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Wed 4 Nov 2009 04:00 AM

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Hotels in the Middle East have managed to retain higher occupancy rates than those in the US and Europe during the downturn. The CEO of The Rezidor Hotel Group, Kurt Ritter, tells Claire Ferris-Lay why this region is an important market for the Belgium-based firm.

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Hotels in the Middle East have managed to retain higher occupancy rates than those in the US and Europe during the downturn. The CEO of The Rezidor Hotel Group, Kurt Ritter, tells Claire Ferris-Lay why this region is an important market for the Belgium-based firm.

Kurt Ritter, so his PR people say, is the longest serving CEO in the worldwide hotel industry. The CEO of the Stockholm-listed Rezidor Hotel Group, manager of the Radisson SAS, Hotel Missoni and Park Inn, began his ascent up the corporate ladder following a posting in Kuwait back in 1979.

“I didn’t even know where Kuwait was,” he smiles. “It was an adventure. I thought ‘let’s go for it, anything is better than being up here in the cold,’ so off I went.” At the time Ritter was managing one of the group’s six hotels in Scandinavia. “I always say I went from minus 50 to plus 50,” he laughs.

The move turned out to be a fruitful one. Ritter has now been serving as the hotelier’s CEO for the last 30 years, the Middle East now one of its most important regions amid the downturn. In September, Ritter announced that the group, a former unit of the Swedish airline SAS, had terminated its management contacts with the owners of three hotels in Norway. In contrast, Ritter has opened five hotels in the Middle East this year and has plans to open a further three by the end of the year, increasing its room capacity by 2,271.

“You have to be in the Middle East,” he explains. “Even though people say business has gone down with the crunch, it’s still a very good RevPAR (revenue per available room) rate here compared to any place in Europe or around the globe.”

Rezidor currently operates 380 hotels and 81,000 rooms across the world. In July, Rezidor announced that 84 percent of its new rooms contracted this year would be in Eastern Europe, the Middle East and North Africa. Around 75 percent of its total pipeline is also in these emerging markets and the group currently has 22 hotels operating or under construction in the Middle East.

Reasons for Rezidor’s continued growth in the region are unsurprising. Hotels in the Middle East have fared better than others amid the downturn. In July, Middle East hotels beat the Americas and Asia-Pacific in terms of performance, according to a Deloitte and STR Global study. In Dubai, which during the five-year real estate boom pitched itself as a global tourism hub, RevPAR (the hospitality industry’s benchmark) increased by 0.44 percent from June to July 2009 compared to a fall of 12.23 percent during the same period in 2008. Ritter says RevPAR has dropped an average of 35 percent in Dubai since the crisis hit. “With this 35 percent you still have $160 in RevPAR, which is seen on a worldwide basis as very high.”

Although the group has been forced to reduce its rates by an average of 20 percent across all of its hotels, Ritter sees huge potential for its three-star Radisson SAS brand as more people opt for cheaper accommodation. “It’s just a matter of time [before more people accept midmarket hotels]. It will follow Europe like Europe followed the States,” he says. “The midmarket [industry] started in the States and we in Europe said we wanted something better but if you look now in Europe it’s full of Holiday Inns, Park Inns, Ramadas.”

He adds that this region’s unbranded hotels are likely to feel the pinch as branded hotels ramp up expansion plans and provide an overall better service. “I think there is a big potential here just because when you talk about three star here, it’s always a little bit shabby, it looks dusty and that you can’t do in Europe. Now with these new products coming here, these hotels will have a very tough time to find a reason to be [open].

“[Unbranded] hotels have no chance against ours because we have a name and they don’t so the American or European traveller, when he has the choice between a non-branded hotel and a Radisson, he chooses the Radisson because that’s the devil you know.”

Rezidor, however, doesn’t just specialise in budget hotel chains. In 2006, the group announced a tie-up with the Italian fashion house, Missoni, to manage their chain of hotels. The first Hotel Missoni opened in Edinburgh in June while a second one in Kuwait is expected to open early next year.

Ritter says the decision to open in Kuwait, rather than the region’s other more obvious fashion conscious hotspots was simple; they asked first. “To find the right place [in Milan or Paris] would have taken years and everybody would still be asking ‘when is your Missoni hotel opening’ so I said ‘whenever we think a city can do it, let’s go for it.’

“In Kuwait the people involved are also the people who have the Radisson and I was the first general manager there in 1979 so it was done by a phone call. They said ‘Kurt can we have Missoni’ [and I said] ‘sure.’”

He adds that the partnership between Rezidor and Missoni is one that works better than other hotel and fashion tie-ups. “When you see the other competitors… their growth has been very slow and difficult and that has probably [been for] several reasons… there is not a clear line between the operator and the brand owner,” he says. “It was very clear that I didn’t want me or my people to have a big opinion on the style, you leave that to the designers and they were happy that they could keep that part. It’s a very good working relationship.”

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