Saudi Arabia and Lebanon were regional pillars of strength for the International Hotels Group (IHG) last year, while the market in the UAE has started to pick up, a top IHG official told TTN.
IHG’s MEA chief operating officer John Bamsey also says that IHG will continue to invest across the Gulf and Middle East, launching as many as 36 new properties in the region over the next three years. The company currently has 76 hotels in the Middle East.Bamsey spoke to TTN on the sidelines of the launch of IHG’s fourth Holiday Inn Express property in Dubai, UAE, last month.
Launched in partnership with Ishraq Gulf Real Estate Holding Company, the 381-room Holiday Inn Express Dubai Airport is the largest of its kind in the Europe, Middle East and Africa (EMEA) region in terms of rooms.
Bamsey says that IHG has got off to a good start in 2010 across all its brands – which include InterContinental, Crowne Plaza, Holiday Inn, Holiday Inn Express and the Staybridge Suites– and is optimistic on the back of a recent Deloitte report, which showed that the Middle East achieved the highest occupancy, average room rates and RevPar globally in 2009.
“Occupancy levels are starting to look good in Dubai and that’s a good sign as you will probably see prices move upwards,” he says.
The regional market still faces challenges with demand from Europe - where disposable incomes are currently scarce - still weak, according to Bamsey. However, he says these markets will bounce back once their economies recover.
“The hospitality industry goes through cycles of growth and we will see these markets return as their economies grow stronger,” he says.
Bamsey also points to the inherent strength of the Gulf’s market as a reason for optimism. “What’s fascinating about this market is its underlying strength,” he says, pointing to Dubai Airport which registered17 per cent growth in passenger numbers in January this year, compared to the previous year.
This shows that travel is on the rebound in the region, he says.
And while there are new properties opening in the market, Bamsey says top brands such as IHG’s will continue to find favour over their competitors.
“Yes, there is more supply coming into this market, but the strong brands will become stronger because of their high quality and clearly differentiated products,” he says, adding that IHG’s brand is backed by its global network of properties and sophisticated IT reservations systems. “This is where we score over our competitors.”
Within the region, Bamsey says Saudi Arabia and Lebanon will continue to be top performers for IHG.
“Saudi Arabia is a very strong market and was the least affected by the economic recession,” he says. “There was a lot of inward investment into the kingdom and it was our strongest market last year.”
The other market which was exceptionally strong for IHG last year and continues to do very well is Lebanon, which has bounced back from “some volatile times”.
Across the rest of the Gulf, you are Bamsey sees “pockets of different performances”.
“There is an underlying level of business driven from the economic markets of Europe, which are coming back,” he adds.But has it been difficult to retain loyal customers with guests so focused on price and value for money?
Not so, says Bamsey. “One of our great strengths is our Priority Club Rewards. We have 44 million customers globally. The other factor in this market is that 50 per cent of our business is inter-regional, so we have a good base of business. Saudi Arabia accounts for a lot of traffic flow into the sub-regions.”
And with the green shoots of a recovery starting to appear in some European markets, Bamsey is confident that “strong brands will only become stronger”.
IHG’s net profit fell 17 per cent last year on the back of a slump in business travel across the world, and the Gulf region was no exception, says Bamsey.
“There is a very fine distinction between a business and leisure customer because you can combine those two things relatively easily,” he admits. “With business travellers, there has been a lot of economic pressure on companies that have had to cut back their travel budgets, but leisure travellers have also been affected with less disposable incomes. So, both sectors have been affected, but of course business travellers have had a larger impact.”
Looking ahead, Bamsey says that IHG is still on schedule to open 36 hotels in the Middle East over the next three years.
”The new properties will be evenly spread over all our brands,” he says. “We will look at each market individually. We’ve been here a long time and have a good number of hotels on the ground and strong relationships. We know our market and that is a great advantage for us.
“I am quiet happy to turn down a hotel if we don’t think it appropriate, because we need a long-term business relationship and we have to make sure we have the right brands in the right location. There is a good spread not only in brands but in distribution as well.
“In the UAE alone we have seven hotels scheduled to open over the next two to three years, while we have plans for a further 10 properties in Saudi Arabia. We are also expanding into Africa and will be entering new markets such as Nigeria, Lagos and Rwanda. Some of these hotels will open this year while others, which are currently under construction, will open in 2011.”Meanwhile, IHG has made substantial progress on a billion-dollar refurbishment of Holiday Inns across more than 3,200 hotels and 430,000 bedrooms worldwide
“We’ve made fantastic progress in the region,” says Bamsey, adding that 23 of the 32 Holiday Inns in the MEA region have been refurbished and relaunched.
Bamsey says that IHG’s strategy has always been very clear – to outperform the competition.
“Today with 4,438 hotels globally, IHG is the world’s largest hotel operator by number of rooms but we also monitor our market share versus local competitors,” he says. “If we can drive more revenue through our hotels, whether we own a hotel or franchise, and if the owner can get better returns… that spurs us towards further property development.
“Owners want to be with the best revenue drivers and our focus is always to outperform the competition in every single market. “Our teams are focused on the right revenue segments, right pricing, using our GDS and this is where brands become so strong. We have made substantial investment in our technology and web capabilities and that’s where the power of IHG comes into play.”
by Shalu Chandran