Rooms for improvement

Henning Fries, GM of the Fairmont Bab Al Bahr, discusses building revenues in highly competitive market
Rooms for improvement
Fries says Fairmont’s average 55% occupancy for this year is acceptable in the current markets.
By Ed Attwood
Mon 27 Dec 2010 08:49 AM

There probably isn’t a better view in the UAE than the one from the Fairmont Bab Al Bahr that overlooks the Sheikh Zayed Mosque in Abu Dhabi. Sitting on the club floor, general manager Henning Fries is six months into a job that entails steering what is already one of the city’s most prestigious hotels towards profitability. Given the influx of hospitality space onto the city’s market — and the resulting lower prices — it’s a tall order, but Fries says it’s a target that the Fairmont has already managed to hit.

“Everybody has their expectations, but this hotel will be profitable in its first year of operation,” Fries says. “Now, could it have been even more profitable two years earlier and under completely different market conditions. But running the occupancies that we do and given that the food and beverage [F&B] and conference side have done so well, it’s allowed us to be in positive territory in our first year of operations.”

That’s no mean feat, especially given the size of the property, which has fully 369 guestrooms and suites. Fairmont opened its latest branch in the latter half of 2009 in the ‘between the bridges’ area of the city, a mixed-use residential and business district that, like Yas Island, has seen several hospitality projects spring up over the course of the last year or so.

That’s not all that Fairmont Hotels and Resorts has planned for the UAE. In addition to the Fairmont Dubai and the Fairmont Bab Al Bahr, the operator is working on other sites in the Abu Dhabi Marina and in Fujairah. However, Fries says that timelines for those locations are unclear as both venues are part of larger masterplanned projects.

When questioned on occupancy levels, the general manager says that the average 55 percent occupancy for this year is acceptable in the current markets, and was built into the hotel’s business plan from the word go.

“Abu Dhabi is on a very strong consistent growth path, but when new inventory comes in, it takes time — and the more inventory there is, the more time that will take. That has been the experience of the new players in the market,” he adds. “Our occupancies have experienced a steady growth, and as new incentives and businesses come into Abu Dhabi, it’s no longer acceptable just to be based in neighbouring emirates. And as more incentives for tourism come online — like Ferrari World — we’ll see also that that will sustain the growth in the overall hotel business.”

The general manager quotes figures provided by Etihad, which show that due to projected fleet growth, new routes and airport expansion, the number of visitors to Abu Dhabi is set to grow by between ten and twelve percent in the near future. Fries says the target for next year is to grow occupancy levels to the mid-60 percent area.

But the hotel’s push towards profitability appears to have been driven just as much by the F&B and conferencing side as the rooms. Fries estimates that contributions of both elements to revenue are an even split, whereas room rates generally provide the higher portion elsewhere in the world.

“It’s a higher proportion in the UAE because you tend to have more restaurants and facilities attached to hotels than in Europe or North America,” the GM says. “There might be others in town that have a similar ratio, but we are one of the few that is doing as well on the F&B side as it is in the room side.”

It’s a model that Fries intends to expand in the coming year. After some strong demand and complimentary feedback from businesses, the hotel will expand its conference and meeting facilities in 2011. Not only that, but the Fairmont will also be offering more F&B venues as well, in addition to a solid line-up that includes a Marco Pierre White steakhouse, as well as the Frankie’s Italian restaurant and Elements.

Do the new facilities mean that costs are likely to rise? Fries prefers to talk about values rather than prices, and is happy to admit that some of the more outrageous prices charged by some of the UAE capital’s hotels in the past was driven by a lack of supply.

“It’s no secret that Abu Dhabi has seen a significant drop from the previous levels of rates that were charged,” he says. “But in the past, everybody was saying that Abu Dhabi was an extremely expensive place to have a hotel stay. With some exceptions, there were a large number of operators who did not deliver this value and were simply making use of the fact that there was high demand and low supply. Those are the ones that are being squeezed out right now.”

But Fries now believes that the market is at — or near — equilibrium. For the future, he says, prices will go back up, but there will be no return to the bad old days of yesteryear.

“Looking at what the pipeline of new entrants into the market, probably it’s not going back to the disparity of what was charged and what was delivered,” he adds. “It could go back to the values of two or three years ago, but with a much, much better experience for everybody, with new hotels raising the bar consistently.”

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