Action Hotels chief Alain Debare has heralded the emergence of mid-level hotels in the region as “the area to watch” as he revealed plans for the Kuwaiti company to grow the number of rooms in its portfolio five-fold to 5,000 by 2020.
The hotel developer and operator, a wholly owned subsidiary of private conglomerate Action Group Holding Company, this month posted a $4.4m operating profit for 2013, down 6.4 percent on the previous year, in its maiden public results posting after it listed on the London Stock Exchange in December.
Total revenue in 2013 increased by 5.4 percent to $29.8m, Dubai-based Action Hotels said, while occupancy rates increased by four percent to 78 percent and revenue per available room (RevPAR) grew by 8.9 percent to $81.
Debare said the results were in line with expectations and reflected a “huge gap in the market” for three-star hotels.
“It is the area to watch – the Dubai government identified development potential and recently announced the need for a lot of budget hotel rooms and we’re in contact here with several bodies in Dubai to look at accelerating our growth,” he told Arabian Business.
The company currently operates six hotels comprising a total 1,004 rooms in Kuwait, Oman, Jordan and Australia under the Ibis or Holiday Inn brands.
It has eight hotels in its current pipeline, including in new markets the UAE, Bahrain and Saudi, which when all completed by 2016 will take to 2,500 total room numbers.
Debare said eventually Action’s ultimate goal was to deliver 5,000 rooms by 2020, fuelled by growth in Saudi, including Riyadh, Jeddah and the eastern province, and Dubai.
“It’s driven by the strong economic growth of the region and you’re also seeing the emergence of the middle class younger population,” he said of the strength of the mid-tier hotel sector.
“But, then also when you’re looking at the hotel inventory at the moment there’s 22 percent of hotel rooms in the mid-scale hotel sector and moving forward and looking at the pipeline of projects into 2016 that 22 percent is actually declining to 18 percent as the pipeline is announced in the upper scale and the luxury sector.
“We’re very different in our markets in the sense that in lots of the markets in which we operate we’ve got the only branded three-star hotels.”
Debare said there were still high barriers to entry with operators unable to own hotels in the region.
“Aside from Premier Inn, with their JV with Emirates where they’re actually investing in the hotel, all the rest of the hotel operators are really into branding and managing hotels and they need partners like us, so becoming a listed company makes us a very strategic partner to these operators and makes a nice case,” he said.
Debare said the IPO, which sought to raise £94.5m ($158.81m) at the placing price through the issue of 147.64 million ordinary shares, had boosted “the visibility and the credibility of the company in the region” and created “very interesting opportunities that we’re considering at the moment”.
However, he said it was not eyeing markets further afield, saying it had “plenty to do” in the Middle East and Australia and had no plans for a secondary listing on a local bourse. A second capital raising exercise was a medium-term prospect, he said.
“(We are) really focused on the resource economies and the stable countries of the GCC,” he said. “At the end of the day it goes back to real estate and it’s a local business. It’s business we know well, we’re here, we’re based here in Dubai and this is what we know.”
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