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GM Survey 2018: Rising above the competition


Shishira Sreenivas, January 13th, 2019

The Middle Eastern hospitality market has definitely experienced a growth spurt in terms of hotel supply, yet has continued to battle with the downward pressure on average daily rates (ADR) and revenue per available room (RevPAR).

In 2018, the UAE alone opened 2,500 keys by Q3 with 98% of the openings in Dubai. Saudi Arabia, as of Q3, has a supply of 49,760 keys, Egypt, which is experiencing a positive turnaround in tourism, currently has a supply of 78,200 hotels keys. Other major capital cities in the region like Kuwait City, Muscat, Manama and Amman now offer 23,700 keys combined as of Q3.

However, with the changing landscape of the incoming source markets such as China and India, properties have had to contend with the growing number of price-sensitive visitors and have had to continue to face rate compression in most markets, according to Colliers International.

In the annual GM Survey 2018, Hotelier Middle East reached out to general managers working in the region to ask their take on the current hospitality situation. While almost all participants agreed on the growing concern regarding supply, they remain positive on the outcomes in the coming years. As a matter of fact, 44.74% of the respondents experienced a slightly higher occupancy rate in 2018 than in 2017, 7.89% reported a significantly higher occupancy statistics while 31.58% notes the same levels as last year with the rest experiencing slightly lower or significantly lower.

With room rates, on the other hand, general managers have had mixed experiences. 17.95% of the participants experienced significantly lower rates compared to 2017, 28.21%, while  25.64% experienced no change, 23.08% reported slightly better performance from 2017 while only 5.13 stated significantly higher room rates in 2018.

According to Colliers International head of hotels Christopher Lund, to succeed in this competitive market, general managers have to think out of the box.

“The increase in competition with the continuous opening of new hotels is the primary concern for GMs in the region. They must ensure their property stands out and delivers high-quality service to secure bookings and maintain an adequate cash flow,” Lund says.

When asked what factors general managers consider most important for the success of the hotel, 70% of the respondents said branding of the property was pivotal for long-term positive outcome. 62.55% stated location as a necessity for success. General managers in the survey also pointed out loyalty programmes as a factor followed by value for money for the guests, luxury or personalised services as focus points for hotels in the region.

Al Bustan Centre and Residence chief operating officer Moussa El Hayek notes that general managers should also pay attention to changing trends in the region: “In the hospitality industry, GMs always face a multitude of challenges, considering business demand and strong competition as a lot of new hotels are being opened from time to time. Capitalising on branding alone will not suffice but maintaining good customer service and up -to-standards quality is more important. Trends are reshaping the industry and so are the preferences of the clientele that’s why continuous development of products and services is a must these days.”

Nayla Chowdhury, general manager at the world’s largest Hampton by Hilton Dubai Airport, says it’s also important for GMs to have a “sound strategy in place”. “Dubai is a very dynamic market and as GMs the focus is always to ensure that you maximise the revenue potential for your property. Therefore you need to consistently keep your eye on the ball and have a sound strategy in place to reach your target.”

Source market

For hotel companies and properties in the region, visitors from the GCC still make up the largest chunk of guests at 79.49%, with higher amounts of dispensable money and access to travel in the Middle East and North Africa region. They are followed by European travellers, who make 76.92% of the hotel guests among the hotels operated by the respondents. Travellers from the wider region, such as Lebanon and Jordan, make up 46.15%. Growing inbound visitors from the Commonwealth of Independent States (CIS) and Russia accounted for 28.21% and as mentioned earlier, visitors from China and India are growing year-on-year. 

The number of Chinese tourists travelling to the GCC is expected to increase 81% from 1.6 million in 2018 to 2.9 million in 2022, according to data published ahead of Arabian Travel Market (ATM) 2019.

The latest research from Colliers International, in partnership with ATM 2019, reveals that the GCC countries currently attract just 1% of China’s total outbound market. However, positive trends are expected over the coming years as 400 million Chinese tourists are expected to go abroad in 2030 – up from 154 million in 2018.

Premier Inn Ibn Battuta Mall general manager John Raffoul says his hotel is working with Dubai Tourism (DTCM) to attract and target the emirate’s top source markets. “We work hand in hand with DTCM and support their initiatives. We focus on what is relevant to each hotel’s business module and target markets accordingly including Dubai’s top source market - India, China, Saudi Arabia, and the Far East. We are also working on attracting more families and leisure travellers across the globe, as Dubai offers an incredible range of leisure attractions such as Dubai Parks & Resorts, IMG World of Adventure, Ibn Battuta Mall, Burj Khalifa, and many others which our guests can enjoy, and are incorporated into our sales tactics,” he explains.

Besides the existing source markets in the region, Chowdhury reveals she’s targeting other growing markets, too. “We are trying to target the growing numbers of visitors from Africa and Latin America, in addition to all the other markets that are well established in the area.”

Challenges

In the survey, when asked what general managers expect in terms of the biggest hurdles affecting hotel performance in the next 12 months, respondents listed increased competition, political instability, rising inflation, staff retention, recruitment and training, and taxes such as the recently implemented Value Added Tax (VAT) as the top concerns. Rising utility costs, possible renovations, securing return on investment, and for some respondents, slowing economy and lack of government support as well as political instability were major causes for concern.

“Finding, recruiting and retaining the right talent is one of the challenges we face every day, as well as developing and growing our talent to ensure the ultimate guest satisfaction. The second challenge is managing overall property expenses and revenue, and looking at how we can maximise all resources for better, efficient and more profitable outcomes,” Raffoul explains.

With pressure to show return on investment to owners and maintain profits, Lund notes that general managers will have to focus on cost saving measures to ensure healthy figures.

“It’s natural for existing hotels to see a compression in revenues over the next year due to new supply, and GMs will therefore have to be creative with their cost saving measures to ensure owner returns remain stable while the guest experience is not impacted,” he states.

Chowdhury also notes that “transparency” is also key for healthy relations with owners. She says: “I think the most critical aspect is trust. As GM it’s very important that we safeguard the asset that has been entrusted to us and deliver the expected financial targets. It is crucial to maintain transparency and make decisions for the hotel that delivers best performance.”

Looking forward

Major hotel companies like Marriott International, InterContinental Hotel Group and AccorHotels are steadfastly expanding their respective portfolios.

Marriott has signed for more than 30 properties and over 5,000 rooms in the region in the last 12 months with introduction of new brands like Edition, AC Hotels and Element driving in competition with different hotel categories in the region. 

IHG recently launched the first voco hotel in the MENA region and will be re-flagging Nassima Royal Hotel and has also revealed plans to open several Holiday Inn Express properties across Saudi Arabia.

AccorHotels on the other hand, in Q2 2018, acquired Swiss-based Mövenpick for US$599 million and the deal integrated Mövenpick’s 84 operating hotels into Accor’s existing global portfolio of more than 4,500 hotels.

As evidenced by the statistics, the competition isn’t slowing down by any means. With big brands bringing in a variety of options for the inbound travellers. Lund advises that general manager should make visibility and relevance a priority to ensure continued commercial success.

“Net profit is the most important element during a highly competitive market. As a result, GMs will have to ensure the continuous flow of revenues by maintaining adequately staffed sales and marketing departments to ensure hotels maintain their presence and relevance to their consumers,” Lund explains.

While Raffoul acknowledges that key indicators are on a decline across the board in the region, he expresses hope for a positive turn out in Q4 2019 in the lead up to Expo 2020 in Dubai.

Raffoul says digital presence is equally important for properties to drive sales and keep up changing demographics and market trends. Hayek also brings to attention that building a solid digital presence helps cope with demands as the “majority of businesses are coming from online bookings and reservations as such opportunities for hotel revenues are boosted.”

Adding to Hayek’s point, Raffould explains: “Over the last decade, we have seen a drastic consumer behaviour change shifting from laptop users to mobiles users when making a hotel reservation. In addition, through this digital era, our guests create memories and share feedback instantly, allowing faster and better engagement with other users, which impacts decision making. We are also able to showcase our products, team members, guests and what makes us different with the help of improved digital presence.”