Jose Silva: All eyes are on Jumeirah's new CEO

Jose Silva has big shoes to fill as he embarks on the company's ambitious plans to grow its global portfolio of luxury - and affordable - hotels. But the former Four Seasons executive says he is the man for the job
By Lubna Hamdan
Fri 13 Jul 2018 12:09 AM

There is a lot riding on Jumeirah Group’s latest chief executive. The legendary hospitality giant witnessed the departure of two CEOs in the span of just two years, before putting its faith in Portuguese hotelier José Silva in January 2017. He has his work cut out for him – maintaining one of the UAE’s most successful homegrown brands is anything but easy, yet growing it into the global empire it wishes to become is a whole other mark.

Jumeirah seeks to become to hospitality what Emirates has become to aviation – bringing Dubai to the world and the world to Dubai. It has already succeeded in putting the once little-known port city on the map through iconic creations such as the sail-shaped Burj Al Arab, the Jumeirah Beach Hotel, and many more. Now he has to scale this model across the world.

In conversation with Arabian Business, Silva appears to relish the Jumeirah’s legacy. “I feel privileged; Jumeirah is iconic,” he says, seemingly reaping what was sown by former longstanding chief Gerald Lawless, who departed in 2016 after almost two decades of building the hotel group into one of the world’s most recognised luxury brands. Lawless remains the head of tourism and hospitality at Jumeirah’s parent company Dubai Holding. The much respected former CEO left behind an impressive portfolio of 23 hotels across 12 global destinations, not to mention a total of 100 restaurants in the UAE alone. In the pipeline, he had over 20 hotels set for Asia Pacific (including eight in China), Middle East (including the now-completed Jumeirah Al Naseem at Dubai’s Madinat Jumeirah) and in Europe.


“Besides the new supply that we put in the market, our total revenue keeps on growing”

It goes without saying that Silva has big shoes to fill, particularly with the group planning on doubling in size over the next five to six years. His appointment follows the 15-month stint by Stefan Leser, who quietly left the firm to be replaced by Marc Dardenne, Jumeirah Group’s chief operating officer, as interim CEO. Though Leser’s departure was attributed to “purely personal reasons”, it came at a challenging time for the UAE hospitality industry. While it remained mainly subdued in 2016 due to weaker macroeconomic conditions and US dollar strengthening, the Dubai market saw average daily rates (ADR) drop 12 percent year to date November 2016 compared to the same period in 2015, according to a report by Knight Frank, partly due to an influx of 6,700 keys into the market. It resulted in a 12 percent drop in revenue per available room (RevPAR). Moreover, a survey by HotStats showed average room rates fall 7.8 percent to $258 in the same year.

But Silva arguably has it tougher, as JLL’s Q3 2017 report revealed RevPAR fell to its lowest level in a decade at $137 during the first eight months of the year. According to analysts STR, occupancy across the country rose 0.5 percent year-on-year in 2017 to 75.1 percent, though ADR and RevPAR fell 3.8 percent and 3.3 percent respectively. These statistics beg the question of whether Jumeirah’s chief will be another to crack under pressure or, conversely, lead Dubai’s monumental hotel group into a burgeoning new era.

I feel privileged. Jumeirah is iconic. It has earned a stellar reputation in the industry”

So far, the answer seems to be the latter. Since his joining in January last year, he has driven a three percent yearly increase in the group’s RevPAR. It’s not its best performance, but Silva’s 35 years of experience – including almost 25 years with Four Seasons Hotels & Resorts and the highly acclaimed Hotel George V in Paris – should work in his favour. The CEO expects further growth with the addition of new hotels, including a long-mooted luxury property next to the wave-shaped Jumeirah Beach Hotel, which is itself expected to reopen on October 15 this year following a “significant makeover” since it opened in 1997.

“Keep in mind that besides the new supply that we put in the market, our total revenue keeps on growing, which means that if we hadn’t [introduced] new supply, our revenue would even be potentially about 10 percent or in the high single digits, which is very healthy at the moment,” Silva says, in one of his first interviews since taking the position.

He is referring to recent additions such as the 400-room Jumeirah Al Naseem in Dubai and the group’s first-ever hotel in Bahrain, Jumeirah Royal Saray. Before the end of 2018, the firm is expected to open Jumeirah Muscat Bay in Oman, Jumeirah Bali in Indonesia, Jumeirah Al Wathba Desert Resort and Jumeirah at Saadiyat Island Resort in Abu Dhabi, followed by Jumeirah Nanjing in China.


Former chief Gerarld Lawless left Jumeirah with an impressive portfolio

Economic options

In a bid to tap into the increasingly important affordable luxury market, Jumeirah earlier this year launched contemporary, millennial-focused brand Zabeel House, vowing to redefine the concept of three-star hotels and attract younger generations to the sector. The first, Zabeel House Mini in Al Seef district, is described as “maximum attitude, minimum frills”, with a focus on playful guest experiences such as free bikes on demand, but remaining friendly to the bank balance by stripping back the non-essentials, with room rates starting at $95. A second, sister hotel located on the banks of Dubai Creek, boasts even cheaper rates at $81 per room per night. A third venue is scheduled to open in The Greens in Q4 this year.

Jumeirah is not the first to jump on the bandwagon, with Dubai-based rival Emaar Hospitality – known for its luxury chain of Address Hotels – launching modern and value-oriented brand Rove Hotels for “new generation travellers” who lead fast-paced lives.

There are some things you want to do in life, and visiting the Burj Al Arab is one of them”

In February this year, Emaar Hospitality CEO Olivier Harnisch told Arabian Business that Dubai has seen increased demand for mid-market hotels, as more travellers spend less of their budget on accommodation, with millennial (or Generation Y) travellers particularly spending less on hotels and more on dining and entertainment.

“They say, ‘You know what? I’m coming to Dubai and I’m only staying four days. I’m only going to sleep in my room. I want an attractive and comfortable space, but I want to spend more on dining and entertainment’. That’s a trend we are seeing,” he said, adding that the shift in consumer behaviour is partly due to changing perceptions of Dubai, where visitors have realised that it is not only sun, beach and shopping, but also about culture, with attractions such as Dubai Opera and Louvre Abu Dhabi having opened in the past few years.

Luxury still has a place

Despite opportunities in the affordable hotel market, Jumeirah remains devoted to its luxury DNA, as Silva reveals plans to open ultra-luxury concepts similar to the brand’s historic sail-shaped Burj Al Arab in gateway cities around the world, including one in Europe. The hotel is one of the world’s most expensive destinations – and the Middle East’s costliest – at a minimum nightly rate of around $2,000.


Burj Al Arab is one of the world’s most expensive hotels

“There are some things you want to do in life, and visiting the Burj Al Arab is one of them. Many people travel to go see the Burj Al Arab. It is one of the world’s most photographed – and Instagrammed – hotels. It has become an icon of Dubai in itself. We want to expand that globally and share it with the world,” Silva says.

He reiterates the importance of having more than one ‘mono’ brand, explaining that it results in limitations. “You can no longer have just one positioning as that will eventually be restricted. There is a space for ultra-luxury. The Burj Al Arab was always a one-of-a-kind destination. It was always a unique property in the hotel space worldwide, not just in Dubai. So there is space for hotels that everyone has on their bucket list,” he says, adding that Jumeirah will unfold details of the plans in the fall of 2018. He remains tight lipped on further details, but confirms the project will retain the $2,000 nightly rates.


The cost of eating out

Last month, Silva outlined a “step-change” in Jumeirah’s F&B strategy with the appointment of a Michelin Restaurant and Hotel Guides executive as its new chief culinary officer to help launch new restaurant concepts and enhance existing outlets. The appointment of Michael Ellis, who was Michelin Restaurant and Hotel Guides’ global director for Europe, Asia and the Americas, is the first step in delivering his vision “to put dining as a core pillar of the Jumeirah experience”.

This shift in strategy is perhaps a sign that Jumeirah, like everyone else, needs to somehow set itself apart from the onslaught of competitors. According to Euromonitor, there are currently 18,345 outlets in the UAE, with another 19,000 expected in the UAE by 2019.

A 2017 survey by KPMG also found that almost half of the UAE’s restaurants and cafes expected their sales to decline further this due to oversupply.

Just last month, Jumeirah announced it is closing Souk Madinat Jumeirah favourites The Agency and Left Bank, while Hakkasan Dubai at Jumeirah Emirates Towers closed in July. Silva says the Madinat venues will be replaced by new concepts over the next few months, while two new restaurants will open in its newer property Al Naseem.


Pepper Steakhouse at Jumeirah Messilah Beach Hotel & Spa in Kuwait

In a sign that consumer behaviour is changing, he says he will also introduce more “smartly-priced” dining into Jumeirah hotels to cater to a wider audience. While the luxury group is known for its celebratory restaurants, it will soon feature ‘social’ outlets that are less costly and revolve around experience.

Silva says guests now go to restaurants for both social gatherings and dining.

“The restaurant scene has evolved a lot. You used to go out to restaurants to dine. Today, you go out to restaurants for social gathering and fun. You go out for a social moment around great dining,” he says, predicting that Dubai restaurants will become “more and more affordable”. According to Silva, the consumer will ultimately decide on restaurant prices. He reveals he himself has systematically lowered rates of overpriced restaurants in the past, given that even guests with high spending power avoid paying for expensive restaurants if they feel they are lacking value for money.

“If [consumers] are not comfortable [with prices], even if they could actually pay, they will choose to frequent where there is a shared value for money,” says the chief executive.


Yet in a slowing economy and an arguably saturated market where hoteliers are dipping into the cost-conscious millennial sector with affordable offerings, why is Jumeirah insistent on more ultra-luxury concepts? Silva compares luxury hotels to airlines’ first class cabins.

“It’s like having first class, business class then economy class. I think it would be difficult for airlines to be seen in a winning position without these top tiers. There is a market globally for ultra-luxury and every ultra-luxury brand is protected by its segmentation of goods,” he says, making further comparisons, this time to luxury bags, watches and cars.

Once you have more supply and offerings, inevitably, you will have more tourism, and growth will continue”

“$50,000 bags elevate luxury companies and the bags’ credentials. Once you choose to position a niche of your selection to ultra-luxury, you bring the entire collection up. I don’t think there are car companies that sell cars at $20,000 that could occupy this space, or have the expertise of ultra-luxury,” he says.

Silva explains that the value the consumer is willing to pay is what defines the positioning of the brand. And so far, guests are buying into Jumeirah’s rates, or so it seems. Similar to Silva, Jumeirah is conservative when it comes to sharing figures and performance indicators. One must wonder, however, whether a brand synonymous with a city’s wider ambitions needs to worry about its performance.

Moreover, the chief executive reveals that the Burj Al Arab itself will likely undergo a renovation in the summer of 2019, possibly in line with Dubai Holding’s massive $1.7bn Marsa Al Arab project, which includes two new man-built islands on either side of the hotel. The project, comprising hotels, theatres, retail space, a marina, a business district, residences and luxury villas, is aimed at supporting Expo2020 and Dubai’s tourism sector. Spread across four million square feet of land, it is expected to be complete in late 2020.


Sail-shaped hotel Burj Al Arab will undergo renovation in summer 2019

Market squeeze or new opportunities?

Dubai attracted 15.8 million visitors in 2017 – almost a million more than the previous year – and is on track to reach its target of 20 million visitors per year in 2020. According to Dubai’s Department of Tourism and Commerce Marketing (DTCM) the emirate’s room supply is set to reach 132,000 by the end of 2019, up from the 107,431 keys that were available as of the end of 2017. Much faith is being placed in Expo 2020 Dubai, which is expected to welcome over 25 million visitors over the event’s six-month duration.

While the momentous happening is expected to bolster Dubai’s position in the international field, it might result in a sluggish hospitality market once Expo finishes, according to Silva. He says an oversupply in hotels, made to accommodate the influx of guests to the city, may lead to slower market conditions for up to three years after the exhibition takes place. “You may have a small stagnation after [Expo 2020] for two to three years, but my experience is that it only helps [markets] grow, because once you have more supply and offerings, inevitably, you will have more tourism. It will be fully consumed soon after and growth will continue.”

His views are shared by industry experts. Simon Allison, founder of investor hospitality network Hoftel, told Arabian Business in February that “there is always a dip in demand after a major event like the Olympics, the World Cup or an Expo, and so there will surely be some softness in the year afterwards.” But it is a general economic downturn that would have a much greater impact on occupancy than a post-event dip. However, Allison said it does not necessarily make it “all doom and gloom.”

Dubai will keep being the growth of the Middle East. I would invest more in Dubai than any other destination”

“I remember asking the head of strategy for a major Dubai firm in 2009 how the Emirate would fare, given the meltdown in financial and property markets. ‘We’re not worried’, he argued. ‘Basically, if you live between Cairo and Karachi and you want to have fun, you’ll come to Dubai.”

Silva, who has taken part in a number of world exhibitions during his long career, says expos have been “transformational” in most cities where they have taken place, adding that Expo 2020 is the “perfect moment” to increase tourism infrastructure in sectors ranging from hospitality to F&B.

Despite predicting temporary stagnation in the city’s hospitality field, he says the Expo will not hinder Dubai’s growth as a regional destination. “When you have events like the Expo, you may have a burst of construction then stagnation for a few years, but it will never be [permanently] stagnant. [Dubai] will keep being the growth of the Middle East. I would invest more in Dubai than any other destination,” he says.

He is not alone in this view. In January this year, Emaar Hospitality CEO Olivier Harnisch said hotels are not built for six-month events such as Expo 2020, but for long-term market development. “I don’t know if anyone would build hotels just for Expo. We’d be foolish if we built hotels just for Expo,” he told Arabian Business.


Jumeirah Creekside Hotel opened in 2012 and boasts a vast art collection

There are other positive indicators that Dubai can continue to grow impressively. While India retained the top spot in 2017, contributing a 15 percent year-on-year increase to 2.1 million visitors, China might have some in fifth with 764,000 tourists, but that figure represented a 41 percent increase, while Russia took eighth place with 530,000 visitors, a 121 percent increase over the previous year. Both markets benefited from easier access following the introduction of visa-on-arrival facilities to Chinese and Russian citizens in late 2016 and early 2017, respectively. These figures should increase with the new policy announced last month to grant free limited visas to transit passengers, which could potentially allow visitors to stay in the UAE for nearly a week.

The conclusion is obvious: there is much potential in the market for growth, even as the squeeze on revenues continues. What is left to find out is whether Silva will be the man to take Jumeirah to the world and the world to Jumeirah.

For all the latest travel news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.

Last Updated: Fri 13 Jul 2018 12:10 AM GST

Subscribe to our Newsletter

Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.