DUBAI, United Arab Emirates—The biggest challenges facing owners and operators in the Middle East are familiar ones within the global hotel industry.
At the top of the list is labor—in particular, finding the growing number of skilled associates required to fill a growing number of hotels.
Not far behind? Driving direct bookings.
So concluded the “Regional leaders’ panel” on Wednesday during the 2015 Arabian Hotel Investment Conference.
“The biggest challenge we have in the region, setting the geopolitics aside … is human capital,” said Alex Kyriakidis, president and managing director of the Middle East/Africa region for Marriott International.
“We are going to double in size in terms of operating hotels by 2020,” he added. “To do that, I’m going to need to grow the total number of our associates from 30,000 to at least 40,000. … Where do we source 10,000 new associates from?”
Particularly acute is the need for Arabic-speaking employees, Kyriakidis said.
This challenge is not new, said Christopher Knable, COO of Katara Hospitality.
“It’s the hospitality business, and it’s a people business. … Human capital has always been the No. 1 challenge,” he said. “Increasingly in this region, the right talent has to be the people that are born in this region.”
He said several countries now require a certain proportion of company’s workforce to comprise nationals.
“The challenge is how to develop those people, but more so than that how to attract them to the business. Perhaps hospitality is not viewed as being the best professional to be in this region,” Knable said.
At Dur Hospitality, CEO Badr Al Badr is determined to turn that obstacle into a competitive edge.
“We have to partner with the international operators, with the (Saudi Arabian) government in particular, to work on training these associates and also making the labor laws more favorable or friendlier to businesses,” he said.
Dur has earmarked 1.5 billion Saudi riyal ($400 million) for 14 new hotels during the next seven years.
Al Badr said women will play an increasingly important role in those expansion efforts. “The power of the female labor force is overlooked in this region,” he said, adding Dur now has a program designed to attract female associates.
“There’s nothing more powerful than seeing someone in national dress working in hospitality,” Knable added.
A necessary evil?
The other big challenge is represented by online travel agencies, which were described during the session as a potentially necessary evil.
“From an owner’s view, we really struggle with this issue,” Knable said. “Part of the premise of the brands is to drive occupancy—butts in beds, as they say. Certainly if the brand channels were to be more effective in attracting travelers to book through them, they’d be much more advantageous to owners.
“We’re seeing tremendous hemorrhaging of profit because (travelers) are looking at OTAs,” he added. “We’re quite keen to know from our operators what they’re doing to make sure guests are booking through their websites rather than through OTAs.”
Kyriakidis said Marriott, which owns, manages and franchises hotels under 19 brands, views OTAs as partners that help owners, where appropriate, maximize value. In the Middle East, OTAs contribute a “very small proportion” of total bookings, he said.
Al Badr agreed. “We think that OTAs are here to stay and probably to grow. We’ve benefitted as owners from OTAs bringing new segments to our hotels that have not been addressed previously by (brands).”
The value of brands, he added, was to keep those guests coming back.
That’s where Marriott is focusing a considerable amount of resources, Kyriakidis said.
“How are we continuing to make sure that the brands are really the main focus for the customer that comes to Marriott and win their loyalty and keep bringing them back? Our rewards program (of 51 million guests) gives me across my region at least 40% of my roomnights,” he said. “That is where we are spending a huge amount of our focus to make sure our customers of our hotels come through our channels.”
Henning Fries, managing director for Al Habtoor Group’s hospitality division, saw a more contentious, if not unsustainable, relationship between owners and OTAs.
“In our business, it’s been tradition to compensate the ones that bring business to your hotels,” he said.
The problem, Fries explained, comes when risks are distributed unevenly.
“We are a bricks-and-mortar business. We hold the assets; we hold the risk. An online travel agent does not hold any of the risk,” he said. “Over time, this situation is simply not sustainable. We are absolutely with the brands to strengthen their resolve of bringing it to a level that is a reasonable business model to take forward in the future.”