Brand leaders see benefits of closer ties with owners
Brand leaders see benefits of closer ties with owners
23 APRIL 2018 8:29 AM

As supply enters the Middle East to potentially put even more strain on average daily rate, brand leaders in the region are prepared to do their part to boost performance, increase direct bookings and appease owner frustration that the only concern is pipeline.

RAS AL KHAIMAH, United Arab Emirates—Brands do not act like lone wolves in the Middle East and understand that success for owners equals success for everyone, according to sources.

Such a defensive comment came during a session at the recent Arabian Hotel Investment Conference titled “Leaders in the hot seat.”

Tellingly, the session immediately followed one titled “What do investors want from the operators?” which included frank criticism of brands’ conduct and focus.

Simon Vincent, president for Europe, Middle East and Africa at Hilton, was quick to defend the brand chains, which on this panel also included AccorHotels, InterContinental Hotels Group and Marriott International.

“It all works best when our goals are aligned. Sixty-five percent of our pipeline investors are repeat investors, and that does not sound like an unhappy camper,” Vincent said.

“Tourism accounts for 10% of (gross domestic product in the United Arab Emirates), and our success runs in parallel with that. We have collectively produced incredible results,” he added.

Alex Kyriakidis, president and managing director for Middle East and Africa at Marriott International, agreed.

“You get to Marriott’s size by partnerships, and I have seen this process through four recessions. … One thing you see is the critical importance of when you have an economic cycle of sitting down with your partners,” he said.

“Yes, we are feeling acute pain in the Middle East of supply. The market is absorbing it, but we’re taking pain on rate, so it is more than important now to sit down with owners and discuss what levers we can use.”

Brand skill sets
Pascal Gauvin, managing director for India, Middle East and Africa at InterContinental Hotels Group, said brands also must focus more than ever on what skills they can bring to the table to boost overall performance and profit.

“We’re focusing on being an operator, not an owner. Brands are more important than ever before, as all the money we make is invested in technology, marketing and training,” he said.

Hilton’s Vincent said one mistake operators permitted was to allow online travel agencies to come between the brands and the customer.

But, he said, it’s not too late for the brands to hit back. “It will be done by digitilization. Do not underestimate the legacy brand to be able to do this,” he said.

During another panel, titled “OTA and rate parity: The unconventional truth,” Filippo Sona, head of hotels for the Middle East and North Africa at business consultancy Colliers International, said OTAs are of particular concern in the Middle East.

Sona said 75% of hotel bookings in the region are via OTAs, the highest in the world, with Asia-Pacific coming in second at 72%.

Kyriakidis said one way the brands are challenging OTAs is by efforts to perfect seamless digital platforms for guests throughout their hotel journeys.

“Why do we have the brands we do? It’s because the guest says this is where I want to stay. We have to do more on distribution and acquisition,” he said.

Vincent added: “This is the power of our commercial machine. Direct is the lowest point of acquisition for the owner.”

That machine is bringing more branded hotels to the region, panelists said.

“Seventy percent of our partners are regionally multi-segment, which shows a strong commitment to this region, and our recent buys allow us to bring new products in,” said Olivier Granet, CEO for the Middle East and Africa at AccorHotels.

Vincent said Hilton plans to triple its portfolio in the Middle East and Northern Africa over the next three years, which includes a 450-room Hampton by Hilton in Ras al Khaimah.

Kyriakidis said Marriott also is concentrating on the UAE, Saudi Arabia and Egypt.

“Customers are driving that demand, and that has not been talked about much in this panel,” Vincent said.

Gauvin said AccorHotels’ focus is on making “sure the customer experience is impeccable,” which includes “a new division to take care of F&B.”

Relationship tweaks
The panelists said they are aware that success is dependent upon relationships. The general consensus was that work always needs to be put into the marriage of brands and owners.

A large part of that is a focus on owner returns, the panelists said.

“The first responsibility is to provide the best guest service and experience, and if we do not do that then the owners should come to us. But when (operators and owners) sign agreements, we all know there will be ups and downs,” Gauvin said.

Granet said the brands’ attention is primarily on “the day-to-day management of the platform and developing the system for guests, (but) when there is a problem with owners, we’ll fix it.” He added that in the Middle East, approximately 92% of hotel deals are management agreements.

“Communication always could be better, but I do spend 50% of the time meeting owners,” Gauvin said.

Kyriakidis said the general model of chains being asset light remains the correct strategy.

“There is more risk in operators taking a piece of the investment. It is better to have clear lines,” he said.

He added that “the industry is not a short-term bet. Cycles will come and go, so you have to have the checks and balances in place to protect both sides.

“Ultimately, it is relationships, relationships, relationships.”

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