On the second day of the Gulf & Indian Ocean Hotel Investors’ Summit, speakers discussed the development prospects of some of the region’s hottest markets.
ABU DHABI, United Arab Emirates—Discussion during the second day of the Gulf & Indian Ocean Hotel Investors’ Summit focused on some of the markets that dominate the region.
The region’s top markets include Indian Ocean stars the Maldives, the Seychelles and Mauritius; African nations such as Kenya, driven by domestic and non-governmental office business; and the Middle East itself, notably its two biggest markets of Saudi Arabia and the United Arab Emirates.
While some uncertainty exists, hoteliers in the region are mostly confident. The demand to travel is there for all to see, and key demand generators are in place.
Discussing the Middle East’s most dominant market, panelists at a session titled “Dubai is in danger of being overbuilt and could be heading for a hard landing” concluded that the emirate is in for a tough couple of years in terms of supply and demand disparity.
“Supply and demand will not be perfectly correlated in Dubai, and there will be micromarkets where there will be temporary oversupply,” said Olivier Harnisch, CEO of Emaar Hospitality Group. “Before, we were blessed with linear growth rates, and we have not been so good at understanding volatility.”
Russel Sharpe, COO of Citymax Hotels, said Dubai’s upper-tier hotels are blurring rate between segments.
“The line has been rubbed out in terms of rate between upper 4-star and 5-star (hotels),” he said. “Where is the demand coming from, and at what price? We were considered an expensive destination, and that is now not the case. Singapore went through the same problems, and Dubai is moving in its direction.”
Luxury product in the Indian Ocean is not inured from challenges either, according to sources.
On a panel titled “Does one type of luxury product offer better investor returns than others?” Christian Nader, VP of development at Kempinski Hotels and Shaza Hotels, said changing global economics and heightened competition means hotel developers must understand their target audience, or “know who you are building for.”
“Ask yourself what is the maximum supportable investment of (a) project versus the rate capacity of the market at any relevant level of luxury?” Nader said. “And carefully assess the impact of value engineering versus brand standards versus the ability to deliver relevant luxury and drive (average daily rate).”
Panelists at a roundtable session titled “Can you secure debt for hotels in Africa?” said the problem there continues to be the lack of expertise in regional banks.
“Owners and developers in Africa see (obtaining) debt as the biggest pain point. For the banks, so much goes back to who is the promoter and what is the guarantee structure,” said Johannesburg-based Xander Nijnens, EVP of sub-Saharan Africa for JLL’s Hotels and Hospitality Group.
Quotes of the day
“Dubai has created something out of what people would have said was not much. Ask taxi drivers in Bangkok, or in a suburb of Atlanta, and if three out of 10 have not heard of Dubai, I will buy you a bottle of your favorite drink.”
—Jalil Mekouar, CEO, hotels, at Dubai-based real-estate developer and owner-operator Majid Al Futtaim.
“Think like an owner but operate like an entrepreneur, and avoid becoming institutional at all costs. Stay interesting.”
—Roy Paul, development advisor, Rocco Forte Hotels, speaking about how his firm looks at entering a new market.
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