Roundtable: Managing Expectations
Hotelier Middle East met hospitality industry experts at Jumeirah Emirates Towers to discuss the most pressing issues facing the region's operational teams, which will form the basis of the agenda for the Great GM Debate
Sven Wiedenhaupt, general manager, Jumeirah Beach Hotel
Laurent A. Voivenel, senior vice president, operations & development Middle East, Swiss-Belhotel International
Sandra Tikal, general manager, Palazzo Versace
Pascal Dupuis, general manager, Address Boulevard Dubai
Pierre Delfau, general manager, Southern Sun Abu Dhabi
David Allan, cluster general manager, Radisson Blu Hotels, Dubai Waterfront & Dubai Canal
Hotelier: We have been seeing a lot more of the phrase ‘experiential tourism’ right now. What are your thoughts on this?
Sandra: The addition of all of the extra parks is a great thing for Dubai and we should all be leveraging off it, and we should all be packaging with them. The heritage system now, the art centres, the libraries, the museums, all of these things are cultural and experiential, and people have been waiting for it in Dubai. So it’s a huge opportunity for all of us to bring more tourists into this region.
David: When I think of experiential, I think of it more as a cultural side and historical side. DTCM is now starting to promote the Grand Mosque in Abu Dhabi — those kinds of things are going to help, certainly on an experiential level.
Hotelier: On that note, do you think there’s enough cross-promotion between the emirates?
Pierre: We are trying to develop Abu Dhabi as a cultural destination of the Middle East, with all the museums that are being opened but there’s still a lot more we can do. We don’t do that enough, and in terms of experiential, it all depends on what you’re looking for. Our jobs as hoteliers with finding that off-the-beaten-track experience, that genuine authentic experience is a lot harder. A lot relies on the concierge as well, and how much work they put into those experiences.
Laurent: When you look at tourism, attractions, and leisure, try to do something which is affordable in Dubai indoors — you have limited choices. It’s still quite expensive. I appreciate that the average rate dropped for the first time this year as compared to the year before, but we are still expecting to have an average rate of $187 by 2020; that’s still very expensive. So, if we want to reach 25 million visitors or tourists by 2020, we must think about what can we do outdoors or indoors for budget travellers. US $2.5bn are going to be invested into Saudi Arabia, and Oman announced $2.5bn also with Omran. When it comes to the leisure market, we are looking at exclusive markets; we need to think about others who cannot afford luxury hotels.
Pascal: If you look at the whole dynamic, the theme parks have made it more of a family destination. If you look at what Dubai Opera has brought into Downtown, it is pretty amazing. It has brought different clientele to our hotel and restaurants. And then if you open up the connection between Abu Dhabi and Dubai, and the rest of the emirates, we’re in a good place.
David: If we want to go down that route, my question is how do you get a family of four, or an awkward-sized family of five or six, in an affordable way from Dubai to Abu Dhabi? Or how do you get to Fujairah or Ras Al Khaimah?
Sven: We have an obligation to be excellent in everything we do but with the interconnectivity between emirates and the experiences in other areas, that’s something we could do a better job of as an industry.
Sandra: We are actually already in a discussion about looking at multi-destination packages with DMCs now because there’s so much to see and everywhere is so close. And there are more opportunities in tourism than sun seekers and I don’t think we’ve nailed that very well.
Sven: The destination has to be the United Arab Emirates. We benefit in Dubai if you have a great time in Abu Dhabi.
Sandra: There is an emphasis on building three- and four-star hotels in Dubai which is essential to tourism growth. It goes to what you were saying that we do not provide enough affordable experiences in Dubai. It’s always been a luxurious, expensive destination.
Sven: Do you not think that with the drop in average rates, we are becoming, by default more affordable?
Sandra: No. I don’t.
Laurent: In Dubai today, you have 680 hotels, out of which 100 are five-star, 114 are four-stars, 363 are between two- and three-star, and 65+ are serviced apartments, and standard apartments are 137. That’s up to today. We are going to have 35,000 new keys coming by 2020 out of which 65% are coming in the five-star and four-star segment. The competition is getting so tough, hotels are selling at lower rates. They expect average rate in 2020 at $187. The rate will drop down because of the mass volume and competition.
Sandra: The courage to stay firm and strong is what is needed at the moment because everyone is forced to compete — because everyone has an owner that requires results. I’m fortunate in some ways because we’re new. The oversupply situation might be temporary, but if this continues for much longer it’s permanent damage to our average rate.
Pierre: The average rate for a four-star hotel in Abu Dhabi is about $65-70. All we see is discount, and you’re right Sandra, somebody has to hold but sometimes you’re the only one at the top trying to hold your rate while everybody is pecking in on the side. But that should make us such an attractive value-for-money destination.
Hotelier: Do you end up working with other hotels or entities to drive tourists to your destinations or properties?
Sandra: It’s complicated. We’re a standalone brand, we’re not part of a hotel group so we need to search for others where there isn’t conflict. It’s identifying other smaller brands that we can partner with, which we are working on at the moment. Some DMCs will package it at a DMC level, it could be a branded property and ours for example. One market which is fantastic for multi-destination marketing is the Chinese market because they love staying in multiple hotels in Dubai, so why not stay in three different hotels across the emirates? I think there is enormous opportunity.
Sven: And I think the big question is: ‘what is authentic Dubai, what is authentic UAE? What is the real Dubai experience and story?’ And what about quality of service because not every decision is driven by dollars and cents. I don’t like that we’re constantly exclusively promoting discounts rather than the quality of the experience.
Pierre: We’ve conditioned people to think like this.
Sven: We have created our own problems by being in this discount market. I am going to stop the discounting in three or four of my restaurants.
Pascal: Even though we have opened recently, this is our strategy. We will not go for happy hours, ladies night, discounts. You come to the bar for its quality and service and experience. I tell you, it works because the quality of the people who come, they spend. This is what we want. But it has to be done from the beginning. We have given Dubai all the coupons and now no one will go for a brunch unless it’s two for one.
Sandra: Why do we as hospitality professionals think we have to drop our prices versus improving guest experience? The authentic experience for me is about improving guest experience.
Pierre: We’re more obsessed with volume than quality. We want to see a restaurant full all the time. We want to see our bars full all the time.
Sandra: As a newer hotel, there is value in The Entertainer. I’m astounded by the discounting in this region, but to use The Entertainer because every single person seems to have it, and to get awareness for your business does work. If you manage it, you can switch them out anytime. To introduce venues to new people and a new location, The Entertainer is unbelievable if it’s done strategically.
Sven: Certain percentage of that crowd chase the discounts.
Sandra: We’ve had no issue with that.
Sven: I understand it as a strategy but can you honestly say you’ve had repeat business with it?
Sandra: Yes. We’re full, and now it’s a really small percentage.
Pierre: As a four-star hotel in Abu Dhabi it’s really hard to sell food & beverage as a destination. We have six F&B outlets and one of them is called The Foundry. We decided to have a brunch. We decided we couldn’t compete with the big brands. So we capped it at a 100 pax, we had service at the table, chef interaction, quality of produce versus quantity of produce. It didn’t work for six months. Introduced it to The Entertainer. They started coming, but we couldn’t carry on with this. The key was to get the footfall to start with and then wean them off. Getting involved with the community, as soon as we were in with a particular community, they started talking about our produce and coming. But the region is bound to carry on using those things, especially now. When you have big brands advertising in The Entertainer, you think, ‘what must I do?’.
Laurent: In the UAE when you look at value of money for food & beverage, it’s off. It’s way too overpriced, the beverages are expensive. I was reading a KPMG report that we have 16,000+ food and beverage outlets in the UAE. 16,324 to be specific, representing about US $14bn. The hotel industry will represent $9.8bn in the UAE by 2020. What does that tell you today? That food & beverage in the UAE is 40% more than what the entire hotel industry will represent by 2020. They expect 19,000 food & beverage outlets according to Euromonitor. The fun part is that the revenue is going to grow by 1.6%, when the number of outlets will only grow by 1.2%.
Hotelier: Changing tracks, how about clustering of operations? Is that something that’s becoming a trend?
Sven: Because we have a critical mass in the city with seven or eight hotels, we have clustering of accounting and HR. We had, in October, clustered sales and marketing and PR, and it’s been a massive thing to do. As a GM, in every part of these, we’ve been able to benefit from it. I get my P/L on the first of the next month, so I don’t have to wait. It’s phenomenal to have speed of information. It’s an extraordinarily logical way to operate when you have critical mass.
Laurent: More and more of the owners are accepting clustering even if they are different owners. I have many, many examples where the owners see the benefits of clustering. Because of the cost of labour is not getting cheaper, and it’s not going to get cheaper. Most of the time, the clustering can reduce the team but it can increase the quality of the people. In the digital world we’re living in, you can even cluster country to country if you have similar type of hotels. As long as it doesn’t take away the customer experience from the property. Everyone who has tried to touch the customer experience with clustering has failed.
David: We’re opening two hotels as a cluster and the third one hasn’t been listed yet. We’re doing exactly that. We’re clustering general managers, we’re clustering sales, HR, security, and IT. Front office, food and drink, and chefs will not be touched at all.
Sven: The big question you get is: what percentage of your time goes to which hotel?
Pascal: We also had great success this year for HR and finance. For us, since the beginning, sales and marketing was always clustered. The question was: how are they going to sell three brands? But it’s working well. But technology is key.
Sven: And as with anything in life, it’s the relationships you generate. I think the ultimate objective was cost-saving but the by-product is that you end up having the best people float to the top. You then attract better talent, and then you almost end up with this inherent efficiency.
Pierre: When the times are good, you tend to find that hotels start employing this [tactic], as soon as the time starts getting hard, everyone looks at savings. And then they think of chopping a few heads. So this time now, we’re looking for efficiencies. And yes it works well but I guarantee that once the time starts booming again, once business starts coming back, you will find that people will be more confident at employing more people and building the structure again.
David: I don’t think so. Ultimately yes, it’s driven by cost, and I can only speak for ourselves. Hotels have been built with a cluster model from the beginning, and if it’s done properly, I don’t think it will start to unravel.
Sandra: Clustering is a group decision, it’s done at that level and often you don’t listen to the people who are affected by clustering and are more frustrated at a cluster journey. There can be a price to pay for clustering.
David: I agree, but it’s about it being done properly.
Hotelier: Another different line of conversation: why is everyone talking about revenue management these days? Has it suddenly become more important?
Laurent: Let me put it simply, I eat, sleep, and breathe revenue management.
Sven: We all inherently have to because we’re in the business of running a business. I think what’s changed is that we have all had to change the lead times and pace, there’s been a lot of shifting in that.
Sandra: The real issue at the moment is the rate war. In revenue management, there needs to be a coming together of minds to say, let’s not do this, because we will not recover from this.
Pierre: We need to get back to a decent RevPAR in our city.
Laurent: If you remember, about 10-12 years ago, we had the bird flu in Asia. At the time, I was working for Starwood and our president was Michael Cole. When bird flu started, absolutely everyone started to cut the rates and Michael said, no one will touch the rate. He went personally to see every single owner to say, ‘Do not undercut your rates. Stick to your rates. You are going to lose money. Be ready, but stick to your rate.’ They dropped occupancy to 12%, competition was doing 25%. Six months later the bird flu was gone, it took 4.5 years for the competition to get back to the rate they lost six months prior. Michael Cole made a fortune for the owners because he got back his business immediately after the bird flu was done.
Hotelier: An interesting story! Are there any other issues worth discussing?
Laurent: We are a people business. We may want to talk about the labour force. Most of the owners, when they look at their balance sheet, the payroll is under liability. It is not on assets. If you look at Dubai, the turnover in Dubai 10 years ago was 12%. Today it’s 28%.
Sandra: It’s the restaurants that are opening that are poaching our food & beverage staff away for more money.
Sven: There should be a discussion about recruitment and poaching. Don’t offer someone a job and take it away quickly; that’s abuse of people’s’ livelihood.
David: I put a generic advert for out hotels. We got more than 17,000 applications. We didn’t even put roles on it. 17,000 unsolicited — mainly from people within Dubai.
Hotelier: Excellent points — thanks for sharing and see you in September!