Hotelier Middle East spoke to some of the region's leading hotel professionals to find out how their properties performed in 2008 and what industry trends they predict for 2009.
Hotelier Middle East spoke to some of the region's leading hotel professionals to find out how their properties performed in 2008 and what industry trends they predict for 2009.Hoteliers across the Middle East told HME their properties witnessed strong financial performance for the first three quarters of 2008.
This was driven by high occupancies due to the consistently robust growth in corporate and leisure tourists. Key feeder markets continued to provide strong support and there was an increase in guests from emerging markets such as Brazil, China and India.
However, towards the end of the year, most hoteliers conceded to a significant slowdown and growing uncertainty in occupancy figures.
Forward bookings were particularly affected, with many corporate clients choosing to wait until the last minute to capitalise on cut-price room rates.
Hoteliers have flagged tough times ahead in early 2009, but many remain positive thanks to emerging markets and the corporate sector.
According to Fairmont Hotels' regional vice president for the Middle East, Phillip M Barnes, 2008 was "certainly a very interesting year".
"Corporate business was exceptionally solid despite challenging economic times during the latter part of the year," said Barnes.
"Wholesale business in the city [Dubai] remained steady, however, due to the increase in room supply, especially on the beach and with the proliferation of four-star branded hotels, business was spread throughout and all properties felt this effect."
Barnes said transient business, particularly exhibition travel, was quite strong, especially from the GCC and Saudi Arabia market.
However, Fairmont Dubai saw a slight decrease in the wholesale and leisure market in 2008. Overall, the property recorded single digit RevPAR growth.
Emirates Hotels and Resorts senior vice president of resorts and projects Tony Williams said the opening of the company's first city-based hotel in Dubai was a great success and contributed to solid growth for the Emirates Group division for the year.
Al Maha, the group's flagship luxury resort witnessed consistent growth, despite some pressure from increased costs.
"Our hotels operate across many sectors of the market, from the serviced apartment sector to Al Maha's distinct and unique markets at the top end of the travel experience," said Williams.
"Each operation therefore has its own particular support base. In general, however, our guest profile matches fairly closely the Dubai market and trends here saw support from regional (GCC), UK, US and European markets.
In addition to these key markets, Williams said increased business activity from emerging markets, including Brazil and India, also contributed to growth.
Emaar Hospitality Group chief executive Marc Dardenne said key feeder markets - including the UK, GCC and Germany - all performed well and the company also saw growth in emerging markets in the Subcontinent and South East Asia.
"All markets performed on par and stronger than 2007, mainly due to the additional airlift, which has been added to the already robust and dynamic hub of Dubai and the citywide events that Dubai has managed to attract," he said.
Layia Hospitality launched its first hotel brand in 2008, with two hotel openings and 11 properties signed for development.
Layia chief executive Daniel Hajjar said the company was very excited about the future, despite being just one year old.
Starwood vice president and regional director Middle East Guido De Wilde said 2008 was an "exceptional" year for the company, with positive growth both financially and in terms of guest satisfaction.
"Abu Dhabi and Dubai continued their strong performances but Doha, Bahrain, Saudi Arabia, Jordan and Syria also achieved record growth numbers," he said.
"Pakistan was impacted by the political unrest and this had an immediate effect on hotel occupancy and room rate levels."
In the Middle East, Starwood saw RevPAR growth of 17.9% in 2008. The average daily rate (ADR) grew by 15.8% and room revenue increased by 22.8%.
Best Western International saw significant growth based on business from rewards members, with an increase of over 50% in materialised bookings. Vice president for international operations, Asia, Glenn de Souza, said that despite an unmistakable drop in bookings in the final quarter of 2008, business in 2008 was "generally remarkable".
"North America, Europe and Japan contributed steady bookings for the long-haul leisure market and with the growing dynamic economy of China and for most parts of Asia, we saw a noticeable increase in short travels within the region - varying from corporate travellers to holiday tourists," said de Souza.
Hilton Hotels president for Middle East and Africa Jean-Paul Herzog said the group had achieved excellent RevPAR growth of approximately 20% for the year, while Accor reported good activity with occupancy rates of 80% and an increase in ADR of 5%. RevPAR was also up 5% for the group.
Managing director Middle East Christophe Landais said corporate markets from Germany, US, UK and GCC were particularly strong.
Rezidor regional director of sales and marketing Craig Senior said UAE, Oman, Saudi Arabia, Bahrain and Egypt all performed well in 2008, although Kuwait and Lebanon were weaker.
"The Kuwait market showed a decline in business levels compared to 2007," said Senior.
"Lebanon also had a difficult start to the year due to the political climate, but recovered strongly in the last quarter.
Kempinksi Middle East and Africa regional vice president of sales and marketing Roland Obermeier said Kempinski's success in 2008 was a result of balancing key feeder markets such as Central and Eastern Europe with emerging markets such as Brazil.
Marriott International achieved RevPAR growth of 16% over 2007. Marriott area director of sales and marketing Middle East and Africa Jeff Strachan said Dubai, Doha, Egypt and Saudi Arabia were particularly strong markets.
Fairmont opened two hotels in Cairo with a combined key count of 835. The company also signed deals for six more Fairmont hotels in the Middle East, comprising 2000 keys.
Emirates Hotels and Resorts made its first foray into the serviced apartment sector in 2008 with the opening of Green Lakes Serviced Apartments in May.
"The property reflects the high standards of the Emirates Group with 260 apartments in a range of luxury one-, two- and three-bedroom units, all fully serviced daily and offering hotel-service options to both its long and short-stay guests," said senior vice president resorts and projects Tony Williams.
"Situated within the Jumeirah Lakes Towers area at the heart of ‘new' Dubai, Green Lakes overlooks nearby golf courses and has easy, direct access to Dubai's central ‘spine' route of Sheikh Zayed Road."
Williams said the "value element" of serviced apartments was very much in demand by both corporate and leisure travellers, where multiple rooms in a single apartment offer substantial cost savings, without lowering the services and luxury expectations of these travellers.
Emaar Hospitality Group focused on a period of growth and consolidation in 2008, marked by the launch of a new brand; The Address Hotels and Resorts.
The brand's flagship property, The Address, Downtown Burj Dubai opened in 2008. The 63-storey property has 196 rooms and suites designed to appeal to business and leisure travellers.
Emaar also took over management of The Palace - The Old Town, with 242 rooms, including 81 suites overlooking the lake or Old Town Island.
Starwood opened three hotels in 2008 - The Four Points by Sheraton Sheikh Zayed Road, The Westin Dubai Mina Seyahi and Le Meridien Makkah Towers - offering 1344 rooms in total.
The group also signed 10 new hotels during the year, which saw the introduction of four new brands into the Middle East. These new brands included Aloft, Element, St Regis and Luxury Collection.
Accor opened four hotels, with 895 keys, across the region in 2008. These included hotels in Dubai, Riyadh and Kuwait. The company also signed eight new hotels with 1846 keys.
Rezidor opened three hotels with 771 keys in 2008 and signed a further eight hotels with 2634 keys.
Most hoteliers across the region concurred that business started to slow at the end of 2008 as the global economic crisis started to take impact, but nevertheless, most hotel groups look set to forge ahead with expansion plans in the Middle East.
"Realistically speaking, everyone has experienced the effect, with each destination in varying degrees," said Fairmont's Barnes.
"But in this region and as a growth-focused company, Fairmont Hotels and Resorts has concentrated on growing market share by providing exemplary service to our key accounts, acquiring new business and by uncovering new market areas. This strategy has been of tremendous benefit to us."
Dardenne said Emaar was lucky to maintain successful figures despite launching a new brand in the middle of global uncertainty.
"We opened The Address, Downtown Burj Dubai in October when the ripple effects of the global financial downturn were felt beyond western economies," he said.
"However, guest response to the hotel opening has been very positive and we continue to have strong occupancy figures."
Dardenne said Emaar did not expect to see a pronounced effect on the company's existing portfolio.
"Emaar Hospitality Group owns and manages a diversified portfolio of hospitality assets such as hotels, serviced residences, golf clubs, Dubai Polo and Equestrian Club, recreation clubs, the Dubai Marina and associated yacht club and we have not felt that the global financial downturn has had an effect on any of these projects," he said.
"Furthermore we are opening two new hotels next year and expanding our portfolio which will be offering the market a new and exciting product with lots of added tangible benefits at a time when the market needs it most.
However, Daniel Hajjar from Layia was adamant that all hotels in Dubai would be affected by the credit crunch and global downturn.
"Yet, we are still waiting for the concrete steps that the government will take to improve the situation," he said.
"We understand that various committees have been formed to look into the challenge. Depending on when the recommendation will take place and how strong they are, we will be in a better position to see how things will develop.
"At this stage, and probably for the next three months, everyone is in a "wait and see" position. Hopefully, it will not drag too long. In all cases, the next 18 months will be critical.
Hajjar said Layia's current offerings were all four-star properties, which he did not expect to be as affected by the crunch as the higher end properties.
The company's first five-star properties are scheduled to open in 2010, by which time Hajjar said he hoped to see an improvement in the global economy.
Starwood's De Wilde said the biggest effect of the credit crunch was a change in consumer trends.
"Currently we have noticed a change in the booking trends and they keep changing by the day," he said.
"Today the booking pickup is last minute a compared to a 30- to 60-day window at the same time last year."
De Wilde said that what began as a US financial crisis "quickly and increasingly" became a global economic slowdown.
"While the situation changes by the day, our view is that this slowdown will most likely persist through 2009," he said.
He did note, however, that the Middle East market was still showing strength.
Best Western hotels that opened towards the end of the year were definitely affected by the downturn, according to Glenn de Souza. He explained that the market trend to immediately adopt contingency plans in travel expenses and cost-cutting measures in accommodation.
Herzog said Hilton had not yet been impacted by the credit crunch and downturn.
"While it is impossible to insulate ourselves entirely from the realities of the global marketplace, we are in the fortunate position of being on sound financial footing with sufficient flexibility to continue to advance our strategic objectives, invest in our brands and the global development pipeline," he said.
"Hilton has more than 1000 new hotels in various stages of development around the world - we will continue full steam ahead while operating with the appropriate levels of decisiveness and discipline."
Rezidor's Senior pointed out that operating expenses were likely to become very closely monitored in 2009 in order to maintain profits.
Fairmont has three hotel openings planned in the region for 2009, with a total of 1826 keys: the Fairmont Nile City, Egypt; Makkah Royal Towers; Saudi Arabia; and Fairmont Abu Dhabi Creek.
Meanwhile, Emirates Hotels and Resorts has currently committed approximately US $1 billion to hotel projects.
Properties underway include the $69 million Wolgan Valley Resort and Spa in Australia's Blue Mountains, which is expected to open in late 2009. The Wolgan Valley project is being developed along the same principles as Emirates' Al Maha Desert Resort and Spa according to stringent environmental standards.
The Cap Ternay Resort and Spa in the Seychelles is currently in the designing and planning phase and is set to open in late 2010.
The Emirates Group has made a $253 million investment in the Cap Terney property, however, there are no further hotel investments planned for the immediate future, Williams revealed.
Emaar will continue to expand its new brand in 2009 with The Address, Dubai Mall and The Address, Dubai Marina.
In addition, the group will launch the Armani Hotel Dubai as part of a joint venture between Emaar and Giorgio Armani S.p.A signed in 2005 to develop a collection of hotels under the Armani Hotels and Resorts banner.
"An ultra-luxury development proposition, Armani Hotels and Resorts envisages the creation of hotels and resorts in key international cities," said Dardenne.
"Burj Dubai, the world's tallest building is hosting the Armani Hotel Dubai and Armani Residences, one of the first undertakings by the Emaar-Armani partnership to open in 2009. The schedule of openings to follow Dubai will be Milan, London and New York."
Starwood will open two hotels in 2009, with a total of 825 keys. These properties include the W Doha - the group's first W property in the Middle East - and Aloft Abu Dhabi, another first for a brand in the Middle East.
Best Western International currently has four hotels under development in Dubai and Oman with a total of 800 rooms. The company also plans to launch its exclusive spa brand Bhuvana in 2009.
Hilton has a total of six hotels planned to open in 2009 throughout UAE, Egypt, Kuwait and Jordan. The properties will have a total 1976 keys.
Accor has seven hotels in the pipeline for 2009, with a total 1656 keys. The company will also rebrand two existing properties - Suitehotel and Pullman.
Rezidor is planning to open eight hotels in 2009, including Radisson SAS, Park Inn and Missoni projects. The combined keys will total approximately 1900.
The Park Inn (to open in Muscat, Oman and Al Khobar, Saudi Arabia) and Missoni brands will be new to the Rezidor group.
"The Park Inn brand will bring a new fresh, innovative hotel stay creating an affordable experience that's warm and casual," said Rezidor's Senior.
The Missoni brand will open in Kuwait, the newest member to the Rezidor family, stylish, intimate, contemporary, eclectic design combining to offer a truly unique hotel experience with the iconic Italian fashion house of the same name.
Secrets to success
According to Emirates' Tony Williams, there are major changes to be made in the market to ensure success in the future.
"Our biggest aim is to develop a product that is actually in demand by travellers," he explained.
"Dubai should focus on providing diversity in its offering, as there has been most recently a large growth in ‘standardised' room product offerings. While Dubai hotels do meet high standards, they do not always meet the diversity of market demand and the many market niches out there."
Willliams said that if Dubai was to achieve its goal of 15 million visitors by 2015, there must be sufficient latitude and diversity in the overall product offering.
Dardenne said that in the wake of the financial crisis, the key to success in 2009 will be to optimise and rationalise resource use efficiently.
"Hiring and retaining a strong team will be a key element to our growth next year," he said.
"We see associate retention, training and development as key to our continued success."
Best Western's de Souza said the best way to hurdle the challenges of 2009 was to take an optimistic and proactive approach. He said it is important to go "back to the basics, from macro transactions to micro details of everyday tasks".
Herzog said hoteliers needed to be disciplined and remain calm. He said the secret to success in 2009 would be stimulating advance bookings.
In addition to continuing development on the company's prestige brands, Herzog said Hilton would launch upscale mid-market and economy properties in the region, with a focus on three new brands in the Middle East - Doubletree by Hilton, Hilton Garden Inn and Hampton by Hilton.
Rezidor's Senior said maintaining customer loyalty in expanding markets across the region will be a key element to business in 2009.
Dardenne said he was looking to a range of new markets, in addition to furthering Emaar's development in the tried and true MENA, Subcontinent and South Asia regions.
He said new destinations for The Address brand included Lombok in Indonesia, Dead Sea in Jordan, Morocco, Saudi Arabia, Syria, Tunisia, Istanbul, London, Los Angeles and New York.
Layia's Hajjar said the company planned to invest heavily in online marketing in 2009 and expected revenue generated from the web to represent 40% to 50% of the company's total revenue within three years.
He was also optimistic about a new low-cost offering.
"We will be launching a budget brand in mid 2009 as we always believed that there was a need for such products in the market," said Hajjar.
"With the dramatic expansion of the low cost airlines and companies having to tighten their budgets, a first class three-star brand will definitely be successful."
De Souza said the onset of budget airlines has contributed to a rise in leisure travellers opting for short-haul vacations.
"Since 2009 will still have the effect of the current global economic downturn, this will only help bolster the increase in short travels," de Souza said.
He also predicted a rise in corporate travellers from small to medium companies and said the Middle East will be a major focus for the next two years.
Hilton's Herzog offered a blunt but insightful view of 2009. He said the biggest challenge would be "self-fulfilling prophecies of crisis.
Similarly, Marriott's Strachan said "prophets of doom" posed the biggest risk to the industry in 2009.
"It is imperative that we all stay positive and continue to work hard as a tourism industry to drive demand to our countries," said Strachan.
"We cannot rest for a moment on our laurels and we cannot accept negativity and doom mongerers."
However, Williams said he accepted that the slowdown was a reality and that it required a pragmatic approach by hoteliers.
"In the light of the general downturn in the world economy, maintaining margins and controlling costs is going to be key, along with maintaining competitive rates against rate cutting in other destinations," he said.
Layia's Hajjar predicted that the credit crunch would continue to affect everyone in 2009, either physically or psychologically.
"It will definitely put pressure on hotels in terms of rates," he said.
"The airline industry will have the first indication of how 2009 will look. We will need to be kept abreast of these challenges."
Best Western's de Souza told Hotelier that the biggest challenge for 2009 would be filling up rooms without sacrificing house profit.
He said restoring consumer confidence in spending on luxury travel would also be an important task for hoteliers.
Kempinski's Obermeier said that as with previous times of crisis in 2009, "the wheat will be separated from the chaff".
"Uncertainty will be the biggest challenge, this will generate hesitance and the results are cost containment if not cost cuttings, which will have an impact particularly on business travel," said Obermeier.
Accor and Emaar both said the main challenge in 2009 would be human resources - both sourcing and retaining key staff.
Looking ahead, hoteliers were divided as to how deep the global crisis will penetrate the Middle East's hotel industry.
Some viewed the economic downturn as a serious threat, while others remained upbeat, believing that the region will be somewhat insulated from the crisis.
As a result, some hoteliers are clearly charging ahead with expansion plans and new developments, while others are committed to consolidating and working out ways to minimise operating costs.
While uncertainty was the buzzword of choice for most hoteliers approaching the dawn of 2009, many remained cautiously optimistic about the future.
The most common prediction HME found was the belief that the market would remain flat in the first two quarters of 2009, would then show a slow turnaround in Q3 and finally begin to grow in Q4.