By Gareth Rees
Kuwait's hotel industry is catering to a predominantly business clientele for now.
As the influx of guests created by the rebuilding of neighbouring Iraq slows, Gareth Rees discovers that Kuwait's hotel industry, for now at least, is catering to a predominantly business clientele.
Kuwait has always been synonymous with business and the run-down airport, mirror checks under hotel cars and local regulations forbidding alcohol mean that the country isn't really prepared or preparing for western tourists, in the same way as, say, Dubai.
As Accor Middle East managing director Christophe Landais says, "Kuwait is not perceived as a leisure destination".
There is a huge demand and it is an untapped market.
That is why Accor has chosen to introduce its Ibis brand of economy business hotels to the country, with the opening in March of its 175-room property in the Salmiya district.
"As far as the condition of the hotel industry in Kuwait goes, it really does depend on what market you're talking about," says Landais.
"We opened the Ibis on March 18 and just 14 days later we had achieved 72% occupancy, so it does show that for this market segment - economy lodging - there is a huge demand and it's an untapped market, so we feel confident this type of product will work as it did in Dubai."
For Landais, as long as potential hotel developers or brands wishing to enter the market accept the type of guests visiting Kuwait, they will achieve success.
"It all depends on what product you introduce to the market. If you developed a resort hotel and wanted to attract European clientele I don't think it would work, but if you create a business hotel targeting the intraregional clientele from the GCC it will be a success," he says.
"You have to position your product at the right level and offer the right kind of service for your guests."
Following the entry of this first property into the Kuwait market, Accor plans to open another Ibis property - the 160-room Ibis Sharq - in the first quarter of 2009, and Landais is certain that property will attract primarily business guests as well.
"At the Ibis Salmiya 80% of our guests are business travellers, as the Ibis product really is for the domestic business market rather than leisure, and the hotels are always located in the business district - it's not a leisure hotel it's a business hotel," he says.
But Accor also has a resort hotel under development on the coast according to Landais, which will cater to the domestic and intraregional leisure market "with a focus on Saudi Arabia" as well as the business segment. But he adds that on the whole "people are simply not going to Kuwait for leisure", preferring to visit places like Dubai where they can find "every service they could possibly want".
"We have the right product, in the right place, for the right people, because there is a lack of economy lodging. You have either the five-star hotel or the unclassified hotels. So coming with the Ibis brand we fit really well into the market, so we don't face any challenges," says Landais.
Positives and negatives
Of course Accor's positive early experience of the Kuwait market doesn't mean that there aren't any challenges, and Landais has already noted one serious issue that needs to be addressed by the government.
"They should certainly be more willing to change and try and understand what is wrong over there, for example if you need a visa for staff it is difficult and you have some hotels that have opened at half capacity because they couldn't get the staff visas," he says.The government should have a vision for the development of business and leisure tourism overall, which will get rid of the administrative red tape that we find sometimes in Kuwait.
Mövenpick Hotel and Resort Al Bida'a director of sales and marketing Hassan Hassanein says that there is a problem with the visa system in general.
"That is one of the big negatives, because visa requirements change frequently and immigration policy is not stable. The government needs to change this so there are clear visa regulations," he says.
The government should have a vision for the development of business and leisure tourism, which will get rid of the administrative red tape.
Apart from the issue of obtaining visas there is not a general problem attracting staff to Kuwait, according to Landais.
"Kuwait is not a hard country to attract quality staff to. It's not a place where staff will be ill treated, quite the opposite actually. I think people would be attracted to working in the hotel industry in Kuwait," he says.
Over the next two years Kuwait will see the opening of five new hotels, including the 207-room Hotel Missoni, 150-room Staybridge Suites Kuwait Salmiyah, 280-room InterContinental Kuwait, 160-room Ibis Sharq and 165-room Golden Tulip Kuwait.
"It's true that in Kuwait there are a lot of five-star hotels coming up, so maybe there will be too many of them," says Landais.
"Now developing economy lodging like we do I think we are taking an untapped market, which is going to be beneficial both for the investor and for the operator, and also for the client - an alternative to the five-star."
Creating an alternative to the increasingly competitive five-star market is Accor's response, but Mövenpick's Hassanein believes that the answer is to increase demand to prevent an suffering from an oversupply of properties.
"I have noticed that the hotel business needs to be facilitated more from the parliament, from the government, they have to get more investment into the country rather than Kuwaitis investing outside the country as they do now," he adds.
Unfortunately Hilton Kuwait Resort general manager Andreas Bossard is not confident that the government will give the hotel industry the attention it requires.
"They made a big effort by working out a tourism plan with the help of certain UN organisations and a very good study was published, but so far nothing," he says.
"I don't think the government is very much interested otherwise. Things which have been discussed for a long time, such as building a convention centre and building some infrastructure to support the industry have come to nothing."
Establishing Kuwait as a meetings destination would be one way of boosting the industry, according to Bossard.
"Attracting meetings business would be easier than attracting tourism, because there you will always have a problem," he says.
"A world-class convention centre would help, but the government hasn't done much, and development of the airport is slow to say the least. No, they are not that interested."
Rezidor Hotels Group currently has one property in Kuwait, the Radisson SAS Hotel Kuwait, and regional director of sales and marketing Craig Senior disagrees with Bossard's negative view of the government.
"From our side the government is interested in the industry. If you look at it I don't see how they could not be interested because it's been a critical source of revenue generation for the country," he says.Levels aren't the same as two or three years ago when the situation was booming because of Iraq, but the city is still doing very well in terms of revenue from hotels, and we've always had positive dialogue with the government.
The government understands the importance of the hotel industry, attending both regional and international trade shows, according to Senior.
But he does agree that one of the key challenges over the next few years will be maintaining the level of business the country has experienced of late.
Since 2003 the Kuwait hotel industry has benefited from a boost in occupancy driven firstly by the Iraq conflict and then the start of the rebuilding process.
"There are new players coming into the market and these new hotels will open during the course of 2009, and of course what you need in any developing market is an influx of new arrivals to maintain the share of business - that is going to be the single biggest challenge," he says.
"The new hotels will bring new challenges both for themselves and the existing properties. New trends will need to be set to maintain these new hotels, but if business levels increase, as they have in other parts of the GCC, then I don't see a major problem."
The Kuwait Hotel Owners Association (KHOA) is a government approved organisation that assists in controlling hotel rates, amongst other things, and most hotels in the country see it as a positive thing, especially in light of the new competition entering the market.
Hilton's Bossard explains: "The hotel industry is in good shape because we have this cartel. We have seasons which are very bad, for example in summer time some hotels go down to 20% occupancy, but that's what they plan for. Then they have a very good winter season with all government conferences where they make very high rates, so overall it's in a good state, but it's not a free market as such it as a cartel.
"Some of the newer hotels are not in the cartel, which is a danger, but I don't think it's going to change things."
For Mövenpick's Hassanein the cartel is a way of ensuring the industry works together with the government to promote the country and ensure future prosperity.
"We are part of the cartel and attend regular meetings between the hotel owners, where the directors of sales and marketing are invited to discuss how best we can push the country forward in terms of our participation in different fairs," he explains.
Rezidor's Senior argues that the cartel prevents a rates war between five-star hotels by ensuring that rates are fixed, forcing properties to be more creative and focus on their individual appeal to guests.
"We have been part of the KHOA from day one, we have owners on the committee, and it works. People know during the summer period that there will be a fixed price you can go down to and it keeps a very level playing field," he says.
"It means hotels focus very much on the strength of their property, the services they offer, the facilities, their philosophies and the staff. You can't add things to that rate, so it will be excluding breakfast and plus tax and service, so you can't get around it. It's in everyone's interest to follow this to the wire." The market
Since 2003 the Kuwait hotel industry has benefited from a boost in occupancy driven firstly by the Iraq conflict and then the start of the rebuilding process in the neighbouring country.
"For the last five years a lot of the business for Kuwait hotels was Iraq related so we had very strong occupancy, but that business is coming down mainly because the Americans are running out of money. Now the personnel have to stay in the camps and more people are going directly to the camps, rather than passing through Kuwait," says Hilton's Bossard.
Accor's Landais agrees that the Iraq war gave the industry a helping hand, but has now started to slow down a lot.
"I guess the market will become more competitive now, especially for the five-star hotels as new five-star properties are developed," he says.
"But there doesn't seem to be a new generation of client to cope with that increased supply, which is different for us because we are targeting the existing market. We are going to take market share from the five-stars and the unclassified hotels."
The increased competition will be good for the five-star properties according to Landais: "The old timers will have to refurbish their properties so they will have a better, more modern product. Also more competition means that the price perhaps will not be so high".
But Bossard is not worried about the Hilton Kuwait Resort maintaining its market share at all.
He explains that he worked in the country during the 1970s before leaving and returning a couple of years ago to see little change aside from the inevitable growth.
"You have some GCC people coming, but otherwise international tourism is very limited. We are not at the forefront of conventions, it is mainly the two major segments: business travellers and the local leisure segment," he explains.
"We have our niche and our leisure clientele makes up perhaps 15% over the year and the rest is business."
In April the resort was running at 98% occupancy, according to Bossard, so Hilton seems to have found the perfect formula for success in Kuwait.
"We have an ideal configuration - 149 rooms and suites in the main building, 61 studios and apartments, 80 two-bedroom chalets, and 52 residential," explains Brossard.
"We have such diversification that we can switch the markets and have a mixture of short and long-term business. I can play with the market. If the market is strong I can take a risk on short-term if it's not I can take less of a risk on long term."
The Hilton Kuwait Resort is located in what Bossard describes as "the oil district", one of three distinct areas hotels developers could look at.
"There's downtown where all the government buildings are and you have Sheraton, Marriott and Holiday Inn, as well as some smaller hotels," he says.
"Then you have Salmiya, which is the shopping and leisure district basically and there you have the Ibis that just opened, you have the Radisson SAS and you're going to have Missoni by SAS. Then the third area is out here where you have us and recently the Rotana."
Hilton is building a second hotel in Salmiya, the Hilton Olympia Kuwait (due to open in 2008), which according to Bossard is going to be "a nice luxury hotel complimenting this smaller resort". The hotel is going to target business travellers and the local leisure market, he adds.
"There is only local leisure and we are by far the leader there. I don't see much on the tourist side happening, but we are building up the domestic market, we have more shopping malls than we need" says Bossard.
"We have been lucky so far to have no competition in the leisure segment. It's a very specific market, because you don't have a big tourist segment in it, you have limited international tourism - you have some people from Saudi Arabia coming in and some people from Iran and Iraq, but it's more visiting friends and relatives rather than tourists coming to see the country itself." The old and the new
The Rezidor Hotel Group is due to open the 207-room Hotel Missoni and the 'new kid on the block' will bring something completely unique to the Kuwait marketing - a branded, boutique hotel, also the first Missoni property in the World.
"We have developed the concept with the Italian fashion house so it's a very new breed of lifestyle boutique hotel that we are developing. It really comes into an area that Rezidor has not developed yet," explains Senior.
"Kuwait has been earmarked for the last two or three years to launch the development in the Middle East and it will not be the last Missoni branded hotel in the region."
Senior explains that Rezidor is aiming to attract individual business travellers coming primarily from Europe and the GCC.
"Fashion and lifestyle brands are becoming very important and I foresee there is a need for this property, with certain guests looking for a different kind of hotel stay in a small, intimate, contemporary property," says Senior.
Of course Rezidor has not just chosen the Kuwait market for the launch of its Missoni brand at random. The group launched its first Middle East Radisson SAS property in Kuwait more than two decades ago.
"Kuwait has been a key market for us and we have a long history with the country and a good relationship with our owners there, which I think has carried us in very good stead," explains Senior.
"It is just a natural market in which to develop the brands. The whole point in Rezidor was to bring in brands that would not be competing with other hotels. Our mid-market Park Inn brand in the future could well fit into the market in Kuwait and I would not remove that from discussion, not would I remove the five-star deluxe Regent brand."
Senior estimates that about 60% of the Radisson SAS Hotel Kuwait's guests currently come from the GCC and whilst 40% are an "international mixture". "Kuwait is attracting certain GCC travellers for the weekend because first and foremost it's driveable from certain countries, the restrictions in place appeal to certain markets and there's a shopping area within Kuwait," he explains.
"At this point in time the weekend and leisure market is supported by the GCC and for things to advance in terms of an international leisure market coming in from Europe, for example, certain things would have to change in terms of promotion of the destination itself."
If the destination is promoted to a greater extent then Senior believes, the country's hotel industry has a bright future.
"From a location point of view its one of the first countries you fly to, or past, coming to the GCC and we tend to find people coming in from Europe who will make it a stop coming in with at least two or three other destinations," he says.
"It tends to be either a first call or a last call on a GCC trip. In four or five days you've seen most of the key cities and when the situation does return to stability in Iraq then they could benchmark each other quite nicely."