‘Budget hotels signal market maturity’

A habour view of the new InterContinental Festival City

Heading up one of the largest hotel operating groups in the region, InterContinental Hotels Group chief operating officer for the Middle East and Africa Chris Moloney sat down with TTN’s SHALU CHANDRAN to talk about the region’s big, budget hotel trend, while letting us in on what the two Festival City MICE-focused properties will offer.


All these announcements at ATM this year, are they a sign of market maturity? Or are all these hotels too fast too soon?
Not at all. Not in this market. Particularly not in the economy sector, which hasn’t been developed at all. In fact it is important to open a larger number of properties in the region because you need the distribution. It is very difficult to establish a brand one hotel at a time, you need to develop 30 hotels in a short timeframe so that there is an absolute understanding of that brand. The market within the Gulf and parts of the Levant has matured beyond the high-end brands needed to service the government, and is now ready for different propositions. And with passenger arrivals going from six million to 15 million, there’s an undersupply at the moment. The same increase, though not the same numbers, is happening across the Gulf.
The state of oversupply is a risk we have to be prepared for. Singapore, for example, saw that in the mid-80s, but today the industry has recovered. But the infrastructure in the Gulf is developing at the same speed as the hotel developments in the city, so there is a requirement for these additional hotels.
We can see the investments that are taking place with these mega-projects and it’s astronomical. As we heard at the AHIC, there is tremendous turnover from the investments and there is great liquidity in the market. Therefore you have got all the components for this mass development to take place.

There’s a lot of noise about the Dh600 million InterCon properties at Festival City? When do they open?
We are very proud of that property and we are very much looking forward to seeing it open. We expect that within the first quarter of 2007.

With a convention centre is the property targeting only the MICE market?
Yes, absolutely. We have a unique location. The convention centre overlooks the creek and will be fronted by a walkway next to the water. It will be a superb facility. We are very excited about both properties and the convention centre and the prospective business it will bring, especially since we are looking to cover every aspect of MICE requirements. Within the Festival City are a large number of major brands and we want to make sure we have the facilities to launch all their new products in a unique environment.

Two hotels right across each other, will they compete?
Not at all, they will complement each other. The InterContinental will be a high-end product with a large portion of suites, and a different room proposition to the Crowne Plaza. The majority of the F&B outlets will be located within the Festival City arena below the InterContinental. The Crowne Plaza will be slightly smaller but very efficient in design and will specifically service the convention centre.

With Holiday Inn Express, you’re making a bid for the budget market. What are the market challenges ahead?
What is extremely important in the economy sector is getting the right location. You need to understand who you are going to service with that proposition, what the current requirements are and the future propositions for that property. Our Express by Holiday Inn is what we call ‘limited service’; so we do not have extensive F&B outlets. We have some quality rooms provided to leisure and business travellers and the latest technology in the room. We service the rooms and provide breakfast.
It is a very specific proposition with a very specific need. There are a large number of players coming into the market, but its how they come into the market that is important, and we feel that we have a very solid brand to look forward to.
There will clearly be a requirement of the existing one- and two-star hotels to upgrade their standards. Consistency is a real issue and will be addressed with major operators brining in established brands.

When can we see the first Holiday Inn Express in Dubai?
We expect to open at the end of next year. Locations have already been determined, designs finalized, now it’s just a matter of construction.

What other markets are you looking at for budget hotels?
We see prospects in Kuwait, Bahrain, Lebanon, Jordan and Saudi Arabia. You will see different markets appearing simultaneously, and within a very short period you will see the brand across the Middle East. These hotels will just marry into our existing system.

With Bawadi, the Dubai government announced 29,000 three-, four- and five-star rooms – how will that affect business?
It will not. If you look at the model, it is very much destination-oriented. And that is what we are doing too, focusing on the destination as well. It’s a little bit like the MOE with the ski dome and the mall, which is the primary source of their business.

Beyond the Middle East, where do you see an area for growth for IHG?
Clearly in Asia, China continues to be a major hub. We have been in China since the mid-80s with the Holiday Inn and there is tremendous expansion there. India is of great interest since that market is expanding and apart from the mega cities, it’s not yet matured. There is also Eastern Europe and Russia – and these markets are open to all our brands.
With regards to specific brands, we see opportunities in North America for the InterContinental brand, and the development of the new brands, because as the market matures and evolves, there is always room for different products. In a mature market locations become very difficult, because there is an existing distribution and you want to avoid impact, so you develop new products.