biggest single difference is size,” he says. “It is the most difficult part of the change.” When Ritter first took over the reins of the group he inherited eighteen properties, while now he is responsible for 319 hotels and the rolling out another 100 in development.

“In the old days if they wanted to paint the kitchen I knew about it and I signed the purchase order for the bucket of paint. You can do that if you have eighteen hotels.”

Looking out over the Dubai skyline, Ritter is one of the few hoteliers in the city who does not believe the sector is oversaturated and he envisions Rezidor opening even more hotels in the emirate.

“I don’t think it has reached saturation point. Dubai started as a holiday destination in the 70s where people thought they were crazy to have a resort in the desert, but people came. Today, with the banking, education and medical, there are more reasons why people come here. If they are creative then the sky’s the limit,” he says.

The back story to the opening to the Royal Radisson Hotel, located just off Dubai’s Sheikh Zayed Road, is quite dramatic and once which Ritter believes will become increasingly common as the Dubai market matures.

The Brussels-based hotel group announced last July it had taken over the management of the 471-room JAL Tower and the 257-room Hotel JAL Fujairah Resort & Spa and both would be rebranded as Radisson properties.

It was never fully disclosed why JAL were relieved of duties by the owners but Ritter says the Dubai market was likely to see the takeovers becoming a bigger factor of life in the Dubai hotel sector in the years to come, especially as the market matures and contracts come up for renewal.

He believes this will mean competition among operators will increase and hotels will change brands a lot quicker, a trend he says is already commonplace in the US market.

“If you look at the States it has become crazy. Every time I go there are new names on the buildings; they change brands like you change shirts.”

High profit expectations among owners are also likely to prompt changes in management, as the city’s rising number of hotels squeezes average room rates.

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“You promise [owners] the blue from the sky and then at the end of the year you blame the market or oversupply or whatever… you failing to reach that level and you are history,” said Ritter. “It has become much more strict and competitive.”

Hotel contracts in the Middle East have typically spanned ten to 20 years, but Ritter says deals are increasingly shorter to allow owners to exit the contract if profits fail to match expectations. “There are also non-performance clauses, which you never had before,” he adds.

As a demonstration of this, Ritter says Rezidor took just two months to sign and take over the two JAL properties. “The owner asked us if we were interested to manage the property. There was no hesitation from our side and it happened very quickly within one-and-a-half to two months, which is very short.”

The maturing of the Dubai hotel market has seen its pipeline of new properties and rooms decrease. While Jones Lang LaSalle reported in January that some 5,800 new rooms are due to come on stream in 2012, compared to 2,500 in 2011, this is due to the fact that many projects expected to open at the end of 2011 were delayed until 2012.Ritter says Rezidor’s next focus in Dubai is to open or take over a resort hotel in the city. “From a strategic point of view if we had the luxury of choosing we would like to have a resort hotel… something on the beachside,” he says.

Moving down the coast to Abu Dhabi, Ritter is less confident and believes the slowdown in construction and the delay of key tourism projects will impact demand in the UAE capital. “Definitely there will be a demand/supply issue with not enough demand and too much supply,” he says bluntly.

Last year, Abu Dhabi, holder of seven percent of the world’s oil reserves, announced it would delay the completion of the Zayed National Museum, the Louvre Abu Dhabi and the Guggenhem Abu Dhabi.

In addition, Aldar Properties, Abu Dhabi’s biggest developer, cut nearly a quarter of its staff and Masdar, a $22bn state-owned renewable energy company, shelved plans for a 100,000 sq m headquarters building and cut nearly ten percent of staff.

Ritter says while his portfolio of hotels on Yas Island are enjoying 80 percent occupancy and saw a 20 percent surge in bookings as a result of the Formula 1 Grand Prix, he thinks it is unlikely he will pursue any more properties in the capital. “We had one in the pipeline which is not ours anymore… but not under these circumstances,” he says.

He also believes the ongoing success of the Dubai market will also cast a shadow over the issues currently facing Abu Dhabi. “Dubai had been first, they have been very clever to diversify the market and I don’t know whether the new cities like Abu Dhabi and Doha can just come and copy and paste... probably not.”

In spite of his reservations about Abu Dhabi, Rezidor’s latest financial report for the first nine months of 2011 showed like-for-like RevPAR, which is the industry standard for revenue earned per available room, was up 17.8 percent in the UAE and the emirates was one of the best performing countries in the MENA region, beaten only by Saudi Arabia with 18.7 percent.

On the whole, revPAR in the MENA region declined 12.8 percent between January and September 2011, with the report attributing this to Arab Spring-related conflicts in many markets such as Egypt, Tunisia and Libya. The figures show revPAR in Egypt was down 38.6 percent and Tunisia slumped 31.9 percent.

Looking at the Libyan conflict, Ritter says the company ran into some conflict with former ruler colonel Muammar Gaddafi when they tried to close their hotel in Tripoli.

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“We had to leave our hotel, not because we wanted but because when the embargo came from the UN… We had a few incidents as when we closed the hotel Gaddafi came in and said ‘no, the hotel has to be open’. So [Gaddafi’s forces] opened the hotel but they didn’t take the Radisson sign down. So journalists went there and they were restricted and mistreated. So it was detrimental to us in many ways,” he says.

However, Ritter also looks on the bright side as there were many journalists who ran out of money who were offered refuge in the Radisson and he is smiling, saying they have now “earned a few loyal journalists.”

With the new temporary government now in place, Ritter is confident the operations in Libya can get back to normal as soon as possible. “It is still a Radisson hotel and we are going to go back in.”

With Egypt he is confident the market will also recover and in Bahrain he says occupancy rates are now back to around 35 percent, compared to reports in spring 2011 which claimed they had fallen to as low as five percent in some areas.

When we first met Ritter back in 2010 he claimed he wanted to open five hotels a year in the Middle East and, despite the Arab Spring and the economic environment he seems to have managed to stick to that. “In 2011 we have opened five hotels… We think it will continue like that.”

One of the new markets Ritter will debut in this year will be Qatar, where he plans to invest $18m taking over the Ramada Plaza Doha and rebranding it as the a Radisson Blu and the group’s first hotel in the Gulf state.

He plans to convert the existing 583-room Ramada Plaza Doha to the Radisson Blu brand in the third quarter of 2012, bringing hotel chain’s total properties under operation or development in the Middle East to 40. With Doha pledging to spend some $88bn on infrastructure and hotels over the next decade as it gears up to hold the world’s most-watched sporting event, Rezidor is aiming to take advantage of this.

“The economic conditions are excellent in Qatar, the country is a rising star. A presence with our core brand Radisson Blu will strengthen our brand profile and image,” he says.

Another brand in Rezidor’s portfolio is Hotel Missoni, a luxury bespoke brand in association with the iconic Italian fashion house. With properties already open in Edinburgh and Kuwait and three more to open in Turkey, Oman and Brazil over the next two years, Ritter also revealed Qatar is also penciled in as a location for Hotel Missoni.

“Our fashionable lifestyle brand Hotel Missoni will be a perfect fit for Qatar. As almost everywhere in the Middle East, people in this country are very receptive towards this kind of new and unique luxury,” he says.

Looking towards 2012 and his 36th year in the industry, Ritter is cautious. “It is always very difficult. I feel a lot of our GMs… If I had to produce a budget I would be sweating.”

Luckily with over 400 hotels now on his plate he no longer has to sign individual purchase orders and can look at the bigger picture and taking his big names rivals like Hilton, Marriott and Sheraton.

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