DUBAI, United Arab Emirates—The Middle East is used to cycle downturns, whether they are instigated by regional conflicts, global recession or a slump in oil prices. But in regions where they occur frequently, the need for flexibility is paramount for hotel owners and operators.
“Cycles (in the area) are becoming shorter, and sometimes more extreme than we are used to, so we need a more flexible model so we can learn how to drive revenues in the bad times as well as the good,” said Kees Hartzuiker, CEO of hospitality consultancy firm Ròya International, during the “Operating in the ‘new normal’” panel at the recent Arabian Hotel Investment Conference.
Hartzuiker said owners and operators need to be more proactive.
“Doing the budgets was a very frustrating thing this year, and they take time to do, so when they are finished no one any longer believes the numbers,” Hartzuiker said. “There is no stability anymore, just as the booking windows have changed, so owners and operators need to work far more closely together.”
Mustafa Al Hashimi, chief hospitality and leisure officer of owner and asset manager Wasl Hospitality & Leisure, said consideration of the “new normal” should start from the moment a management contract is discussed.
“So that owners do not pay twice, once to management, the second time to (online travel agencies). …. There are also not too many asset managers in the region, but in the next five years you will see that changing, people who can look at things from the outside,” Al Hashimi said.
He said the new normal lies within looking at profit-and-loss statements.
“You cannot blame the GM as he is focussed on the ground, so you need support. It will not be about franchise versus white label but about individuals at hotels,” he said. “In terms of hierarchy, we wanted a pyramid but ended up with a rectangle, as this is the hotel industry, and everyone is nice.”
Al Hashimi said he worries that the chains are being reactive, not proactive. Pascal Gauvin, COO of India, Middle East and Africa for InterContinental Hotels Group, disputed that claim, and said that chain executives and employees are well aware of the pressure to return revenues.
“Our employees have to own the results they are responsible for and to work as a team,” Gauvin said. “Ultimately the relationship between owners and operators is about the bottom line. What is good for you is good for us.”
Gauvin said chains also need to focus on the long term and on brands, “to make them absolutely relevant to the guest, while at the same time focusing on developing more revenue and loyalty.”
An onus on increased flexibility is resulting in a new type of relationship between owners and operators, according to Olivier Granet, managing director and COO of the Middle East for AccorHotels.
“What is new is that we have strong pressure on rates, even as occupancy is high,” Granet said. “The key takeaway of (this conference) is that we all get a better understanding of the present situation, which is not normal. We all need to be looking at prices.”
Focus now
Wasl’s Al Hashimi said performance dips in the region tend not to last long. Time cannot be wasted while markets emerge, he said.
“This is the time for owners and operators to really look at the operating models differently, not just about (average daily rates) or occupancy, but to challenge the methodologies of how we operate as we become a mature destination,” Al Hashimi added.
Many owners and operators said they are turning their attention to midscale product to help the bottom line. It was a repeated theme throughout the extent of the conference.
“It cannot be one or the other,” Hartzuiker said. “We will focus on RevPAR and our revenue-generating index. We do not accept the excuses, as everyone is in the same boat and in competition, so it is about asset management. It cannot be about ticking the boxes and (key performance indicators) and then moving on to the new property on your (curriculum vitae).”
He said it also boils down to the long-term real estate strategy.
“It is frustrating to sit in Quarter One discussing matters with hotel chains that you felt should have been discussed much earlier,” Hartzuiker said. “For example, there is no incentive for owners to give F&B out when there is a perfectly good alternative with the operator, for them to provide the same revenue.
“Our chief goal is to stimulate the operators to drive revenues in the same way an independent could, as that drives revenue, as brands still have enormous influence on the final decisions of consumers.”