Imagine this: You’re chartering an uninhabited—and seemingly uninhabitable—36.8-million-square-meter tract of desert along the Red Sea. The sun-scorched landscape is empty, barren, devoid of life. Mother Nature abandoned the place long ago. Any rational person has done the same.
But where others see only waste, Samih O. Sawiris sees possibility.
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Samih O. Sawiris Orascom Development Holding |
The chairman of Orascom Development Holding has emerged in the past decade as one of the most innovative real estate developers on earth—but he’s someone few in the hotel industry have ever heard of.
That changed Tuesday when Sawiris took the stage at the International Hotel Investment Forum. In what proved to be one of the conference’s more captivating sessions, this innovative thinker described how he has literally created cities from the ground up.
On the surface, his concept is deceivingly simple: Buy large tracts of land no one else wants, develop enticing real estate that matches the locale, provide the civil services and infrastructure to support the new demand—all while keeping a huge chunk of newly appreciating land in your back pocket.
Sawiris’ first such project, El Gouna, was a desolate plot in Egypt, until Orascom built resorts, followed by housing to support the necessary workforce to operate them, the schools to educate them, the hospitals to keep them healthy and so forth. It’s planned development in its purest form. Sim City come to life. A seed sprouts into a sapling, which before long becomes a towering tree. Orascom prunes along the way, and before long the fruit is ripe for the picking.
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| El Gouna is a 36.8-million-square-meter destination in Egypt that includes 18 hotels. |
Sawiris’ success has attracted the interest of governments the world over. After tackling that first project in Egypt, he’s since worked elsewhere in the country, as well as Ras al-Khaimah in the United Arab Emirates; Oman; Montenegro; Morocco; and the United Kingdom. Orascom’s most recent project is Andermatt, a self-sustainable Alpine resort town 120 kilometers south of Zurich.
Hotels have played a crucial role in nearly every project—something that surprised Sawiris himself. He never liked the hospitality sector, he admitted freely. He deemed it as too risky. Only after he realized the crucial role such properties play in the development of any community did he truly embrace the sector—and the revenues he’s been able to generate along the way.
Orascom has approximately 30 hotels in its portfolio at present. The group’s managed some themselves and has employed third-party operators in others. Brands, partners and other players don’t make much of a difference, he said. In his experience, it all comes down to the GM.
“It’s amazing how the manager of the property ends up becoming almost more important than the management brand,” he said.
When his assets are overseen by strong GMs, Orascom’s hotels prosper. But when less-capable captains take the helm, performance slips faster than a toddler wearing wool socks on a freshly waxed floor.
But it’s not all about profits, Sawiris said. Philanthropy plays a part as well. He seemed believably genuine in his remarks, particularly when he said his proudest accomplishment to date was developing housing for 35,000 previously slum-dwelling citizens outside Cairo.
“You created a small town that would have otherwise been living in slums. You give them the schools the hospitals, all the works. … This is the most fascinating project of all,” he said.
Were they all successes? Certainly not. “I could write a book on what you shouldn’t do,” Sawiris, an Egyptian-born mechanical engineer by training, said.
“But I always fix them. You do a mistake, you fix it, and then you move on.”
I’m just excited to see what he fixes next.
Now on to the usual goodies …
Stat of the week
11.8%: Increase in revenue per available in euro terms for Ireland in the 12-month period through January 2013, according to STR Global, sister company of HotelNewsNow.com. The country’s hotel sector, which suffered dramatic declines during the downturn, saw performance benefit from improving demand levels with 4.9% more rooms occupied in the reviewed timeframe.
Quote of the week I
“At an investment forum like this what should we talk about is really the drive of this industry. We should not talk about brands anymore. We should talk about investment, management, skills, who has the best model, who is running business at a high productivity. The stars of this stage should be all the managers, not the brand. I wish that would happen next year. That is the problem we have in this business—we believe in brands, but we cannot believe in them anymore.”
—Anders Nissen, CEO of owner/operator Pandox AB, pulling out his well-worn hammer to put another beat down on the global hotel chains, who he criticizes have lost touch with the industry as they’ve pulled out of real-estate ownership.
Nissen has beaten this drum before. Like him or hate him, give the guy credit for speaking his mind on one of the largest stages in the hotel industry during a general session at IHIF.
Quote of the week II
“Either they are wrong today or they were wrong then. My own view is they were probably wrong both times.”
—Arne Sorenson, president and CEO of Marriott, regarding the U.S. sequestration lapse, which could see trillions of dollars in cut government spending during the next decade. Politicians initially designed the cuts to be so painful that they would never be allowed to go into effect. But in failing to compromise on a new budget, politicians allowed for just that—and once again displayed the dysfunction that essentially has paralyzed the U.S. political system.
That Congress failed to act responsibly is not surprising. That the U.S. economy—and consumers—have displayed such resiliency in the meantime, certainly is. Many at IHIF suggested the private sector might be strong enough to offset the devastating, trillion-dollar cut in government spending.
Quote of the week III
“When you wake up in the morning, who do you want to kill?”
—Laurence Geller, former chairman and CEO of Strategic Hotels & Resorts, posing a question to Rezidor Hotel Group’s new CEO Wolfgang Neumann during a “New CEO” panel at IHIF.
Geller’s cheeky, pointed moderating style is off-putting to some, but I’ve always found it refreshing. As his persistent—some would call reckless—approach to hotel acquisitions has proven, the guy typically gets what he wants. That means panelists can’t dodge the tough questions. In this case, Neumann eventually acquiesced and named Hilton Hotels & Resorts, Marriott Hotels & Resorts and Sheraton Hotels & Resorts as his primary competitors for Radisson Blu. Rezidor’s mid-tier Park Inn by Radisson faces its biggest competition from the likes of Holiday Inn. (Neumann’s response to Geller? “I don’t want to kill anybody … but I’m very competitive.”)
Reader comment of the week
“Whether it is Brand company or Management contract or Third Party Management co.; It is essential that they carry certain asset weight of what they manage and bear and share the accountability for performance. That is a level playing field for the good of all.”
—Commenter “K.V. Simon” responding to harsh criticisms of global brand companies from Anders Nissen of Pandox AB, which were shared during a general session at the International Hotel Investment Forum. (See quote of the week I.)
Email Patrick Mayock or find him on Twitter.
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