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Sun 8 Dec 2013 02:18 PM

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Interview: Marriott's MidEast boss Alex Kyriakidis

Leading hotelier Marriott International is planning to more than triple its presence in the Middle East and Africa over the next seven years. Regional boss Alex Kyriakidis explains how

Interview: Marriott's MidEast boss Alex Kyriakidis
Planning Kyriakidis’ strategy has been to separate the 70 countries he overlooks into three categories: super growth, moderate growth \nand lower growth.

Alex Kyriakidis has some pretty ambitious plans. Marriott International’s man in the region may already be overseeing some 20,000 rooms in the Middle East and Africa, but he’s planning to more than triple those numbers to 70,000 in the next seven years.

Are those plans realistic? Kyriakidis certainly seems to think so. His strategy has been to separate the 70 countries he overlooks into three categories: ‘super growth’, which includes the UAE, Saudi Arabia, Egypt and Nigeria, and which will see the most investment; ‘moderate growth’, where Marriott will be investing through a programme of regular visits and conferences; and ‘lower growth’, where the firm will invest reactively, i.e. when approached by property owners in one of the 55 countries in that bracket.

Last month, Marriott International added an extra dimension to those plans by announcing a plan to buy Protea Hotels, a South African family of three brands that operates or franchises 116 hotels in seven African nations. At one fell swoop, Marriott will jump from being the eighth-largest operator on the continent, in terms of the number of rooms it runs, to the largest.

It will now have 80 hotels in South Africa, a fast-developing market, up from precisely none before the deal was announced. Another 16,000 people have been added to its payroll in sub-Saharan Africa. Kyriakidis sees the deal as a game-changer, especially in light of research that projects Africa’s population will double to 2 billion people by 2050, and the tripling of the continent’s middle class to 1 billion people over the same period.

And, in line with better transport connections and more foreign direct investment from the Gulf into Africa, he’s also making a clear pitch for some of that regional wealth to be allocated to the hospitality sector too.

“There are lots of [Gulf] sovereign wealth funds that want to get into the hotel business in Africa, but until now the question was, is there a trusted name I could work with?” Kyriakidis says. “Well, now we’ll be able to give those investors a real platform.”

Marriott already has experience in dealing with the Abu Dhabi Investment Authority (ADIA), the world’s third-biggest sovereign wealth fund with $627bn of assets under management, according to the SWF Institute. Last year, ADIA bought 42 Marriott hotels controlled by the UK’s Royal Bank of Scotland, as well as purchasing three Edition-branded hotels in London, New York and Miami for $800m.

Kyriakidis is also refusing to rule out the prospect of any further acquisitions, though he won’t specify where.

“The analyst community was very positive on the Protea acquisition as being highly strategic, value generative and exactly the right thing to do at this point in time of Africa’s growth trajectory,” he says. “Does that mean it’s the end and we pack up shop? The short answer is absolutely not. We are very committed to growth and will look at any or all opportunities in the future, whether organic or acquisition.”

But it seems that most of the growth will come organically. Marriott’s plans for the UAE market are extensive; it has 2,700 rooms in the country right now, and will push that up to 5,500 rooms by the end of 2015. By 2020, Kyriakidis thinks he can get that figure to around the 10,000 mark.

Much of that expansion will take place in Dubai, a city that now lies third globally in terms of revenue per available room (RevPAR, a key industry metric) at $185, placing it just behind New York and Paris. Barely a month seems to go past without a new glitzy hotel opening up in the UAE’s commercial capital, but Kyriakidis says he has no concerns about Dubai’s capacity to suck up new supply.

“I look back to my files in 2007 — the year before the global crash — and at that time in Dubai there were 34,000 rooms,” he says. “Today there are 60,000 and another 20,000 in the pipeline. What’s extraordinary is that Dubai has been able to absorb the global crisis and the growth in rooms, and still have 79 percent occupancy in the year to date today.”

The Marriott executive points towards recent investment infrastructure by the government in the travel and tourism industry, especially with regard to new hotels and the full launch of Al Maktoum International, the emirate’s second airport, in October.

“Another key fundamental is the focus on expanding the market beyond business and couple leisure into family,” he adds. “Family is clearly the sector that is being focused on when making these kind of announcements — the theme parks that are being built, the kind of investment that Abu Dhabi is making in culture tourism and so on.”

Marriott has itself benefitted from the government’s investment in the industry via the launch this year of the JW Marriott Marquis Hotel, a twin-towered 1,600 room behemoth in Dubai’s Business Bay that is owned by the Emirates Group. Ranked as the world’s tallest hotel, the property will open its second tower towards the back end of next year. While new hotels normally take a couple of years to reach high occupancy levels, Kyriakidis says the JW Marriott Marquis will “hit market” in its first year. And with 75,000 square feet of meeting space, the executive also points out that it has been a game changer for the city’s meetings, incentives, conferencing and exhibitions (MICE) sector.

“Once you get to MICE meetings of, say, 500 plus, you very quickly run into logistical problems in putting them all in one place, and you could potentially lose that business to people — like the Barcelonas of this world — who can accommodate that headcount,” he says. “So the vision of Emirates to build a hotel of this size, and with 15 leisure outlets, means that Dubai could all of a sudden switch on the MICE market for groups of 500 plus.”

Over in Abu Dhabi, Marriott has been relatively slow to expand in the market, a strategy that has served it well due to the recent influx of big-name brands opening in the UAE capital and driving down prices. The city has an average occupancy rate of 65 percent, according to STR Global, and Kyriakidis says it has almost been a “victim of its own vision of success”.

“In a way, when those hotels came onstream, the demand curve hit the supply, so there was a period when Abu Dhabi was suffering from oversupply,” he says. “And yet today, there are 20,000 rooms, which is about a third of Dubai and their occupancies have started climbing as the curve starts to catch up.

“Our outlook in Abu Dhabi is very positive; we have one hotel open and we’re opening three more over the next 12 months, and there are a number of opportunities in the pipeline coming through.”

With regard to the northern emirates, Kyriakidis says that there is nothing solid in the pipeline, although Marriott has been in discussion with “a number of the emirates that are really looking to develop their tourism industry”. All told, the executive thinks that he can increase the number of rooms Marriott runs in the UAE to “close to 10,000” by 2020, a huge jump on the 2,700 rooms the firm is operating currently.

The other high-growth market for Marriott in the Gulf is Saudi Arabia. The target for the kingdom is even steeper; it’s aiming to have around 10,000 rooms in seven years  time, up from just 1,800 right now. The kingdom is far less developed than the UAE, and Kyriakidis sees plenty of scope for new hotels amongst the billions of dollars of infrastructure that is being built out across the country, particularly in places like Jeddah, Dammam, Riyadh and Al Khobar. He’s also hoping for opportunities in Saudi Arabia’s secondary cities. In Jazan, for example, Marriott has just opened the city’s first branded hotel. Given that Jazan is the location for one of the four new economic cities announced by King Abdullah, and is currently undergoing furious development under the auspices of Saudi Aramco, it seems like an astute bet.

“I will tell you right here and now this hotel [in Jazan] is going to outperform many hotels in major cities in the kingdom, and that’s the kind of opportunity our developers are focusing on,” says Kyriakidis. “We see growth as being two dimensional — there’s lots of room for luxury upscale brands like Ritz-Carlton, but also, with regard to the secondary cities, it’s really all about giving the traveller — both business and family, an affordable trusted brand that they could stay at as they travel round the kingdom.

“So what we’re looking at in the kingdom is the kind of relationship with an investor that is a multi-unit relationship, as opposed to just one hotel. It’s kind of ‘how many can we do together, 10?’ — that’s the kind of development you’ll see in the future.

Another key area of interest for Marriott will be Qatar, where the hotelier already has an extensive portfolio of six properties.  As the emirate builds towards hosting the FIFA World Cup in 2022, there have been concerns about the slow pace of contract awards, as well as human rights issues cited by international and local media. But Kyriakidis says the market is performing well.

“What I’m seeing is that despite the increase in room supply — it’s doubled in size room-wise in the last four years and will double again in the next three years — the occupancies are being sustained,” he says. “But it’s largely business tourism and, thinking about the future, Qatar needs to do more on the leisure tourism side to complement the business tourism piece. Our hotels are doing very well and we’ll be making some very major announcements in the next couple of weeks.”

Can Kyriakidis deliver on his promises? Given that he oversees two of the fastest-developing regions in the world right now, the chances look better than ordinary.

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John Tainsh 4 years ago

Were is Alex Kyriakidis now