BERLIN — The growing interest hotel owners in the Middle East have in third-party managers has opened a wide range of opportunities for Valor Hospitality Partners.
In a video interview at the International Hospitality Investment Forum EMEA, Julien Bergue, co-founder and managing partner, Middle East and CIS at Valor Hospitality, said the company is focused on growing even more in the region.
“Suddenly we went from literally zero hotels to today we have 15 hotels in Dubai itself,” he said. “We’re growing the pipeline of a complete region. We’re entering Central Asia. We are entering all the destinations that we are not in.”
Since the pandemic, hotel owners have been more demanding about what they expect out of a property, and while brands are powerhouses for distribution, communications and marketing, focused operators are delivering on what owners need, Bergue said.
“The only way for a brand to really get traction and expand, in reality, is to move to a franchise model, because at the end of the day, despite being big, you can’t really expand that wide,” he said. “So, having the support of operators like ourselves who can ensure protecting the brand standard, ensure that we’ll put correctly their identity and respect that identity with various owners, help them to have a broader expansion.”
Over the next 18 to 24 months, Bergue said he wants to reach 5,000 to 5,500 hotel rooms in the Middle East. Valor Hospitality is in a good spot to reach that target. The Middle East is becoming the new reference point of hospitality, design, experiences and diversity.
Owners who work with Valor Hospitality typically have their hotels managed by brands but want to move to the franchise model to have more control, he said. Greenfields are another avenue for new management contracts, but they’re a lengthy process and not a priority. There’s also a substantial trend in conversions through flags changing or a building being repurposed.
Often owners will build two to three hotels and turn to Valor to help them develop them, he said.
“So, we build the hotel completely to spec, right? Completely to spec,” he said. “And they call us 60 days before, negotiate a contract and say, ‘Listen, here’s your hotel. It’s ready. Give us an agreement and take your hotel and run it.’”
There are respected third-party management companies competing for market share in the Middle East now, Bergue said. There are so many hotels opening and operating in the region that there’s enough space for everyone.
One approach some competitors take, however, is to charge low fees, something that doesn’t work for Valor Hospitality’s model, he said. Some are trying to gain market share through discounting the services to charge a low fee, but that means some corners will be cut. That issue came up in a recent negotiation with an owner.
“We said, ‘If you want to be with us, it will be slightly higher, but we commit to a certain deliverable, and we do that,’” he said. “Then after a couple of weeks, [the owner] came back and said, ‘OK, it’s yours because we prefer that.’”
Having more third-party managers in the region means hotel owners will be more familiar with the operating model, Bergue said.
“When we look at it in the next 10 years, then the best person with the best track record will succeed, and the more educated owners around the space, the better it will be for us,” he said.
For more from the interview with Valor Hospitality's Julien Bergue, watch the video embedded above.