"We don’t own, manage or operate any of our hotels,” says the president and CEO of one of the biggest global players in the hospitality industry, Lindsey Ueberroth.
Yet Preferred Hotels & Resorts is one of the most influential players in the hotel business, with partnerships with 650 of the most luxurious properties.
The company allows independent hotel owners and management companies to utilise joint global sales, marketing, distribution, revenue management and loyalty services, reducing individual costs and strengthening efficacy.
“It’s a portfolio of services that all the big chains do, but without making [the independents] put our name on the side of their building,” Ueberroth says, sitting in the palatial surrounds of Palazzo Versace Dubai, part of Preferred Hotels’ Legend collection.
Last year, the company repositioned itself, shifting from a multi-branded business model to one master brand, “transitioning from a house of brands to a branded house”, as Ueberroth says.
The result is five distinct luxury collections — Legend, LVX, Lifestyle, Connect, and Residences.
The business, which generated more than $1bn in revenues for its 650-plus member hotels last year, charges a percentage of every booking, as well as a fixed annual charge.
“I like to put it as more of a pay-for-performance type of model. On average, if you were to compare us to chains, we’re probably somewhere between 3.5 percent to 4 percent of gross rooms revenue. The chains could be upwards of 10 to 12 percent of total revenue. So it’s a very different business model. We’ve got annual fixed fees and then the hotels are paying for transactions that come specifically through our channels,” Ueberroth says.
Attracting new hotels to the portfolio comes from both operators or owners approaching Preferred Hotels or the company targeting properties that fit the brand.
“It depends on the market. In a market like [the GCC], we were doing a lot more outreach initially, but I would say 80 percent of business is hotels coming directly to us, sometimes through existing relationships,” she says.
“We go to a lot of investor conferences, so we meet a lot of hotel developers, owners and operators. I guarantee you we could drive around the city [of Dubai] and say ‘we want that hotel’ and ‘that hotel’. We are specifically looking for existing hotels, but [we] also go to development investor conferences, because we’re also looking for hotels that haven’t come off the ground yet.”
The Middle East — the GCC in particular — has been “exceptional” for Preferred Hotels, according to Ueberroth, who says it has played a “significant role in our company’s overall growth”.
“We brought on a lot of hotels, but in addition to that, hotels in city centre markets in particular really are wonderful for us because they tend to be feeder markets for the resort destinations,” she says. “We brought on a lot of hotels in major markets, which has definitely been great for the company, especially in this region, when we were starting out. Business in the region for the region is one of the most important for Dubai, Qatar, Bahrain and Saudi Arabia. This is pushing lots traction and transactions.”
The company has grown its presence in the GCC from 12 hotels a few years ago to 23 currently, led by Saurabh Rai, executive vice president of Preferred Hotels.
“Saurabh was originally based in Delhi. When we first bought the company, we had one hotel there and he grew it to 33. That was why we relocated [Rai] to the Middle East. He still oversees all South Asia, including India, but from a development standpoint; we’re very strategic.
“We had some existing relationships that helped us launch a couple of new developments, but then we also signed great partnerships with Qatara Hospitality [in Qatar], and a couple of other groups that now, all of a sudden, have a handful of properties in the region, versus [one previously].”
Preferred Hotels has three member properties in Qatar with Qatara Group and Murwab (the management company arm): The Avenue, a Doha city centre property, and two beach resorts, Simaisma and Sealine, which are north and south of the capital, respectively.
“We’re growing with Murwab in Qatar,” she says, with two new properties due to be added in the near future.
Last week saw Preferred Hotels make its first venture into Saudi Arabia, with two boutique properties in Vivienda Granada (49 rooms) and its sister property Vivienda Residences (12 villas), both in Riyadh.
In a city that has 6,657 rooms in 30 hotels under construction, matching the entire kingdom’s current hospitality construction trend, Ueberroth is excited about the prospects of expanding further in Saudi Arabia.
“It’s a market that we definitely want to expand in and we want to be there. It’s a fascinating market, a growing market, and challenging, especially Riyadh, which is starting to have a bit of an oversupply as a destination,” she says.
“We found really strategic partners in Riyadh. It’s going to benefit both ways — business going from Riyadh into our
partner hotels in the region and vice versa, because it’s a corporate destination at the end of the day.
“We want to grow further in Saudi Arabia. We’re looking into Jeddah, Al Khobar and the Eastern Province, as our focus areas.”
The company also has recently signed its first property in Bahrain, The Domain Hotel & Spa in Manama, while in Oman it has two properties in Al Nahda Resort.
“We’re looking at Muscat now. We would like to have a presence there; we are in discussion with some prospect properties in Muscat,” Ueberroth says.
In Kuwait, she says the company is looking to add a lifestyle property to complement its luxury hotel, The Regency.
“It’s ‘the’ property in Kuwait," Ueberroth says, referring to The Regency. "[It's] an historical property and the leading property in destinations when it comes to luxury product. We’re now looking to have a lifestyle product. We’re in discussion and negotiations with particular property [owners]."
There are also discussions over properties in Ras Al Khaimah, and while Fujairah is on the ‘watchlist’, she says Dubai remains the focal point in the UAE.
“[Dubai] is one of the most fascinating hotel markets I’ve ever been to — the fact that there’s 630-something hotels,” Ueberroth says. “It's a hotelier’s dream come true to be able to come to a market like this and see what’s happening.
“This is a city that sets the trends; it’s an incubator for some really unique things that are happening in the hotel industry. We have had hoteliers that came in a few days early [for the company’s global conference] just to go visit and tour hotels. It’s a market that everybody loves to watch.”
She describes the ongoing drop in hotel room rates in Dubai as an adjustment to market demands.
“There’s definitely a rate correction, with business from key, major markets being down. And now you’ve got a lot of supply that’s increasing. That’s where we come in. Instead of focussing on the Russian, Chinese and Saudi Arabian markets, now we’re looking at how we can get business from other key markets and how do we get our fair share of what’s coming into the Dubai market to our hotels,” she says.
A recent report said that Airbnb’s 4,200 listings in Dubai also were hitting hotel rates in the emirate, but Ueberroth says she has not seen any real impact on the properties in Preferred Hotels’ portfolio.
She says airbnb attracts certain types of travellers, who are not her hotels' typical clientele.
“It’s definitely affecting certain markets, but what we find is that... in some cases they’re [using airbnb] because they’re travelling with a large group and they really do want a bigger apartment. In most major cities, we haven’t seen an impact,” she says.
Ueberroth says the number one reason hotel management companies and operators sign up to Preferred Hotels is because it offers a global reach without demanding a specific brand be adopted.
“There are owners who want to have control of their asset. There’s a great sense of pride [amongst those]. They just need a global operator,” she says.
“We have seen hotel owners ‘deflag’. We’ve seen about 40 hotels that have taken a chain down and gone independent [using Preferred Hotels’ services] and had great success and now [we] really see this as an exciting, viable option.”
From the management companies’ perspective, she says there are some who don’t want to establish a brand.
“Their core is ‘we’re a management company but we don’t want to have to go build a global sales infrastructure; we don’t want to have to build a central reservation system’.
“So they come to us and say ‘great, we’re going to partner with you to do all those things so that we can focus on what our core business is’,” she says.
All hotels are full-service and what Ueberroth describes as ‘upper-upscale to ultra-luxury’, so the company insists on a minimum standard. That used to require adhering to 1,600 points of quality assurance, but the number has been halved.
“They are inspected annually; we do unannounced inspections [by] a third party,” Ueberroth says.
An aggregation of the top 20 sites reviewed online by consumers also is used to set a regional benchmark.
“It’s real time, taking all the consumer reviews and benchmarking it against our quality assurance,” she says.
The company also has its own loyalty programme, iPrefer, and while not on the same scale as Starwood Preferred Guest, she says the growth has been encouraging.
“We relaunched the programme two years ago as a true points-based loyalty programme and we’ve just crossed the 2 million member threshold. If you were to compare us to Marriott-Starwood's 85 million members, it’s hard, but the momentum has been really good.
“This hotel [Palazzo Versace] is an example — it started engaging and signed 1,500 members in a very short period of time, so you multiply that across 650 hotels. We’re looking to do double-digit growth year over year, from 2 to 4 million.”
Preferred Hotels is also optimistic about having double-digit growth in its portfolio in the region.
There is a ‘wish-list’ for each destination, Ueberroth says. They are properties that the company believes would add significantly to Preferred Hotels’ overall offering across the five collections.
“It’s big one,” she says, with a laugh, when pushed to reveal details.
“There’s a lot of growth potential here. I think I’d like to believe we could definitely double this in the next year, if we get the right partners. I think it’s doable. We’ve done it before in markets and I think we’ve got a really strong pipeline and some partners than can bring in multiple properties at one time, which is also an advantage.
“We’re very bullish on this market. We’re very excited. When I look at it as a growth market, outside maybe parts of South East Asia, this is probably one of our most bullish markets that we’re looking at.”For all the latest travel news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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