More hotels in the Middle East are adopting third-party—or “white label”—management as the region’s hotel industry continues to mature.
DUBAI, United Arab Emirates—As the hotel industry in the Middle East and North Africa evolves to accommodate midscale product, alternative development funding and economic diversification, third-party “white-label” management companies are finding a foothold in the region.
At an Arabian Hotel Investment Conference panel titled “White-label operators,” advocates of the business model said it provides a tried-and-tested route to securing franchises.
“It is growing exponentially, and the consumer is none the wiser,” if the asset has a brand flag attached it, said Bani Haddad, managing director for the Middle East and Turkey at Dream Hotel Group and managing director of Aleph Hospitality.
Getting a foot in the door was touted as the biggest advantage, especially in growing markets such as Dubai, panelists said.
“It allows the operator to gain experience of getting into harder-to-enter markets and expand their footprint,” said Panos Loupasis, VP of development for the Middle East and Africa at Wyndham Hotel Group.
“It’s a different solution, and the franchisee might need nothing else apart from our software,” said Rana Mukherji, GM of the Middle East and Africa for Bespoke Hotels.
Muhammad Al-Amir, managing director of Omani white-label management firm Riyada International Hotels & Resorts, agreed it might be a different solution, but it also can link local operators with local investors.
“Investors realize the comfort of a local third-party operator,” he said. “It is a perfect marriage. We’re still able to take (hotel ownership firm) IFA (Hotels & Resorts)’s expertise, and the asset retains value when it changes flags as third-party is deemed expert. All our contracts are bespoke.”
Haddad said a growing number of institutional investors are asking for white-label management due to the model’s flexibility.
“We allow termination closure contracts that are not mere gimmicks,” Haddad said. “Of course the first question we get is, ‘So why should I pay the brand and then you?’ In a market new to this, more education is needed to show (owners) will pay a smaller percentage in fees and get higher returns.”
Haddad added third-party management will soon be everywhere in the region in the next few years.
“The model will be shown to work here in the next two to three years,” he said. “And with third parties, there are still the same number of agreements. It is just that the licensing agreements are called something slightly different.”
Attracting quality employees
One concern, according to Loupasis, is how white-label management companies could bring new faces to their assets in destinations where third-party managers don’t have proven track records.
Haddad said a comfort for owners is that he believed brands are even tougher on white-label managers than they are on themselves.
“It translates to higher guest satisfaction and scores. Brands leave nothing to the side,” Haddad said.
Al-Amir said he agreed it is more difficult to attract quality without the presence of a brand, but Mukherji said he felt third-party managers provided more flexibility in terms of developing a successful career.