CEO interview: Sumair Tariq
R Hotels CEO explains why franchising is the way forward for the group
CEO of R Hotels, Sumair Tariq explains why franchising is the way forward, and reveals his key goal for the Ajman firm is to enter the stock market within five years
Since its launch seven years ago, R Hotels, the Ajman-based hotel subsidiary of 2005-established multi-faceted business group R Holdings has come a long way.
Its first property, Ramada Hotel & Suites Ajman opened in 2008, and the following year Ramada Downtown Dubai launched. Since then, the group has announced a AED1.5 billion (US $408.7 million) investment to double its portfolio to six properties by the end of 2015.
This came just three years after the appointment of Pakistani national Sumair Tariq, who was brought on board in 2010 to head up the hotel division as managing director of R Hotels.
“R Hotels is a very important focus for the holding company,” Tariq told Hotelier Middle East during an interview at the company’s headquarters in Ajman.
“I haven’t done the numbers but the hotels arm will be maybe 15% of the holding company.
“I think it remains a very important development focus for the holding company and I would say it is one of the core divisions.”
An owning company first and foremost, Tariq explains that R Hotels’ USP as an operator is a keen understanding of how to generate return on investment.
“That’s the key difference from when you have a hotel and a third-party managing it,” he says, explaining that all of the company’s properties are currently franchised under Wyndham brands.
“They may not realise the importance of an investment that you are looking to make in your building.
“We are very customer-focused, but we are also very cautious about investing in the right areas. It’s not just an investment to make you look good, it’s something that will either benefit the bottom line or benefit the guest. This is one of the key areas that differentiates us.”
Today, R Hotels manages and operates three hotels under the Ramada brand in the UAE — Ramada Downtown Dubai, Ramada Hotel & Suites Ajman and Ramada Beach Hotel Ajman.
The firm also has one serviced apartment property on JBR Walk, Hawthorn Suites by Wyndham.
This is in addition to two projects in the pipeline, both of which are part of the aforementioned investment plan, and for which franchisors have not yet been confirmed.
An acquired property on Al Mina Road in Jumeirah, will house an upscale three- or four-star property and is expected to open in the second quarter of 2015. This is in addition to the company’s first sharia-compliant four-star resort and spa on Palm Jumeirah, announced at the end of last year. Set for a Q4 2016 opening, R Hotels invested AED500 million (US $136.2 million) in the project.
The property is currently at the piling stage according to Tariq, who hints that it will be a “holistic resort” with a “renowned” spa operator. “We’re going to provide a product that is missing. We have planned it very carefully because a lot of people would have a different opinion about a four-star dry hotel on The Palm, but we are bullish on it,” he says, adding that the company is in talks with “a few” franchisors.
“We’re shortlisting them now but it’s still too soon to sign off. It’s scheduled to open in 2016 so I think within six months we will have chosen an operator for that.”
Given the track record, it would appear there is a strong likelihood Wyndham will be the franchisor of choice again, however Tariq claims the company is considering other options this time.
“We have a very strong relationship with Wyndham. We’ve been with them for the last six years. We know how they operate, their flexibility, their strengths and we also know their weaknesses.
“We are not committed to always opening a Wyndham property; we don’t have any exclusivity with them, so the decision to choose a brand is multi-fold,” he says, admitting that Wyndham however, does accommodate R Hotels’ alcohol-free model. “We are dry hotels, so this limits the brands and we need that flexibility to operate.”
Choices are also restricted by the fact that several operators don’t do franchise agreements.
One that does however is Accor, which is one of the firms being considered for the operation of the Palm Jumeirah property. R Hotels is also in talks with European operators that are not yet present in the region.
“These are prime locations so there’s a lot of interest from different operators and companies to come in. For example, the Ramada Downtown Dubai was an amazing location for Wyndham and this was a win-win situation for both parties.”
One disadvantage of the franchise model in this part of the world however, is managing expectations. Tariq exemplifies the discrepancies that may be encountered between a Hawthorn Suites in an average location in the US, selling for US $50 per night, compared to the Hawthorn Suites on JBR Walk, which has its price point at around the $300 mark.
“[Guests] have to reconcile the differences and there is that positioning that needs to happen,” he says.
This focus on key locations is certainly one of R Hotels’ USPs, particularly being an alcohol-free operator. Since achieving a five-star classification usually requires an alcohol licence in the UAE, the operator’s prime locations of Downtown Dubai and JBR Walk, and now Jumeirah and Palm Jumeirah have allowed it to keep its price point closer to the five-star mark.
“We don’t think the requirements to get a five-star add a lot of value,” explains Tariq. “For us, the property, the location, and the service will determine the price point; not the star-rating. We can focus on the guest services and we can focus on bringing them there, rather than on amenities and the building.”
Despite these potential misconceptions in terms of positioning, Tariq contends that franchise agreements offer up “more advantages than disadvantages”.
“It gives you the flexibility to have your own strategies, but to benefit from their systems and their name.”
Quick decision-making processes are also a bonus for this model.
“Any good idea and we immediately roll it off.”
Having honed its management expertise over the last seven years of operating in the UAE, Tariq admits it may soon be time for R Hotels to begin managing hotels owned by other firms.
However, this would happen when “development stagnates, so when we’re not stretched and are looking for other revenue streams”.
“There are a few proposals out there but we’re very picky.
“We don’t just want to go out and manage for others until we are sure of the results.
“I do see one day R Hotels as purely a manager of third-party hotels, apart from owning and operating our own hotels.
“I’m very proud of our management style, our ethics and the way we have developed our hotels and I think owners can benefit from our experience,” Tariq asserts.
Managed hotels would also be operated as franchises according to Tariq, who claims he is not currently interested in the company developing its own operational brand.
“Within the team there’s a lot of discussion on the value of having your own brand, and as we expand further this is something we’d maybe consider.
“But at this stage we’re pretty happy with what we have, it allows us to focus on the development.
“If you’re going into the brand side it would take a lot of our resources. We currently have more focus on our acquisitions and development. It’s very easy if you have a known brand supporting you to start, versus a new brand.
“I don’t rule it out, but it’s something for the future.”
Future plans also include potential expansion into Saudi Arabia, and Makkah, Madinah and Jeddah are key targets. Additionally international plans are being discussed, with London on the horizon.
“We are looking into serviced apartments in London,” Tariq reveals. “On the real estate side we do have some investments in London and we’ve been actively looking over the last year or so.
“Maybe in the next two years you’ll see something.”
Hand-in-hand with these expansion plans however, is Tariq’s keen ambition for the company to become listed on the stock market, and he asserts this will ensure its continued success.
“In terms of owning and operating portfolio I can safely say we’ll have double [the number] we have right now within the next five-10 years, but more importantly, I think we’ll be a listed company.
“I think the success story behind R Hotels is very sellable and the potential is far greater than we, as a company, are able to achieve.
“I think with more partners we can grow much faster than where we are right now.”
R Hotels’ Palm Jumeirah property
Proposed opening date: Q4, 2016
Location: East Crescent, Palm Jumeirah, Dubai
Investment: AED500 million (US $136.2 million)
F&B: All-day dining restaurant and poolside bar
Facilities / services: Spa for men and women, gym, swimming pool, sauna and steam bath, wellbeing treatments, fitness and nutrition programmes, indoor and outdoor play areas, childrens’ entertainment
USP: The first four-star sharia-compliant hotel on Palm Jumeirah
R Hotels’ Jumeirah property
Proposed opening date: Q2, 2015
LOCATION: Intersection of 2nd December Street and Al Mina Road, Jumeirah, Dubai
Investment: Part of a AED1.5 billion (US $408.7 million) investment
F&B: All-day dining and banqueting facilities
Facilities / services: Gym, swimming pool, concept spa and salon, meetings space, business centre, retail space
USP: Targets business travellers with close proximity to Dubai World Centre and DIFC