By Claire Ferris-Lay
How HRH Prince Bandar Bin Saud Bin Khalid Al Saud is changing the face of hospitality in Saudi.
Can the head of Al Khozama Management Company change the face of hospitality in Saudi Arabia?
HRH Prince Bandar Bin Saud Bin Khalid Al Saud is a busy man. On the table to our left, several of his senior executives are studying the finer details of a new deal and to our right, two of his most senior lawyers are thrashing out the terms of an agreement with the Landmark Group in Saudi.
There are stakes in Saudi Thomson Reuters and Lulu supermarkets to contend with, not to mention his day job of running the multi million-dollar Al Khozama Management Company (AKMC). "I have so many hats. I don't know how I manage to balance all of them. Sometimes I get confused and think ‘where am I?' I try to delegate, otherwise I'd sink," he laughs.
Actually, Prince Bandar, the grandson of Saudi Arabia's late King Faisal, is being modest. In total, he sits on the board of 22 different companies, including the National Tourism Company and the Saudi Aviation Club. He is also the deputy managing director of the King Faisal Foundation, one of the largest philanthropic foundations in the world.
But it's his role at the helm of AKMC that is the most high profile and time consuming, with the company's diverse portfolio including some of Saudi's most iconic hospitality, retail and mixed-use complexes. AKMC owns and operates five five-star hotels across Saudi Arabia, including the Al Faisaliah Hotel, one of only two five-star hotels in Riyadh. He also has grand plans to expand the business, potentially impacting the country's hospitality sector.
Saudi Arabia's tourism sector is expected to increase by an average of 6.5 percent year-on-year to the end of 2014. This year alone an additional 2,000 rooms - nearly half of which will be generated by one Mecca hotel - will come onto the market with another 7,000 by 2013. "Saudi Arabia is really rich when it comes to visiting the historic places, it's beautiful," says Prince Bandar.
AKMC is unlike many other companies. As part of the King Faisal Foundation it ploughs any profits back into the foundation, which in turn re-invests its earnings into the promotion of Islamic culture through the building of mosques and universities. The foundation is probably best known for the annual five prizes it awards to those dedicated to making a positive difference. The prizes, which are awarded for services to Islam, Islamic Studies, Arabic language and literature, science and medicine, are often regarded as the Arab world's Nobel Prize. To date nine of the winners have gone on to win Nobel prizes for the same work that was recognised by the King Faisal International Prize.
Although the foundation owns 85 percent of AKMC, it is run in the same way as any other business. Two years ago the firm was valued at nearly $1bn, a figure Prince Bandar assures CEO Middle East has increased tremendously since then. Several years ago Prince Bandar wanted to take the company public but was forced to delay the IPO due to market conditions. "The market dropped so we decided to hold," he explains. "Hopefully soon [we'll look to IPO], maybe next year or the year after. I think we'll look at selling 30 percent," he muses. "We're not looking for the market to rebound but at least for it to stabilise [before we think about it again]. It's the volatility in the market that bothers me."Prince Bandar joined the King Faisal Foundation (which was established by King Faisal's sons in 1976 and is now run by HRH Prince Muhammad Al Faisal) as a junior member of staff shortly after graduating from university. He spent one month in each department before settling in as director of public relations in 1984. He has been working for the foundation ever since.
Saudi Arabia's tourism sector is a key area in which the oil-rich country is trying to diversify its economy. In 2008, the country's tourism contributed to 6.7 percent of its gross domestic product, and it remains central to a wide and varied economy. "Economically hospitality is very important," explains Prince Bandar. "We're all working together, government, industry, everybody to shape this growth. Saudi Arabia has been trying to diversify away from oil-based economy and it could be a very lucrative area in which to diversify."
AKMC is aligning its growth alongside Saudi's hospitality sector. Over the next two years AKMC will open two new hotels, a boutique hotel in Al Madina Al Munawarra and a 600-room property in the holy city of Madina. This year will also see an additional 106 rooms open in a new wing of the Al Faisaliah Hotel.
The firm commissioned the opening of the Al Faisaliah Hotel - which forms part of a shopping mall complex designed by renowned British architect Sir Norman Foster - back in 2000. Since then the 197-room hotel, together with its sister property Hotel Al Khozama, has dominated Riyadh's skyline. The two hotels' only five-star competition in the last few years has come from the Four Seasons, owned by another member of the Saudi royal family, HRH Prince Alwaleed Bin Talal, which opened in 2006.
All of that, however, is set to change. There are currently nine international hotel brands under construction in the Saudi capital alone. These include Hilton, Marriott, Hyatt and Rocco Forte amongst others. Prince Bandar stresses the need for more hotels in the kingdom. "Saudi needs more hotels across the board," he says. "In the past, there was a cap on the prices so it was not economical for people to invest. At the same time, for some reason, real estate investment in Saudi Arabia had always been in property and land more than developing projects. [That is] until companies like Al Khozama came about and then others discovered this market," he says. "In Riyadh the number of hotels that are being built as we speak is unbelievable."
The majority of these hotels will cater to three very distinct markets; domestic travellers; business tourists (who account for around three quarters of guests to the kingdom); and religious tourism, which accounts for 43 percent of tourism. "It's for everybody; it's religious, it's business. We have a lot of domestic travel in the kingdom. People move within Saudi Arabia and they need places to stay so it really is for Saudis," he explains.
As the economic power of the kingdom continues to grow, increasing its business tourism, so does its leisure industry. In 2008, more than 30 million Saudi tourists took domestic trips in the kingdom, spending an estimated $10bn and staying 199 million nights in the country's hotels.
But it's not just domestic travel that Prince Bandar hopes to attract. To Western eyes the country might seem a foreboding place but it does boast a number of historical attractions such as the relatively unknown Mada'in Saleh, a pre-Islamic settlement that dates back to the first century BC.Although it is virtually impossible to get a visa to Saudi unless you are travelling on business or visiting for religious reasons some cracks are starting to appear. The Saudi government recently began issuing a small number of visas through its Saudi Arabian Airlines' Discover Saudi Arabia programme, which allows tourists to book a tour with an approved travel company.
As the chairman of the board of directors for the National Tourism Company (Syahya), Prince Bandar is witness first hand to the changes that are being introduced. "There is now what we call tourist visa; there never used to be such a thing in Saudi Arabia and now it exists. It's still limited and it's on a trial basis but we are trying to learn first; crawl before you walk," he explains. "The commission for tourism, a new entity that is putting things together, is putting the industry on track and I think very soon you will see a change," he smiles.
I ask the Prince if this seems ambitious to want to attract non-religious tourists; does he anticipate people will be concerned to visit a country that is still relatively unknown in the West? "I hope not. I hope they come. We'll receive them with open arms. Saudi Arabia has been very hospitable to foreigners for years with the Umrah so we're not new to the industry. Hopefully people will see that, and join us and see what we have to offer," he says optimistically.
It's all very well building hotels to accommodate visitors but if the country doesn't have the infrastructure in place to be able to deal with the tourists, the efforts will be in vain. Prince Bandar says Saudi's biggest challenge is infrastructure. "I don't mean infrastructure by roads. I mean hotels, places to stay, transportation. You need to have airplanes and airports going to these places because Saudi Arabia is huge.
"In Madina Salah, for example, there is no airport close enough to it so you need to develop all of this, especially in hotels. Secondly, which is more important, are the workers," he says.
Last year, the Supreme Commission for Tourism and Antiquities (SCTA) announced a plan to create 900,000 new jobs in the industry by 2020, almost doubling the 1.1 million currently employed in hospitality. It is likely that some of these new recruits will be recent graduates from the King Faisal Foundation's two tourism colleges and two training facilities that Prince Bandar has personally helped to establish.
"We're now graduating Saudis who have actually started to work in the industry. We need manpower. We need tour guides and people who are at these facilities. It's not just about opening up Saudi to tourism you have to open up when you are ready."
Prince Bandar's is also hoping to grow AKMC abroad. In 2011, AKMC will open Saudi's first gated residential community, Durrat Arriyadh. Its opening is likely to coincide with Saudi's long-awaited mortgage law which the Prince expects will impact the country's housing sector significantly.
"The mortgage laws will be huge. It's going to open up a huge market in Saudi Arabia," he says."We're going to establish a new company to manage compounds. It will be the first compound management company. We're also going to launch another company that's going to go into the market of residential projects for the middle income market because that is a huge market."
The Prince also has grand plans to expand the firm outside of the kingdom. "We're looking at projects in Lebanon. It will probably be residential and mixed-use but won't include hotels," he reveals.
He later adds that the firm's feasibility study has been completed and that AKMC is in talks with Solidere, the Lebanese firm that was founded by the country's former prime minister Rafik Hariri, to redevelop Beirut's city centre.
"Demand in Lebanon right now is very high. Lebanon wasn't as affected by the downturn; prices are still going up so it's a good market. Beirut is like Manhattan, you can build whatever you want up but in terms of retail space there is only so much of a footprint so the price certainly has to go up," he explains.
AKMC's investment in the residential sector doesn't stop in Lebanon. Dubai, the US and Egypt are also on his radar.
"We definitely plan to expand internationally. I don't know when but Dubai is definitely a destination for us." Doesn't he think Dubai's property sector is saturated? "It is saturated but we're not going to build, we're probably going to acquire. We're looking at what's available but I think it's a little early now. We're going to wait a bit. Egypt is also another destination and we're looking at the US and the UK to acquire," he adds.
Given his track record, it will be well worth the wait.
The business prospects within Saudi hospitality already look fantastic. With such enlightened executives such as Prince Bandar the sector has a healthy outlook for the future. Recruiting and training the right staff to work in all these new hotels will be key, and to show the world how great Arab hspitality can be! Dean Sanders www.service-superstars.blogspot.com
Totally Agree with Sanders. The Supreme Commission for Tourism and Antiquities (SCTA) plan to create 900,000 new jobs in the industry by 2020 is very encouraging, however apart from recruiting and training for the new jobs, this is would be a very good time for SCTA to look at additional training for the 1.1 million currently employed in tourism and hospitality industry and set standards that would compete on International levels. Iâ€™m sure that under the guidance of HRH Prince Bandar, the service industry and the Arab hospitality in KSA will become the finest in the whole world. Letoille