By Jamie Knights
Rixos Hotels vice president Naim Maadad speaks to Jamie Knights about ‘cash by the bucketful’ in Libya, rough roads ahead and why investors need to revisit their ‘dusty shelves’.
Rixos is one of the top hotel brands in Europe and is widely recognised for its extensive leisure offering. But the Turkish hospitality giant is not so prominent in the Middle East. While it boasts successful properties, such as in Libya, other projects have had false dawns.
The management of a property on Jumeirah Palm in Dubai was handed to Jumeirah at the last minute and questions are emerging over the funding of a property in Bahrain, scheduled to open in 2011.
The Rixos flag is currently flying at half mast in the region, but that is all about to change. With the announcement of new properties imminent and a monster of a hotel planned for Egypt, Naim Maadad, vice president Rixos, explains why he is excited about hoisting the company’s flag high over the Middle East.
“We are not ignorant to the fact that the brand is not exactly present in the market,” he says.
“Having said that, we know our strengths and are trying to diversify our regional presence.”
However, emerging markets such as Libya are giving Rixos a chance to shine in the region. It made a big impression with the opening of Rixos Al Nasr Tripoli and has signed a number of JVs for hotel, construction and catering projects.
“An advantage we have is that the big brands are indecisive about stepping into the unknown so we’ve got a head start and we seem to be doing extremely well,” he asserts.
“Libya has at least 10 years before we reach a plateau that is comfortable regarding supply and demand. We believe that pioneers in the market will capitalise on that and will continue to develop.”
While this is positive news for those chains already there, Maadad concedes it’s not all plain sailing.
“The words ‘emerging market’ describes the limitations and frustrations at times,” he explains.
Like every market attempting to establish itself, hurdles are there, such as a lack of service providers and a limitation in high-end products, but the “enormous demand” makes the effort worthwhile.
“Make no mistake about it,” Maadad enthuses, “cash is in Libya by the bucketful”.
Other good news comes in the form of a new property in Sharm el Sheikh in Egypt. While the announcement and details are being finalised, Maadad clearly knows this is going to be an exceptional property.
“We will have one of the largest hotels — the inventory itself will be more than 4000. The whole idea for us is that we don’t believe Sharm el Sheikh has a centre, so our place will be the centre where every other hotel guest will feel they have to come and see,” he says.
Maadad says Egypt has generated the impression of being a “no brand zone”, despite major brands operating in the country for decades.
“There were a lot of brands, but they dropped their levels to the local level, rather than bringing the local level to the international market,” he explains.
“I think travellers today are demanding more — they want more for their money and they are willing to pay, they want quality, but sadly I think the quality aspect hasn’t been tapped into.”
While confidence in Egypt is abundant, the future of the Rixos Marina West Bahrain is met with a more subdued response.
Maadad says the company “would like to believe” the property will be up and running at some point in 2011, but the owners are facing “some challenges with the funds”.
The mention of “capital being on the back foot” brings up the wider implications of the changing face of hospitality financing since the downturn and on this matter Maadad is adamant that the game has changed for good.
“What has been faced is beyond anyone’s expectations or experience and I believe we have experienced in the last 12 months an end of an era on the financial front,” he asserts.
“Going forward I don’t think anyone has established how it’s going to be panning out or how it will be resolved, although whoever does that will go a long way.
“We are entering a new era and we are all learning about it to try and learn how we finance our businesses, how do we use cash — in the past it was money, but not cash.”
So how does this new era affect Rixos’s desire to enter the UAE, a destination that has thrown more spanners at the group than hugs?
“The strategy is very clear,” he says. “Obviously while we are in no rush to have flags all over the place like many other big groups, our strategy is to find the right hotel in the right city.
“We are not only catering for international tourism but for the local markets and that has been one of our great successes. We actually cater for the people who reside there and eventually use the hotel as a base for their business and leisure.”
While he acknowledges “a couple of setbacks” in the UAE, the removal of any exclusivity agreements has meant Rixos has been on the market and is “close to making a couple of announcements”.
While the prospect of a high-profile Rixos property in the UAE is exciting, the question had to be asked as to whether the amount of inventory already online in the region worried Maadad.
“It depends where you are talking about,” he suggested.
“Certain parts of the UAE, yes, inventory is going to be more than the demand dictates, but I believe Dubai can take a few more rooms.”
Despite this he maintains that owners and operators need to understand two important points.
“One is to accept reasonable GOPs that compare with the rest of the world — stop being greedy and saying ‘we want more’,” he says.
“The second thing is to focus on ensuring we understand how multi skilling works — it works everywhere else in the world and it helps develop individuals and deliver services so everyone benefits.”
But in terms of finding its own niche Maadad believes Turkish hospitality, combined with a focus on locals, will see Rixos stand out.
“Furthermore, the biggest market that nobody has really tapped into yet is the local market and it is something we keep forgetting in the industry,” Maadad enthuses.
“Locals need to be rewarded, from the pricing, rewards, value add strategy, they are part of the community and need to rewarded in a better fashion.”
Despite optimism and enthusiasm for Rixos’s future in the region, he still envisages a tough time ahead.
“I don’t think we have seen the worst of the economic situation and I think there is still a bit more of a rough road ahead,” he says.
“Until Europe is really out of the mess it is in, we will continue on suffering ourselves here.”
However, he tempers this by saying market sentiment is more positive, particularly with investors.
“I think investors are pulling those folders off the dusty shelves and having a second look, asking ‘is it time?’.
“Equipment is much cheaper now and architects are available. From a cost perspective, today is the right time to start that development process. The win is that by the time your project is ready the market will have stabilised and you will be the first cab off the rank.”
So it looks as though Rixos will be hoisting its flag to the top of the flagpole and that is something that tourists and residents of the region should be eagerly saluting.