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Tue 6 May 2008 04:00 AM

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Islamic-compliant investing

Almulla Hospitality chairman Abdulla Mohamed Almulla speaks about his plans to unveil an exciting portfolio of Islamic-compliant hotel brands at the Arabian Hotel Investment Conference.

Almulla Hospitality chairman Abdulla Mohamed Almulla speaks about his plans to unveil an exciting portfolio of Islamic-compliant hotel brands at the Arabian Hotel Investment Conference.

What is the plan for the Islamic compliant hotels?

Looking at the whole region, we have a tremendous boom in tourism infrastructure in the region - it is almost a trillion dollars of investment. That will cover around 900 hotels, so the region is going to undergo huge developments in the next 10 to 15 years.

You cannot take one brand to every location. there is no such thing as a ‘fit-all’ brand; we have a portfolio of brands for that reason.

These hotels will offer between 60 and 6000 rooms. They come in every size, in every style, and with every service range, so the matrix of hotel room offerings [is extensive]. This is a driving force for the new brands. Existing international brands have been - and will be - saturated.

What sort of people are going to be catered to with each of the brands?

In our industry there have been two types of guests, the short stay and the long stay, and we are seeing more and more of the long-term stay guests coming in, and more and more people with limited budgets.

We have to provide hotels for a limited budget with value for money. For that we are offering Wings Hotels. Under that brand we can cater to different segments; we have Wings Hotels, Wings Express, or a Wings Plaza hotel.

We are well represented by sub-brands in that area, which is what really divides us and sets us apart from other Islamic hotels.

We are different from them in the amount of brands we hold. Most of them only have single-brand entry into the market.

We also have our luxury brand, which is Cliftonwood, and our deluxe brand, which is Adham.

Cliftonwood can be branded in the super-deluxe category. People staying in this hotel are not concerned so much about the price, but they do care about the service. They could spend US $1000, $2000, or $3000 per night.

Adham is a deluxe property, that operates for the international executive traveller where he can enjoy the facilities of the hotel. It is targeted to that segment, and our room product in that segment will be no less than 40m².

How is the portfolio of properties going to be structured?

This [number of brands] gives me as an operator the flexibility to position each brand in the proper location, according to the guest profile for that location. You cannot take one brand to every location. There is no such thing as a ‘fit-all' brand; we have a portfolio of brands for that reason.

We are riding the wave of development. For example, we have our ‘service-on-demand' model, which is Cliftonwood. This is a very expensive product to build and maintain. Even with known brands in this category, you can't find them everywhere - they are unique.

What stage is the company at? Have you already signed properties, or are there any just about to open?

We launched our company last October, so we are just four or five months old. We are in negotiations with new properties right now.

We have ensured our strategic growth will be through equity funds. Right now we are working with these funds, and we hope to be able to make an announcement during the Arabian Hotel Investment Conference.

That will give us the opportunity to grow faster, because at this stage [of the company's development] we need to buy existing properties - developing properties could take anything from two to three and a half years.

We are looking at a nice property down at the Dubai Marina, where we are looking for a couple of investors to come in.

Where are you seeking equity?

One of our points of differentiation is that we have multiple brands. Another [point of differentiation] is that we have a Shari'ah compliant board, which regulates our offering, our services and our financial behaviour. This board allows us greater connectivity with Islamic financial institutions.

We are going to do ‘Islamic hotels', whereas other companies say they will do an ‘Islamisation' of their hotels. There are a lot of high net-worth individuals who want to be sure that the money they have invested is not Haram [unlawful under Islam] and is ethical under Islam.

We are a big lure for those investors.

There are two driving forces for Almulla Hospitality. The first is the demand is the demand for rooms, which is driven from the Far East right to the Middle East.

After the launch of my company I got a call from NBC Arabic. I was expecting them to ask about the hotel rooms and perhaps the restaurants, but they presented me as a new Islamic product - I was shocked that the investment community looked at my product as an investment product they could invest into.

The institutions want to diversify - they have offices and residential developments and they need something new.

The hotels, which have a long-term potential with tourism growing all the time, will have a good return.

There are 900 hotels coming up - nobody would put their money in without expecting to get it back.

Are you seeking further investors?

Investors are after money. I am looking for guests. My guests are more important than investors, because if I have guests who stay in my hotel then they will produce the money and the return on investment.

The key driver is to design a product and a service that will attract the highest return for each brand category. The basic philosophy that I have is that it is expensive to buy a guest from all the sales and marketing activity.

It is much cheaper to have a guest return again and again. My strategy is to have the highest percentage of return guests coming to my property.

Some people like to have the highest rates, but they have spend so much money to achieve that, that in the end it is not worth it.

What sort of markets are you looking at in the Middle East?

The Middle East is both inbound and outbound, particularly for those people in the UAE and Saudi Arabia.

There are 47 million tourists in the MENA region, which is growing 5%. The GCC will be our key countries, but the span of operations stretches from Hong Kong to London.

So when we are talking about our target markets we have three main sections; southeast Asia, the subcontinent, and the Middle East. These markets all have one destination, and that is Europe. Once we have developed these three markets, then we will try to develop Europe.

What timeframe are you looking at to develop the company's portfolio?

I am looking at a seven year period. I have set a target of 150 properties amongst all the brands, and for this year specifically I want to achieve a maximum of 20% either by contract or actual properties.

You have to have a target, and without that you will not achieve anything - demand creates supply.

What can people expect from an Islamic-compliant hotel?

Some people ask why I am doing Islamic hotels, and I respond that I am doing first class international modern hotels. Muslims don't like to go to non-Muslim hotels - they want to go to a high-class hotel that they can afford.

Their needs are basically cultural - they want their food, they want their movies, they want it served the way they want it.They also want to feel that they are in a particular culture or place, so if they are in Paris they have to feel like they are in Paris.

This is a very delicate balance to achieve in the design of the product.

At the same time we need to please non-Muslims. Muslims like to see non-Muslims with them (at the same property), otherwise the product is not a good product. I have a bigger challenge than other operators in this respect.

What is next for Almulla Hospitality this year?

I am waiting for the conference to explain my brands. There are a lot of developers who want to invest - we get calls two or three times a week from around the world. It's exciting. Sometimes we are getting calls from places we do not expect.

Last year at the Arabian Hotel Investment Conference I was one of the people sitting, watching and listening. This time I will be talking to people, and that is a shift.

In my experience as an international hotelier, there is a critical mass that a hotel chain or brand has to break.

Many international brands have failed to break that critical mass, perhaps because of geographical reasons - for example luxury hotels from the Far East cannot go to America because they cannot afford that service culture.

Plan ahead, work on your branding strategy. We at Almulla Hospitality are coming into this market very much aware of the sales and marketing on one side, and the needs of guests for services on the other side.

You cannot serve your brand with three different names at three different prices - this will confuse the guest, and lower the value and equity of the brand.

Branding is critical for the hotel industry's success. Brand capital has to be looked at very carefully and strategically when planning any chain strategies before budgeting for sales and marketing.

The future of the hotel industry is brands.

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