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Mon 7 Dec 2009 04:00 AM

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Room for more

John Bamsey of the InterContinental Hotel Group tells Claire Ferris-Lay why the world’s largest hotel company will continue to invest in the Middle East and Africa.

Room for more
Room for more
IHG plans to add an additional 12 Holiday Inn Express hotels in Saudi Arabia over the next five years through a partnership with the Saudi investment company, Siraj Capital.

John Bamsey of the InterContinental Hotel Group tells Claire Ferris-Lay why the world’s largest hotel company will continue to invest in the Middle East and Africa.

It’s difficult not to believe that the region’s hospitality industry isn’t picking up when you talk to John Bamsey, the chief operating officer for the Middle East & Africa division of the InterContinental Hotel Group (IHG).

If industry experts and financial results would have you thinking that business in the Middle East’s hotels is only just starting to show some signs of recovery, Bamsey’s well-rehearsed speech will soon have you thinking otherwise.

“We have a much higher performing business than probably anywhere else in the world,” he grins. “That’s really our key message in the Middle East and Africa; if you look at everything else, there is something different happening here.”

UK-based IHG, which is listed on the London Stock Exchange, only owns 17 hotels but manages more than 4,400 hotels globally under its brands; Holiday Inn, Crowne Plaza and InterContinental Hotels & Resorts. Bamsey’s IHG patch covers the whole of the Middle East and Africa across 94 hotels. In September, occupancy rates in the Middle East dropped 8.2 percent to 56.9 percent while revenue per available room (RevPAR) — the hotel industry’s benchmark — fell 6.9 percent, according to data from STR Global.

Despite the decline in numbers, Bamsey plans to double the hotel manager’s footprint in the region over the next three to five years, bring the total number of rooms under IHG’s name to 35,565. The firm’s recruitment drive across the region — 33,000 staff over the next three years — has been highly publicised in the UK amid the downturn.

While the majority of these new properties will be across the GCC, IHG will also be entering new markets such as Syria, Angola and Nigeria. “We’re quite financially spread so each of those three regions; the Gulf, Saudi and the Near East, that’s all about the same sort of size,” Bamsey explains.

He adds that he sees the biggest growth in this region through its mid-market brands such as Holiday Inn, the group’s largest division of hotels, which the Memphis hotelier Kemmons Wilson founded in 1952 and grew rapidly through franchising.

In Saudi Arabia alone IHG plans to add an additional 12 Holiday Inn Expresses over the next five years through a partnership with the Saudi investment firm, Siraj Capital.

Bamsey is also overseeing the refurbishment of several hotels within the Holiday Inn brand. The move is part of a global $1bn refurbishment programme, which started in 2007, to overhaul the 57-year-old brand’s long-eroding reputation and weed out older, badly performing hotels.Overall, IHG has taken on responsibility to restore more than 2,400 of properties. But in the US, the onset of the global economic downturn has forced the hotel manager to drop more than 300 Holiday Inns from its portfolio after its owners failed to spend as much as $250,000 per property in order to bring the hotels up to standard.

Bamsey says more than 50 percent of the Holiday Inn’s within his portfolio have already been completed and he is on track to meeting his 2010 deadline. “In this part of the world we have converted 50 percent of our Holiday Inns... We will have probably got to 70-75 percent by the end of this year so we are well on track to reach our global requirement of 100 percent by the end of next year,” he says, adding that persuading owners to inject cash into their hotels hasn’t been as difficult as in other parts of the world.

But that’s not to say that the region hasn’t suffered amid the downturn. IHG’s third quarter financial results showed the impact the economic crisis and swine flu had on the group, particularly in the Middle East. IHG was forced to adjust its operating profit to $124m from $154m a year ago and while revenue declined 13 percent in Asia/Pacific and 19 percent in the Americas, it dropped the most — 25 percent — in Europe/Middle East/Africa.

Bamsey attributes the lower figures for this region on a lag effect. “If you go back over the last year, the economic downturn was probably visible in the States way back in March 2008 [then] we started to see it come through in the rest of the world last summer and the autumn,” he explains.

He adds that pockets of the region have continued to thrive. “You started to see the effects of the downturn coming through in the first quarter of this year in some of the markets. But Lebanon was going crazy, Saudi [was] still performing very strong, Africa protected and even within the Gulf region we had exceptionally strong months in Doha and Abu Dhabi.”

Saudi Arabia, which accounts for 25 percent of IHG’s room rates in this region, is one of IHG’s strongest performing markets, despite the impact swine flu had on pilgrims travelling to the Holy Cities during Ramadan. “We have a very strong business in Saudi Arabia. [The country] has been riding the global economic downturn a lot better than anywhere else because of its sheer size,” he says.

“In our terms, apart from swine flu — which is a one off — we would still have had growth in Saudi Arabia this year.”

He adds that the oil rich Gulf state has also propped up its business in some of Europe’s major cities. “We also have a huge piece of outbound business [from Saudi] to Europe particularly in the summer. A lot of the royal families migrate in the hot summer months to the key cities in Europe, London, Paris and Geneva.”

Lebanon has also been a hugely successful market for IHG. Occupancy rates at hotels in Beirut reached 69 percent in the first nine months of 2009, up 41 percent compared to the same period last year while RevPAR in the city increased 82 percent during the same period, according to a report by Deloitte & Touche.

“Occupancies in the city effectively went from 25 percent to virtually 100 percent in the summer of the previous year and the market has been strong ever since,” says Bamsey, who believes the country has enough demand to warrant more hotels and further refurbishments.

“As soon as Lebanon gets stability everyone wants to go back to it… I think the more stability that market has, I think it will continue to grow and you will therefore see new hotels coming into the Lebanese market.”

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