Amani Saraya Boutique Hotel
Applied Project in Global Real Estate Development Capstone Project
Luxury Boutique Hotel Development Dubai, UAE December 12th, 2016
Ameni Kabboudi
Professor Manish Srivastava Professor Barry Hersh Professor Stuart Brodsky
Real Estate Capstone Project
1
Amani Saraya Boutique Hotel
Table of Contents
I.
TRANSMITTAL LETTER..........................................................................4
II.
EXECUTIVE SUMMARY ...........................................................................5
III.
OVERVIEW..................................................................................................6 1.
PROJECT SUMMARY ................................................................................................. 6
2. CATALYST FOR THE PROJECT: ................................................................................. 7 3. IDEA FOR THE PROJECT .......................................................................................... 7
IV.
PROJECT DESCRIPTION .........................................................................8 1.
SPECIFICATION OF THE LOCATION ......................................................................... 8
1.1
Neighborhood .......................................................................................................................... 9
1.2
Shopping ................................................................................................................................ 9
1.3
Attraction and Entertainment ................................................................................................. 9
1.4
Hospitals .............................................................................................................................. 10
1.5
Transportation ...................................................................................................................... 10
2.
BUILDING CONCEPT: DESIGN ........................................................... 10
IV.
LAND ACQUISITION DOCUMENT ..................................................... 11
V.
MARKET ANALYSIS ................................................................................ 12 1.
HOSPITALITY MARKET IN DUBAI .......................................................................... 12
2. RESIDENTIAL MARKET IN DUBAI .......................................................................... 13 3. ECONOMY.............................................................................................................. 13 3.1 STRONG TOURISTS’ PURCHASE POWER ................................................................. 13 3.2 CURRENCY EXCHANGE EFFECT ............................................................................ 14
4.
CONSTRAINTS AND INCENTIVES ..................................................... 14 4.1 S.W.OT ................................................................................................................. 14 4.2 5 A’S OF TOURISM .................................................................................................. 15 4.3 POTENTIAL DEAL KILLERS.................................................................................... 15
VI.
SUSTAINABILITY .................................................................................... 17
Real Estate Capstone Project
2
Amani Saraya Boutique Hotel 1.
ENVIRONMENTAL: ................................................................................................ 17
1.1 Sustainability Concept in Dubai ................................................................................................. 17 1.2
Environmental Challenges ..................................................................................................... 17
1.3 Project: Green Building ............................................................................................................... 18
IV.
PROJECT TEAM AND BUSINESS PARTNERSHIP ............................ 19
V.
MARKETING ANALYSIS AND MARKETING PLAN .......................... 19 1.
BRANDING STRATEGY ........................................................................................... 19
2. PRODUCT AND SERVICE STRATEGY .......................................................................20 2.1 DIFFERENTIATORS ................................................................................................ 21 3. TARGET MARKET................................................................................................... 21 3.1 LEISURE TRAVELER PROGRAM ..............................................................................23 3.2 CORPORATE TRAVELER PROGRAM ........................................................................24 4. SELLING STRATEGY ...............................................................................................25
IV.
COMPETITORS ........................................................................................ 26
VI.
FINANCIAL ............................................................................................... 28
Real Estate Capstone Project
3
Amani Saraya Boutique Hotel I.
Transmittal letter
December 12, 2016 Attention: Investment Committee NYU Shack institute of Real Estate 11 W 42nd street, New York, NY 10022 Regarding: Development Proposal for “Amani Saraya Hotel Dubai” Dear Investment Committee, It is an honor that Carthage holding, presents this proposal to develop “Amani Saraya”. This luxury boutique hotel is a landmark in Dubai’s hospitality market with a total square footage of 410,000 on located a strategic corner plot of 20,000 sq.ft situated in south of Sheikh Zayed Road and few blocks away from Palm Jumeirah in Dubai. This development proposal is accompanied with a catalogue for more details about the design and amenities offered by the hotel. Correspondingly, the proposal clarifies why this project is unique and how to penetrate such growing market with a different approach for this hotel while keeping the local vibe and its tradition. It also entails a detailed marketing strategy while supporting sustainability on its three main pillars; economic, social and cultural perspectives. Carthage Holding, wishes the committee to be highly interested and believe in this unique product that is not only driven by the high returns and the opportunistic deal but rather by setting a new standard for the hotel industry in Dubai by the integration of the culture and modernity without being affected by globalism effects. Your attention and your time are highly appreciated. Kind Regards,
Amani Kabboudi Chief Executive Officer Carthage Holding
Real Estate Capstone Project
4
Amani Saraya Boutique Hotel II.
Executive Summary
This proposal is a deep analysis towards developing a corner lot stretching over 20,000 sq.ft into a luxury boutique hotel in Dubai, United Arab Emirates. The development will be 400,000 sq.ft with 10,000 sq.ft below grade dedicated for a spa and parking space. The hotel will be 20 stories high and include 400 units with a three room mix of 40% double rooms, 50% king rooms and 10% suites. The hotel will also feature three restaurants offering international cuisines and one hookah lounge in the first floor. A dedicated rooftop and pool is also planned and open for public. The product is sustainable as the hotel aims for a Leed certificate defined by UAE standards. The target for the hotel is to use 175 Gallons per day per room, which is below the median of luxury hotel consumption and 40.66 Kwh/Sq.ft also lower than the standard for luxury hotel consumption of energy. The development is well positioned in Dubai hospitality market, which is estimated to be the fastest growing market in the world. The product is also unique in its approach, reinventing a boutique cultural hotel while emphasizing on the local Arabic identity by implementing simplicity and modernity with a white color dominance in its design is key. That is why hiring local talents and dedicating a star architect is key to the development. As for marketing, the hotel is affiliated with Taj Hotels brands, an approach to gain quicker access to market and more value. The target market lies between corporate travelers which make up 30% of tourists floating to Dubai as well as leisure travelers. A detailed plan and a more sub segmentation is discussed later in the report. Different activities and sales strategy on how to embrace the least competitive advantage the hotel possess and tailor it towards an opportunity and partnership with different businesses around the market. From financial feasibility, the project development will cost about $112 Million with a 5 year-holding period. With a simple joint venture structure (90-10%), the equity will constitute 35% of the total contribution of funds estimated at $78 million while the debt is 65%. The limited partner can benefit from a levered internal rate of return of 33% and will have an equity multiple of 2.4 times while the capital return is estimated at 1.7 times. The financial modeling is conservative and different scenarios are explored in more details.
Real Estate Capstone Project
5
Amani Saraya Boutique Hotel III.
Overview
1. Project summary In one of the fastest desert growing city, a project for a boutique hotel project is planned. Not many lands, which are under sale, are available on the market and if they are, mostly are available on prime locations such as Jumeirah Palm or Jebel Ali Beach with over 200,000 square feet. Beachfront lots require a resort style hotel, as many big chain hotels with recognizable brands are available around the area such as Atlantis Dubai or Jumeirah hotels. The mission statement of the hotel consist of providing sustainable product that matches the neighborhood vibes but also brings a deeper recognition for the area where community can benefit from the services and amenities as well. The idea behind this project comes after a deep analysis of the market and forecast of a good opportunity as market snapshot shows positive outlook. Besides, many mega projects are expected to take place before Expo 2020, which seem a trigger for more infrastructure but also an expansion of the city. Dubai is often though of “Las Vegas of the Middle East� because of its ambitious buildings but also its unique and quite open lifestyle that other neighboring countries lack such as Iran and Saudi Arabia. In this project, local talent is appreciated from early stages from Engineers to contractors selected based on their experience and competence. Since Dubai is a tax-free jurisdiction and one of the few places where foreign ownership of land is possible, this can be seen as a great opportunity. Geopolitical environment is also taken into consideration when a country like UAE tries to emerge as a free-zoned place to attract more of cross-borders investments. For financing which is the biggest portion of the project. New Diyar Holdings will be the local partner as a joint venture is agreed upon. No bridge loan will be involved and a complete use of equity will be used for the land acuqision. The construction loan will be financed by U.S based bank. However for the easiness of transactions, HSBC is identified as a potential partner as it has global outreach to complete transactions between Dubai and NYC. Further options might be taken into account after meetings with the board and reviewing of portfolio of each company especially if they can incorporate a local knowledge with international exposure as we aim to provide a unique product.
Real Estate Capstone Project
6
Amani Saraya Boutique Hotel Bank
Contractor
Engineering
Architect
Interior Design
HSBC Bank Middle East Limited: An affiliation of HSBC located in NYC to facilitate our financial transaction and money swift.
Arabian Construction company: An extensive knowledge in India and Middle East Market. The company has world trade center Abu Dhabi, gate towers as part of their portfolio of mixed-use projects.
Emitech: provides excellence but also experience in the region. Emitech has more than 13 years of experience in hospitality industry.
JS Designs: an acclaimed interior designer company located in New York. Promote innovative design and a winner of MEA Awards for the Concept Design of the Year. Julia Eva Sikorski holds Master’s degree in Marketing and Interior Design and NYU Alumni.
Queen I LLC: an independent design firm. The owner Imen, has deep knowledge in Dubai Real Estate Market and lived in the Middle East for 4 years. Imen, is Holding a degree in E-commerce and Fashion design from prestigious universities in Paris and Beirut. Her extensive exposure to design in European and Arabic style makes her qualified to be part of the team.
2. Catalyst for the project: This project is still estimated to be a unique product in the hospitality in Dubai. While most big chain hotels have installed themselves in the city, a lack of product like our hotel is the missed piece of the puzzle. Not only are we excited to present an initiate to glorify Islamic architecture but also a younger vibe but also keeping up with the modern aspect and high tech that is used among other competitors. We believe that this hotel would bring a lot of attention to independent boutique rising hotels which are not affordable and almost non-existent in this market. The only incentive behind this project is a belief that such products which seem to be quiet popular in Europe. Glass towers have been significantly noticed within financial districts of each mega city that is trying to climb globalization. However, hospitality is not imminent in the system. Besides, such project will unveil a different category of Islamic architecture which many might think all falls into the same category while the flight different is existent within. In this concept we will bring the Andalusian/Moorish art into a more eastern and oriental city. Dubai has been always considered to be the jewel of the Arab/oriental world. While New York stands as the capital of western hemisphere, Mexico as a capital of Latin America and Hong Kong as the Asian version of global city, Dubai has positioned itself within the last 40 years to be the hub between south east of Asian and Middle East while bringing a dusted culture that is rich in color, history and attributes. 3. Idea for the project The site is an empty lot and a hotel development seem to be the perfect proposal. A Retail was part of the initial idea but due to the closeness to big malls around Dubai, we decided to eliminate it as we see no opportunity to compete within the retail industry when you have over 15 malls within 10 miles radius. Real Estate Capstone Project
7
Amani Saraya Boutique Hotel The concept will be discussed in more details about the whole idea. But the vision of the product would be bringing an affordable but yet trendy and chic concept for both corporate travelers and leisure travelers in an expensive city such as Dubai. IV.
Project description
1. Specification of the location This Plot is 20,000 Sq.ft Privileged to other Surrounding plots not only because it is a mixed use and not only because it is a corner plot, but also because all other surrounding plots are G+8. While This One Is G+12. However, a request for an additional FAR is possible to make and a written form or online submission can be found on Dubai municipality website under zoning with a minor fee of $14. It is also a Prime Location for a Hotel as it is close by different amenities. The listed market Price is 56 Million AED, which is approximately offered at $15,246,601 USD which means it is provided for about $763 US Dollar per square feet. The plot is listed for sale by Szz Properties, a brokerage firm based in Dubai by broker Ziad Mustafa and it is a freehold with 3% commission estimate. The site is located in Barsha First neighborhood.
Zoning Lot Regulation about parking is defined for commercial and residential area, which accounts for one to two parking spots. However, this would not be discussed, as this building will be just a boutique hotel. Setbacks: Âź Quarter of the Height from The Neighbor and from wide road a maximum of 24 feet and a Minimum of 10 square feet. Address: Al Barsha 1 Lot Area: 20,000 sf Lot Frontage: 125.42' Lot Depth: 125 Year Built: 2017 Number of Buildings: 1 Number of Floors: 20 Gross Floor Area: 410,000 sq.ft Hotel Rooms: 200 Total Real Estate Capstone Project 8
Amani Saraya Boutique Hotel Room Mix: 40% Double, 50% King, 10% Suites Land Use: Mixed Residential and Commercial Buildings Landmark: No Historic District: No, but the hotel concept is to bring back the historical component into Dubai Evolution. Municipality: Dubai 1.1 Neighborhood Al Barsha First is considered one of the newest residential neighborhood in Dubai established in 2006. It is located on the west side of Dubai and close to the palm Jumeirah. This neighborhood is convenient for people who are working in the knowledge village and the media/internet city, which is discussed in deeper details in the marketing analysis phases of the report. The neighborhood is quite but also have access to Educational Institutes, Business Centers and Offices, a branch of Dubai Courts, Police Station, Hospital, And Shopping Centers Such As Mall Of The Emirates.
Neighborhood 1.2 Shopping The Main Shopping Attraction of The Area Is Malls. Unlike New York and other cities, there are no street shopping, it is mostly known as indoor malls where retail become more of an experimental atmosphere rather than a shopping concept where food courts, lounges, movie theatres take place. The closest mall is Mall of the Emirates, Which Offers More Than 500 Stores and hone to the famous ski park in Dubai. 1.3 Attraction and Entertainment The location is close to Palm Jumeriah, malls, Dubai marina, Jebel Ali horse racecourse as well as Emirates Golf courts. This is important and is implemented as a strong part of the site that can be employed in the marketing strategy and within the segmentation of guests. Further details about partnership with these clubs to provide guests with special experience within 10 miles radius is important since one of the weaknesses of the site is the 20 minute drive from Dubai downtown.
Real Estate Capstone Project
9
Amani Saraya Boutique Hotel 1.4 Hospitals This is important to our research even though it is not directly related to the development proposal but it is important to know since many guests travel to UAE for medical tourism purposes and can stay at our hotel although they do not make up a big portion of our focus as a target market. Hospitals in the neighborhood include Al Zahra Hospital Dubai in ( Al Barsha 1), Saudi German Hospital Dubai (al Barsha 3) and al Barsha Health Centre ( Al Barsha 3). 1.5 Transportation Transportation is key element to define the success of a hotel. foot traffic might be necessary for retail space but public transportation is the biggest issue when it comes to hospitality. Tourists need to be around a walkable area and since Dubai is somehow a scattered city, where mega projects have been rising all over the place, the city is not a walker’s paradise. However, closeness to public metro station is crucial. The site is located close to 3 Metro Stations That Serves Al Barsha Area Are: • Mall Of Emirates Metro Station: important for downtown transportation with express train • Sharaf DG Metro Station which: important for leisure travelers, towards beach access • Dubai Internet City Metro Station : important for the corporate travelers segment In addition, two major airports are surrounding the neighborhood, which are Dubai international Airport as well as Sheikh Zayed Airport. Since the hotel deped son international clients, an arranged shuttle will be incorporated. 2. Building concept: Design The development is aimed to a preserve the location. The concept is to develop a modern hotel but also rooted by a great civilization within simplicity yet sophistication of details. Arabesque Minimalist Concept will be defining the hotel. The façade will be a purely glass tower with Islamic pattern inspire by the North African/Moorish décor. The vision for the rooms also include a very modern touch but also has a very oriental background with a modern and chic concept. Design, décor and architecture will play the biggest key differentiators in our product among its rivals in the market. Drawing Renderings with floor plan for units and major floors is included in a catalogue for more details. Since being different is essential, our boutique hotel will use the top floor for an exclusive club membership for people to enjoy the lounge during the day while having a great party time but still intimate like what we see in some rooftop hotels in New York. This might not be viewed well within the community but the venue be also used for special occasions such as birthday and private parties which seem to be quite popular among locals. So a study about functionality of the top deck would be studied as culture, profitability should be considered. This can be a seasonal switch between both functionalities depending on the target market as it would be more profitable to engage not only tourists but also residents of Dubai into getting to the hotel. Even though, space is not issue for having the biggest clubs, biggest pools in Dubai, exclusivity and western concept is often welcomed and easily absorbed by locals who tend to be more up to date for innovative projects. If not this can be a great, opportunity too to draw people to a nightlife especially when the weather is hot and people do not use/enjoy the outdoor space as much. A pool and maybe a fitness center can be included too as this is the basic in Dubai Hospitality. A nice lobby and spacious access to lounge for clients of the hotel is also considered. The regular floor plan which will consist of a mix of the bedrooms but also one suite per floor as indicated in the catalogue is considered. Also the space between rooms will include a simplified with an Andalusian style courtyard Real Estate Capstone Project
10
Amani Saraya Boutique Hotel component with indoor garden and small pool to add more into the character of the Moorish/Arabesque hotel design. The lobby includes three restaurants and access to a Hookah lounge since both play a key role in the emirate culture as well as their views about going out/entertainment. A catalogue for more details is provided. IV. Land Acquisition Document
AGREEMENT TO PURCHASE REAL ESTATE The undersigned Carthage Holding (herein “Purchaser”) hereby offers to purchase from the owner Dubai land Department (herein “Seller”) the real estate located at 35 al Barsha 1, in the city of Dubai , County of United Arab Emirates. the legal description of which is: upon the following terms and conditions: 1. Purchase Price and Conditions of Payment The purchase price shall be 56001527.80 United Arab Emirates Dirham equivalent of ($15,246,601 United States Dollars) as of 07/20/2016 exchange rate date to be paid in accordance with subparagraph, below: A: Cash. The purchase price shall be paid in its entirety in cash at the time of closing the sale. 2. Earnest Money Deposit As earnest money Purchaser deposits $15,246,601 United States Dollars with the broker which shall be applied to the purchase price at the time of closing the sale. In the event that this offer is not accepted by Seller this earnest money deposit shall be promptly refunded to Purchaser by the broker. In the event that this offer is accepted by Seller and Purchaser shall fail to perform the terms of this agreement the earnest money deposit shall be forfeited as and for liquidated damages suffered by Seller. Seller is not, however, precluded from asserting any other legal or equitable remedy, which may be available to enforce this agreement. SAMPLE (continued) 3. Real Estate Taxes, Assessments, and Adjustments Real Estate Taxes accrued against the property shall be prorated through the date of closing the sale and Seller shall pay all taxes allocated to the property through that date of acceptance of this offer to purchase. Rents, if any, shall be prorated through the date of closing and all rent deposits shall be transferred to Purchaser. Existing casualty insurance shall be canceled/prorated through the date of closing. 4. Title to the Property Seller shall provide purchaser prior to the closing and promptly after the acceptance of this offer, at Seller’s expense and at Seller’s option an abstract of title to the property brought down to date or an owner’s policy of title insurance in an amount equal to the purchase price, said abstract of policy to show marketable or insurable title to the real estate in the name of Seller subject only to easements, zoning and restrictions of record and free and clear of all other liens and encumbrances except as stated in this offer. If the abstract or title policy fails to show marketable or insurable title in Seller a reasonable time shall be permitted to cure or correct defects. Real Estate Capstone Project 11
Amani Saraya Boutique Hotel Seller shall convey title to Purchaser at the time of closing by a good and sufficient general warranty deed free and clear of all liens and encumbrances except as otherwise provided in this offer and subject to easements, zoning and restrictions of record. 5. Possession of the Property Purchaser shall be given possession of the property on 08/10/2016. A failure on the part of Seller to transfer possession as specified will not make Seller a tenant of Purchaser, but in such event Seller shall pay to Purchaser $ 10,000 per day as damages for breach of contract and not as rent. All other remedies, which Purchaser may have under law, are reserved to Purchaser. 6. Time for Acceptance and Closing This offer is void if not accepted by Seller in writing on or before 04:00 P.M Gulf Standard Time and 7:00 AM Eastern Standard Time of the 06/15/2016. Closing of the sale shall take place 30 days after Purchaser’s receipt of an abstract showing marketable title in Seller or title insurance binder showing insurable title in Seller. This offer is made at Dubai land Department, State of Dubai, 07/15/2015 Carthage Holding (PURCHASER) Acceptance by Seller The foregoing offer to purchase real estate is hereby accepted in accordance with the terms and conditions specified above. The undersigned hereby agrees to pay a brokerage fee of $ 457,398 United States Dollars (3%) to Ziad Mustapha, broker, in accordance with the existing listing contract. Dated this 07/15/2015. Kahled AL Suwaidi Chief Executive Officer and Board
V. Market Analysis 1. Hospitality Market in Dubai Dubai is home to 20% of world cranes as well as the 4th most visited city in the world after London, Paris and Bangkok. That is why; there is an opportunity for a hotel development. According to reports of 2016, Dubai’s hotel market has been steady in the first quarter of 2016 even though it slightly declined by 1% during the same period from the last year. Dubai Market remains the strongest in the region by a very high margin. Struggles have been a signature for 2016 hospitality industry facing more cash constrained guest profile and that is why hotels had to offer a more compelling but also attractive packages to keep the market share. This is due to the increase of Dubai Airport as fourth biggest connectivity hub in the world. Dubai growing by over 14% from last year. That is why, transit passengers are not the main target market for Amani Saraya hotel, and further details are explained in the marketing strategy later in the report. In the first quarter of 2015, the average daily rate was $286 while in 2016 it dropped to $236, while occupancy dropped from 86% to 85% with RevPAR reaching $200 for this year. This slight decline is explained by the global challenges of 2015, which continue throughout 2016 with a strong US dollar, lower of tourism incomers from Russia and neighboring countries, which dropped significantly by 23%, affecting the demand and thus the price and Real Estate Capstone Project
12
Amani Saraya Boutique Hotel occupancy. Other external factors consist of the slowdown in China economy as well as the Eurozone, which will continue throughout 2017 as well. Positive outlook for both Dubai and Abu Dhabi are considered with the increase of demand in the leisure sector in the end. The mega projects that are expected to open soon such as the Opera district as well as Bluewater Islands and other major retail destinations will entice the demand. From supply side, there is a lack of affordable hotels that can bring the balance since most hotels are classified as luxurious. In fact, the area hotel prices are not expensive thus; we aim to raise the price as we bring a new product. The spa industry, tradition and modernity is intertwined. Since the trend towards health and wellness and beauty in this region is expanding, an opportunity to develop a spa/hammam is important. 2. Residential Market in Dubai Just like hospitality, residential witnessed a drop of 9% in most emirates markets. Dubai’s prime market is the outperformer of the market average. Interestingly the performance of apartments or condominiums have surpassed the villas with a 2% index increase which is important for us as we need to figure out an exit strategy to switch the hotel into service apartment which seem to be increasing in Dubai market. Dubai government is committed to invest in infrastructure spending with the soon to come of expo 2010 such as routes metro 2020 which will draw more inward capital. Moreover, a controlled supply among developers who need to watch out the correlation to bring equilibrium for demand and supply. Strong liquidity is also a major factor, Dubai still attracts capital from strong liquid markets such as India and Saudi Arabia; two of the biggest players in Dubai Real Estate Market. Also given Dubai’s position as one of the top five global cities that matter to private high net worth individuals based on Knight Frank Global Wealth report, the UAE overall is expected to still attract both regional and global investors and tourist. This positive outlook is a strong indicator to proceed with hotel proposal. 3. Economy 3.1
Strong Tourists’ Purchase Power
While examining the hospitality industry, retail industry is also one of the Middle East Faster growing sectors. Malls and shopping are part of the social life of Middle East culture and with the opening of Dubai mall home to over 700 brands and the biggest mall in the world; a target segment for shopaholics is identified. If Saudi Arabia is the religious destination of Hajj pilgrimage, UAE is the shopping paradise. Gulf nationals are big spenders when abroad, they spent about 65 billion in 2013 while an estimation of reaching 70 billion in 2019. Besides, Dubai is always thought of Las Vegas “sin city” for many of the conservative neighbors such as Oman, Qatar and Saudi Arabia especially. This stay gateway Americans tourist who only make up 6% of total international visitors are the largest spenders in the UAE accounting for 21% of overall tourist spending which average of $845 per night in Dubai alone. The total tourism revenue for Dubai is $11 Billion. Saudi Arabia nationals are the top international visitors to Dubai but come second as the highest spenders accounting for 12% of spending followed by UK, China and Kuwait. That is why, with a strong purchase power of tourists, the hospitality market can still integrate another luxury for Amani Saraya Hotel. And an increase in room rates are integrated in the next years. Real Estate Capstone Project
13
Amani Saraya Boutique Hotel 3.2
Currency Exchange Effect
The strength of US dollar plays a big role in tourism industry. While the appreciation of U.S dollars against major world currencies make American tourists have higher potential to travel more and enjoy more, other tourists from other countries have witnessed a sharp drop from 2015 such as a decrease in Australian tourists by 12% and a decrease for Egyptian and Jordanian tourists by 25% combined. These markets are still among top 20 source markets for visitors to Dubai due to their local currencies depreciation against the dollar. This can be good for Dubai as Americans are the fifth tourists representing 6% only of total International Visitors but also with the highest purchase power. The currency’s depreciation also puts higher pressure for hoteliers to adapt their strategy mainly in Dubai to provide a wider range of affordable accommodation. Especially. The Russian market which dropped by 40% was one of the top five spenders in Dubai tourism market but due to their local currency depreciation it fell off the list of top spenders. This creates an opportunity to focus on international visitors’ pattern unaffected by the currency fluctuation and with rising GDP. 4. Constraints and Incentives 4.1
S.W.OT
Strengths: • Unique product with a star architect reinventing the cultural aspect of the city as well as bringing a modern touch to it • Great location close to Jumeirah Palm and the closeness to different amenities and entertainment complexes such as marina, golf, beach, horse racecourse and malls • No big direct competitors in the boutique hotel market • Affordable prices lower than the 10 top boutique hotels with a different concept • Green building • Corner lot with easy access • Generous financing Weaknesses: • Upscale and luxury hotels might get the best spending clients however the hotel is not a resort, • Not a “big” remarkable landmark in Dubai Skyline, only 20 stories • No big front space for an amazing lobby • No Beach Access • 20 Minutes’ drive to Downtown Dubai Opportunities: • No niche market • Expo 2020, 20 Million visitors target-set by government • FIFA 2022 • No nice affordable boutique hotels • Corporate travelers 30% of Dubai visitors • Integrating the use of Airbnb for a better exposure • A rise of demand of service apartment in the GCC area Real Estate Capstone Project
14
Amani Saraya Boutique Hotel • • •
Oil prices decrease push many oil-producing countries especially Saudi Arabia to diversify their portfolios into Sharjah and Abu Dhabi and as well as Dubai. Partnership with beach clubs to mitigate the weakness (more details in the marketing plan) Shuttle from/to Downtown (more details in the marketing plan)
Threats: • Volatility in oil price, the EU Referendum (June 2016) and U.S presidential elections (November 2016) and ongoing geopolitical tensions are likely to affect investors risk aversion as well as purchasing power of potential buyers from GCC region. • Mega development projects affecting the demand and supply of the product. • Property prices in Dubai have increased dramatically but for 2016 indicators prices for all real estate sectors have fallen. As any crisis, most people fear a price-bubble bursts, which can shoot the macro economy and put it into a new recession. However, statistics show a steady growth and even decline have been affecting all sectors, it is not as steep as it might which can have a wealth effect as well as financial effect when it comes to mortgage lending. • The Geopolitical climate plays a big role in this part of the world where economic boom in the real estate sector in Dubai, and to some extent in the Middle East, can be partly explained by massive capital inflows after September 11, 2001 as Arab funds were more closely scrutinized in the US and Europe. Although most capital outflows were settling in London, Paris and Berlin in order, a local preference have been on the rise as investors see potential growth in Qatar and Dubai Markets since 4.2
5 A’s of Tourism
5A’s of tourism are crucial component to the hotel development project and mainly applies to any sector hospitality. The 5A’s define how lucrative the project is based on closeness and efficiency for these amenities. Location, product, service, experience, distribution and the brand value is what makes a hotel remarkable or more competitive. In our case, product, service and experience would be the biggest advantage to hedge against any risk from our competitors or external environment. 1. Attractions: malls, beach, village, marina, golf club, racecourse. 2. Access: three major metro stations, Sheikh Zayed Al Maktoum Airport is 29 minutes’ drive away while Dubai international airport is only 19 minutes away, while , organizing a shuttle to transport tourists to Dubai Downtown and from/to airport is a key 3. Accommodation: Nice rooms very customized modern but cultural depth. 4. Amenities: Rooftop lounge and nice lobby as well as a pool, no fitness center is integrated since 87% of populations do not workout according to statistics. Obesity rates are highest in GCC, in fact, opening up a mega gym is a trend but very difficult to gain revenues on fitness centers within hotels in Dubai Market as statistics shown. 5. Awareness: Affiliation with Taj Hotel brand to add value to the hotel. 4.3
Potential Deal Killers
Potential Deal Killers would be another Real Estate Crisis as the world is still struggling economically. In addition, as Dubai Real Estate Crisis took place in 2008, prices fell off dramatically and even though he market seems recovReal Estate Capstone Project
15
Amani Saraya Boutique Hotel ering, there is no cushion against another crisis. This is important for the proposal of the hotel as a joint venture is involved within this project and equity investment can be threatened Also, construction prices of some items such as steel and concrete have been increasing for more than 13% which can create a problem if contingency created does not cover the development budget or if prices arise dramatically. In addition, many mega projects are planned all across Dubai City. As much as they can improve the economy activities, it might be an obstacle for our project as well with the oversupply of hotels, which will increase the competitiveness. In fact, there are ten mega projects are under construction for the World Expo of 2020 held in Dubai. Besides, Qatar as a neighboring country who is trying to compete with Dubai, is hosting Fifa World Cup which might help the exposure for the small country to get more attention from international investors as real estate prices continue to be more affordable than in Dubai. This can be a slightly negative spillover as well as the Mega projects that will put more areas within Dubai city into more focus and this will affect the location value. The picture below indicate the site location of the hotel compared to the upcoming projects. The implementation of southern suburbs and eastern side closer to downtown Dubai around Sheikh Zayed Road and the switch from upper Dubai to southern part. 1- City Walk, a mixed use development with residential and retail space located at Al Wasl Road 2- Dubai Canal, a mixed use development including public parks, 4500 apartments, 44 townhouses, 19 villas and hotels and retails 3- Mall of the world, 8 million square feet retail space with 80 hotels complex and 20 hotel apartments and 20,000 rooms 4- Dubai Creek Harbor located at Ras Al Khor, at the same location the tallest tower will be revealed as well, offering 39,000 apartments, villas and hotels and hotel apartments
Dubai 2020 Mega Projects
Real Estate Capstone Project
16
Amani Saraya Boutique Hotel VI. Sustainability 1. Environmental: 1.1 Sustainability Concept in Dubai Our partners support our purpose of building with sustainability and a vision for future of the next generation. Sustainability is consisting of three pillars which are; environmental, economic and cultural. The proposed project meets the three requirements set to be a green building. The environmental aspect is described below in more details, while the economic is set by employing local talents by hiring local engineering and contracting firm as well as the marketing and PR firms through partnership and business building. As for cultural aspect, The Taj brand found in India is aware of the Arabic culture, as both countries have been heavily engaging in trades since decades, which guarantee the continuity of bringing ties together. Taj operation of the hotel as who is familiar with the area trying to incorporate local materials and local spirit of the design while preserving the city of Dubai heritage as an Islamic city with strong Arabic features but also modern and welcoming foreign innovation and guests. Sustainability is monitored by UAE government. However, it is not compulsory but penalties will take place in the next few years. With 2020 Expo of being a pioneer in the sustainability, the government is implementing it through design and construction of the site. In fact recycled materials will be used in 30% of construction and 50% of the expo operation strategy will be from renewable resources. Waste water recycling reuse and carbon footprint on sites is taken into account. That is why the construction of the hotel will include an energy efficient procedure with employing local materials and local expertise. Energy such as electricity and heat is to be generated from incineration of water. Dubai is committed to produce 5% of its energy from renewable resources. LEED rating is not strange to Dubai as many developers are rushing to build green while Dubai’s chamber of commerce and industry’s headquarters was the first building in the Middle East to receive a LEED certificate with platinum rating. Dubai has also imposed a new law by 2011 that is mandatory for all government buildings but even in 2014, this regulation was open to new developers in order to construct in more effective and reasonable ways. That is why, the hotel is entitled to compete especially Emaar announced al Murad tower which is located in the same neighborhood to set new standards for going green. 1.2 Environmental Challenges The location of the site is not a beachfront area neither a proclaimed land which alleviate problems that are marine and coastal pollution related. However, building in the most deserted place in earth does have many challenges. Many challenges consist of the lack of water that becomes a necessity to build such oasis, canals and waterparks around the city. Desertification is another issue that the government tries to deal with through greener projects. Al In fact, Dubai is securing from Abu Dhabi Nuclear Power Plant an efficient, clean energy that can keep up with the rapid growth of the energy consumption to reach a growth rate of 9% which is triple the global average. The country will have 12% of its total energy by 2030 coming from nuclear power while12% from clean coal and rest is from natural gas. UAE is planning on 4 nuclear plants with total production of 5600 MWe where the first one will operate in 2017 and each one will open each year until 2020. This is expected to be all ready for expo 2020 where an installation of 9700 Megawatts is made. That is why, the hotel will be a green building that compliments the values and the mission statement of Dubai initiative to go green through the use of local materials and being energy efficient. Real Estate Capstone Project
17
Amani Saraya Boutique Hotel 1.3 Project: Green Building The hotel aims to be one of the green buildings in Dubai while sustainably is highly supported by government as many initiatives have dictated it. We believe that our product will be unique in the market but also will blend perfectly with Dubai intention of becoming the most sustainable city in the planet by 2020. Projects such as Dubai sustainable city is expected to be completed this year of 2016. While desert rose is another project that will put different standards for green developments. In the project, the main green element is not just about electricity, we are taking advantage of the heat that surrounds Dubai and being exposure to sun and thus implementing solar panels as key elements. Besides, the fact that we are relying on local products, furniture and construction elements from Dubai rather than aiming for Italian furniture from or customized marble from there or Glass from Germany. we will explore the different part of the products available on the market to ensure that our building stay faithful to its initial belief on heavily relying on local element. 1.4 Sustainability Target There is still no clear concessions to developers if they build a sustainable building that confirm the requirement and since there is no law enforcing the project need. However, Competitors play a big role in Dubai’s hospitality market, thus with many hotels initiatives, the project need to meet the expectations. Another reason why to go green is the terminal value at sale that we think will add value to the property after the holding period. Dubai green initiative is stated by Emirates Green Council (found in 2006 and a full member of the World Green Building Council) which recently stated its first report on Green Benchmark for hotel development in the city. The main goal is to advance green building principles to protect the environment but also cater towards future generation. Although Abu Dhabi has enforced laws regarding sustainable buildings and different policies incorporated and by enticing developers to build green with a ranking system such as LEED certification. Masdar city was the first conglomerates in the United Arab Emirates; Dubai Sustainable City as well is expected to be done by 2016, while another projects such as Dubai Desert Rose. However, the definition of sustainability has been always mistaken for just energy and water consumption. For a city to be sustainable, it must include three pillars, which are; environmental but also social and economic. The main goal is to provide residents with high quality of life with less environmental impacts. 1. Environmentally sustainable performance targets a. Water Consumption For developers as well as community, sustainability is implemented in water, wellbeing, material and waste. The buildings are intended to minimize water use by increasing efficiency and re-use the water by: • Recycling water by encouraging the collection and re-use of rainwater even though in a city like Dubai which receive only 5 days of rain per year (December until March) equivalent of 3.7 inches of rainfall yearly. • Requirement for new buildings to install smart water efficient fittings and water meters. • Low-Water Use Landscaping even though this seem like an irony for Burj Khalifa daily water’s system supply of 250,000 Gallons through 62 miles of pipes There was actually a high negative correlation between the year built and water consumption unlike energy which seems to be highly correlated. The values for Water Use Intensities per guest night ranges of 30 to 399 Imperial Gallons/Guest night year. Real Estate Capstone Project
18
Amani Saraya Boutique Hotel In fact, luxury hotels consume about 175 Gallons per day per room on average with 30% allocated to domestic water use that include toilets, showerheads and faucets. Water consumption is also considered in the hotel since a rooftop pool and a Hamman will be included. Also, competitors seem to be a major driver for deciding to go green even for Hammam/Spa component. Al Maha Resort which is a few Miles away from the site was voted as the best ecotourism hotel that is constructed to represent the traditional Bedouin camp and embraces the indigenous culture, wildlife and desert and its spa includes very sustainable design and environmentally friendly material such as biodegradable cleaning products. b. Energy Consumption: According to 2016 Report on “energy and water benchmarking for UAE Hotels” which studied over 46 hotels across UAE to find out that energy and water consumption varies dramatically between properties, However a poor performing hotel consumes 3 times the amount of energy and 7.4 times of water which seems a scarce resource in UAE. The key finding too confirms that recently built-hotels have better performer as they are benefiting from newer technologies, which is the case for our boutique hotel, which will be dedicated for a green building. Energy consumption is the highest during summer time due to the extreme heat and demand for AC. According to EUI (internationally acceptable norm for benchmarking hotels, the median hotel in UAE has 26.29 Kwh/Sq.ft with a range between 9.66 Kwh/Sq.ft and 66.98 Kwh/Sq.ft 2. Sustainability Market Analysis UAE’s Green Hospitality landscape of the end of 2015, includes 41 properties certified to Green Globe and 25 properties certified Green Key and only 4 property certified Earth Check. This boutique hotel will be among the few properties that will be known as a Green Building, which meets the requirement of the Emirates Green Building Council. IV. Project Team and Business Partnership The partnership consists of LP (New Diyar Holdings) with 10% of equity’s contribution and 90% by GP( Carthage Holding). The equity is consisting of 35% of the development cost and will be covering only the predevelopment phase. “Ameni Saraya, set up by the partnership of Ameni Kabboudi (Founder of Carthage Group and Angham Al Maktoum (Founder of New Diyar Holdings) For the design collaboration, Julia Eva Sikorski (Founder of JS Design and Architect) and Imen Kabboudi (Founder of Queen I LLC and Interior Designer)”, develops its first luxurious boutique hotel in Dubai. An affiliation with Taj Hotels Brand is interwinted with positioning the hotel. Making no concessions on quality and customer satisfaction. V. Marketing Analysis and Marketing Plan 1. Branding Strategy Since researches show that branding, enhance the market value to hotels, we decided to go with an affiliated brand that is recognizable and can match our financial Performa as well as the vision of Hotel. That is why Taj Hotel is the most qualified, as it is a recognizable brand as well as having the experience to operate in this market. Taj Hotels, Real Estate Capstone Project
19
Amani Saraya Boutique Hotel which have 3 affiliates: Taj, Vivanta hotels and resorts as well as The Gateway Hotels and Resorts. Taj remains the most luxurious and since we are not doing a resort property we decided to go with Taj, which is a much known brand that has operational, and familiarity of our type of product in the UAE Market. In fact, franchise fees come into different categories (specified franchise fees also included in the financial model): 1. Initial Fee: Fixed fee that require a minimum fee plus another initial fee on the revenue per room for the first year 2. Royalty Fee: represents a compensation for using the brand’s trade name with service marks such as Logos and goodwill as well as franchise services. 3. Marketing Fee: 4. Sales/Reversion Fee: 5. Frequent Traveller Program fee: 6. Miscellaneous Fees: Franchise fees varies between brands, however a median of 300$ of revenues per room is estimated as the median with franchising also an initial fee of 60,000 for a 200 Room Hotel (our case) will need to be provided. The overall Median for franchising is at 7%. For Taj, Total Cost to Initial fee percentage for room revenue is 8.5%, while revenue of year one is at 1.2%, which is low in order to make the hotel recover from its expenses. Furthermore, Royalty Fees is at 4%, loyalty fees are at 0.4%. The marketing fees, which are important for our marketing plan is at 2.5%, which is not too high, and can help us with advancing the hotel positioning. The marketing plan will depend on the great service that Taj provided to its client. This is important to us, as the plan includes dedicating a VIP Team that caters towards top 100 clients for the hotel. Moreover, hotels nowadays do not consider competitors as much as they used to do but rather focus on providing the best customer services. 2. Product and Service Strategy The hotel will cater towards corporate travelers, which make up 30% of tourists in Dubai by providing them a unique experience to stay within the hotel with amazing spa, three restaurants and rooftop lounge as well as a hookah lounge. 1. Amenities for the 20 suites includes a dedicated team of hosts, once daily replenishment of non-alcoholic beverages, as well as twice a day housekeeping services are offered with VIP white glove service. For women, complimentary appointment hair blowouts are available. In addition, Spa beauty products are provided with bouquet of flowers upon arrival and freshly baked macarons at turndown as well as a daily continental breakfast in the atrium restaurant in the first floor, which is a private lounge area at the lobby that only hotel guests have access to enjoy it. 2. Open spaces for public include a bar, 2 restaurants where customers can have lunch or afternoon tea upon appointment with a small library that sits in an open-alcove off one of the restaurant for all kind of social gatherings. In addition, an event space is available and it is 800 sq. Feet with a view over the main street that can accommodate up to 40 guests. 3. Other amenities include a spa/hammam as well as a spa that carries a recognizable brand such as La Mer, which is one of the most expensive beauty products. Real Estate Capstone Project
20
Amani Saraya Boutique Hotel 4. Services can range from a ride with a chauffeur around Dubai in a vintage car within radius of 15 blocks from the hotel. As well as a partnership with museums and cultural events that change throughout the month. 7P's mix for the hotel is also explored within the marketing plan: 1. Product: customized gifts should be given to customers even if it is small, the more customization and personalization, the better it is. 2. Price: Price is already a bit lower than what major competitors offer and in a place like Dubai where money is everywhere spent, customers would not be price-conscious but rather a defined strategy implantation to raise some of the prices later after one year of the opening. 3. Physical: There is not much to do physically since the hotel is new and modern but a more attention to couples should be done such as having a music selection bringing nice atmosphere to customers. 4. Process: quick service is the key here with customized name tag in their rooms or feedback collection at the end of the customers stay can test and inspect if there is any problem. Like Hilton even though it is not among our competitor set, it was successfully integrating a score balance card which helps the business and been a secret recipe for it. 5. People: Baccarat hotel needs to level up its customer service experience since many reviews were degrading the unprofessional service so special training and more workshops need to be done for their staff. 6. Promotion: The hotel needs to be more open about public appearance although Luxury brand do not need to be as "commercial as many other products". In a world full of choices even in hospitality industry, free discounts or a loyalty member card need to be invested in, to make customers more willing to come back to the sale place. 7. Place: Channel of support and tools of Marketing by using hospitality renowned tools to attract customers with a reinforced sales support. 2.1
Differentiators
The hotel is different from other high-end hotels through focus on minimalist and modern luxury, rather than resort charm. However, imitation can be a problem over time, to keep a competitive advantage, Amani Saraya hotel focus on ever-evolving suite of services. Such as surprise gifts each day of the stay tailored to individual’s interests such as food samples, books. 3. Target Market The location of hotel and its competitors estimate the target market would be young people who need an affordable yet a chic place to stay in while vacationing in Dubai while taking into account the proximity to certain working zones such as the media city and internet city. The chart below identify two major segments, which will be the main business attraction:
Real Estate Capstone Project
21
Amani Saraya Boutique Hotel
Although transit traveler make up a big percentage of total travelers coming to Dubai with an average of 3.6 nights only spent in the city. The huge success of local airlines such as Emirates and Etihad in making Dubai a focal transit point between western world and eastern part is important. However, this does not reflect the focus of the mission statement and the vision of the hotel, which consist of “proudly opening doors to the true spirit of the city of gold by endorsing Arabic Authenticity�. The segmentation plan is explained below:
Real Estate Capstone Project
22
Amani Saraya Boutique Hotel
3.1
Leisure Traveler Program
Since domestic and international make up the biggest the portion of this group 10.74 Million total international guests in 2016 according to Dubai statistics center) sales calls and appointment meetings with representatives from these countries or local region is necessary. Sales incentives such as offering a better commission than the average deployed in the market is beneficial and can create a win-win process that make travel consultant more careful about advising/directing the clients towards the Hotel rather than the rest of them. Gifts also is the best way to anyone’s heart, although complimentary breakfast referred to as continental plan (CP) or internet seems the rule, clients might not appreciate it much as they believe it does not add a lot of value even though they might need it more than anything. Upgrades of room is quote targeting since that means a good customer service by employing a special treatment such as the less-heard of spa gift cards, or timely access to the spa with few discounts since the spa is independently operating. Sales trip are also important to encourage group appointments to give all travel consultants a Real Estate Capstone Project
23
Amani Saraya Boutique Hotel good idea about what makes the hotel special and having them attending FAM trips, which they would love. Entertainment is key element anywhere that is why by dining them and showing them the cuisine Restaurant or by setting an appointment at the hookah lounge, the agents will not be just amazed at the wonderful decoration but would be able to transfer the experience they had at the hotel while being concentrated on the meeting at the same time. To target the older generation, sales consultants might be the intermediate. Programs should include a partnership with malls and souks as well as arranging some tours. Gallery hopping tours for high-net worth clients who cater about Art can also be arranged upon request since different galleries are spread all over Dubai such as Al Quoz Gallery located at Dubai International Financial Centre, Al Fahidi Historical neighborhood. Other partnership can also be with the Dubai Creek Golf and Yacht Club by offering a special pass for the top 10 VIP customers who seek a gateway within the city or Jebel Ali Race Course and Emirates Golf Club which are within 5 miles’ radius of the hotel. For younger generation and especially these traveling all the way from abroad, a ride towards Jumeirah Palm beach and partnering with the best beach clubs in Dubai such as Riva beach which is equipped with private beach access, a climate-controlled pool and a day rental for a lounge is possible with a discount for the hotel clients. Also Airbnb is huge player within the millennials who seek a home atmosphere away from home, Thus, serving them can be accomplished through providing this tool. This might be more relevant to tourists from western countries rather than MENA (Middle East North Africa) and GCC (Gulf Council Countries) areas. For female visitors and mainly from GCC, constituting about 25% of total Dubai visitors according to 2016 data, special promotions with brands around the different malls surrounding the area can be a big incentive since many travels for shopping purposes to Dubai. For the spa/hammam component as well, UAE revenues from spa is estimated at $435 million this year. Since 60% of total spa visitors are residents who are not staying in the hotel, this can be a great opportunity especially witt the high purchase power of locals. The Hammam/Spa element in Amani Saraya is an innovative and a cultural revolution of old oriental rituals while implementing a strong brand such as La Mer with its finest products. 3.2
Corporate Traveler Program
The main segment is for those working close to Dubai Media City, Dubai Internet City and Dubai Sports city who aim for special retreat within their business trip. By explaining the different packages as well as the benefits of staying at the hotel, one can negotiate although I doubt the price is negotiable for corporate as this independent hotel does carry a brand value and budgeting is not and should not be an issue for its customers. That is why, a complimentary chauffeur / driver around Dubai and a Concierge dedicated to help them with their business plans is good, maybe offering them a free-IPad for use for their stay can be beneficial, as they need to write notes and can take them outside the hotels as long as they can return them before checkout. A gift for Spa Treatment or discount can be a bonus, as they might need it after a day at work. Representatives from these corporations need to be addressed and for a room at $ 500 Minimum this can be seen as targeting only top managers/executives from all industries and mainly Media related as there are many companies ‘headquarters are in the same radius of the hotel.
Real Estate Capstone Project
24
Amani Saraya Boutique Hotel 4. Selling Strategy The marketing operation will take between 6-12 Months before the major opening taking place in July 2017. For the hotel grand opening, the team will invite people from Dubai department of tourism and commerce marketing as well as Dubai municipality governors to introduce and connect the brand in a memorable way. Since the hotel show Dubai will take place from 18 to 20 of September 2017, one month after the hotel opens, the sales team will be present there in a dedicated stand for the hotel. A descent sponsorship contribution will be assigned as part of the marketing budget. This show is important as it has run for 17 successful years in Dubai and have over 78 countries participating that can be a strategy to not only position the brand within the tourism industry and hospitality scene in Dubai but also gain wider access to more partnership with foreign agencies and clients. From selling point, the hotel can utilize many different tools in order to increase the sales among the fierce competition in Dubai. Even though such luxurious hotel might seem not in need for establishing sales activities, marketing and sales are leading departments that can bring more clients and better exposure of the hotel. Since the hotel deals with domestic (including travelers from GCC countries) and international clients, travel agents are still necessary in the process despite the fact that statistics show that online booking will make up to 50% of total booking. Also since it is hard to get access to international clients, using FIT techniques as well as travel consultants is the best way since it is hard to get easy access to certain market and since some markets operate quite differently. In addition, since the Hotel has high room rates compared to others, which means that target market is towards the baby boomers who can afford it, travel consultant is the biggest reliable service that they can use while booking that is why commission and special care for travel consultant is important. For each segment, two major groups are identified; Leisure and Corporate, the marketing staff also defined specific activities that might work to increase the sale. Digital marketing is also crucial in this era since 50% of hotel booking occurs online nowadays, that is why a dedicated budget for OTA (online travel agencies such as Priceline, Booking, and Expedia etc.) is important with offering a commission of 10% to travel agents. Group sales tool includes using Cvent, Starcite, meeting broker, know land group and Delphi websites. Taking into account FIT (Foreign independent tour) technique, which does not incorporate a packaged tour but customized by a travel-selling professional. This can be mainly successful in countries with less advancement in technology where online booking and payment is not available yet. In fact, many travel agents choose to book with the FIT market/receptive. This booking pattern is important for these reasons: • • •
The length of stay is on average of 7 days or more Stay pattern-builds occupancy over need days (business hotels) Exposure to well-qualified industry partners located in more than 100 countries
Wholesalers are also an important way to get more coverage, bundling of hotel, air and car together to create a package by providing specific clients with special deals. The hotel will work with wholesalers by providing opaque rates: net rates for each piece of the trip, allotment of rooms. Selling strategy will include B2C and B2B with 10% commission rate for travel agencies. Real Estate Capstone Project
25
Amani Saraya Boutique Hotel All these sales strategies can be effective by establishing sales calls, sales incentives, sales trips and promotions. That is why, a dedicated marketing budged is necessary. Below are the hidden costs of online travel agencies, estimated at $467,200
Number of Rooms
200
Average Annual Occupancy
80%
ADR OTAs % of Total Revenue OTA Commission/Margin * Total Annual Spend on OTAs
$400 20% 10% $467,200
Also, working with convention center and visitors’ bureau by generating leads, networking, sales mission and DMC. The marketing material will also include using professional photographer and design firm to produce the following materials: • • • • •
Website E-mail newsletters Direct Mail Magazine Ads Marketing kit for corporate business development
The marketing kit is customized towards leisure travelers and business travelers by having separate marketing material. A social media plan will also include ideas from all over the world and history of the architecture and the golden age of Islamic/Arabic civilization. The goal is to position the hotel into non-commercial lodging but rather a cultural hub that is tailored modernity towards its customers. IV. Competitors Nowadays, clients are more attracted to the experience and more curious about the character of the hotel they are selecting. Taj Name not only bring value but also carries brand awareness, which makes it identifiable for many hoteliers. Although all of the comparable hotels are pointing out to the amazing architecture, the projected hotel has a unique approach to luxury. Here are four competitors who seem to meet the hotel’s standard of being a luxury hotel, which offer competitive rewards and complimentary services to its customers, but also only boutique hotels: Real Estate Capstone Project
26
Amani Saraya Boutique Hotel
In this Competitive set, the hotels are located around 10 miles radius might seem the biggest competitors as price and brand name carries same value as the projected hotel except the fact that is not strategically located to offer a beautiful view over the Arabian gulf sea. In addition, the number of rooms for all comps set is more and less than the 200 rooms offered at the hotel including 12 suites. Service and management has been a critical separator for luxury and upper upscale hotels but this is understood. Thus, brand awareness as well as brand loyalty might be measured differently. While Jumeirah has over 40 hotels around the world, while Armani relies on its name correlated with luxury haute couture, the projected hotel is relying on Taj brand value to position itself as luxury hotel within Dubai with the intention to expand regionally in other GCC countries. This might be a big differentiator on the services provided by each hotel but it goes without stating that Baccarat has a potential for growth by offering more benefits than other hotels within the same budget. As this competitive set include the biggest rivals, we believe that Baccarat Hotel has competitive advantages through the following elements: 1. Having smaller hotel capacity: means a more intimate and private experience, One of the restaurant incorporates a lounge which is only dedicated to hotel guests and this exclusivity is highly appreciated which is not considered among other competitors.
Real Estate Capstone Project
27
Amani Saraya Boutique Hotel 2. SPA/Swimming pool: Although most of the hotels in the set include this feature, the advantage of the Hotel t is having the most expensive and sought after brand such as La Mer. 3. Luxury: all hotels seem to be a complete definition of luxury in the industry. However, the hotel is a unique Moorish/Andalusian style to bring a very sophisticated manner that brings luxury in its highest definition. VI. Financial The deal structure includes a construction loan of 65%, $78 million and $33 million equity that contributes 35% of equity. Carthage holding who acts as general partner, contributing 90% of total equity while New Diyar Holdings as the limited partner contributes 10% of the total equity. The total acquisition costs consist of 17% of the total development cost while the land acquisition cost $15 million accounting 13%. While the total hard cost is about 51% and soft cost 19%. As we are operating a hotel, 3 million is allocated towards the operations costs and about 10% is allocated for the hotel fit out costs. Since the hotel is implementing a strong Arabic identity throughout its geometry and patterns, hiring a star architect and allocating about 7% of the total development costs is a necessity. Refinancing right after construction is also considered at a loan to value of 70% and different scenarios are explained in more details later in the report. As for the hotel proforma, we started with a conservative approach of dedicating 80% of the occupancy rate wich is lower than the average of 86%. More detailed development budget can be explored further in the financial model provided. A holding period of 5 years is projected with a sales cap rate of 6%, the terminal value of the hotel upon completion of construction is estimated at $204 Million with a sale cap rate of 7%, and the value is estimated to reach 189 million. According to market comparable boutique hotel sales (further details within the financial model), the blended sale rate per key ranges between 390 million and 1 million. That is why, we estimate the sale per key to reach almost $1 million making it a primer hotel sale especially it is new. Potential buyers range from regional investors or the Emirates REIT. Global capital has been also a highlight into hotel acquisition mainly from Chinese investors. Despite the fall of oil price, the international hotel acquisition scene has not yet fell. For the unlevered IIR is estimated at 14% while the capital return is at 1.7 times which is quite healthy but also due to the conservative approach employed. As for the levered Internal rate is estimated at 33% while 2.4% is the levered equity multiple. As a backup plan and as mentioned earlier in the report potential deal killers section, the hotel can be turned into a full-service apartment which seems the trend in GCC market which is increasing rapidly and this can also be beneficial if the hotel construction is interrupted.
Real Estate Capstone Project
28
Amani Saraya Boutique Hotel
Work Cited "Boutique Hospitality, Fall 2014 | Price. HOTEL FRANCHISE FEE GUIDE "Franchise Fees & Royalties." Griffin University "GCC Tourist Spending to Top $70 Billion." Gulf Today, 15 Oct. 2015. "GCC Tourists to Spend $100bn by 2018: Report." Emirates 24/7.., 07 Jan. 2015 "Getting Ready to Create a Marketing Plan?" Hotel and Motel Sample Marketing Plan - Ideal Customer - Mplans. "Middle East Real Estate Predictions: Dubai 2016." Deloitte 2011.11 (2011): 12. Https://www2.deloitte.com/content/dam/Deloitte/xe/Documents/realestate/me_re_real-estate-predictions2016.PDF "OTA Calculator | Marketing Luxury Hotels." Marketing Luxury Hotels. "Planning and Programming a Hotel Abstract." "Property Tax / Real Estate Tax in Dubai, Tax Rates." "Sample AGREEMENT TO PURCHASE REAL ESTATE." Capital Advisors "Taj Hotel Home." Corporate "Tourism Sector Performance." Tourism Sector Performance "VERTICAL TRANSPORTATION • Design Guidelines." AIA Los Angeles Aaraj, Elias. "Have Low Oil Prices Changed the GCC's Spending Patterns? - Gulf Business." Gulf Business. N.p., 30 May 2016. Web. 11 Dec. 2016. Craven, Francesca A. Ippolito Justin Thompson, Tyra Hilliard, and Michael Wilde. "Water Benchmarking: Is It Important to Your Hotel? , by Russ Horner." HotelExecutivecom Daily Headlines Divecha, Devina. "Dubai Using Sustainability to Attract Tourists | HotelierMiddleEast.com." HotelierMiddleEast.com. Dubai, Visit. "Art Galleries in Dubai - Art and Culture in Dubai." Art Galleries in Dubai - Art and Culture in Dubai. Emirates GBC Unveils Findings of First 'Energy & Water Benchmarking for UAE Hotels | Zawya." EventMB. "5 Tips for Planning a Successful Hotel Grand Opening." Event Manager Blog. 28 Sept. 2015 Matthew Dresden on August 9, 2016. "China Law Blog." China Law Blog. Payne, Lynne. TAJ 4.04 Spring Issue Team, the GN Focus. "UAE Spa Industry worth Dh1.5 Billion in 2016." Team, The GN Focus. "UAE Spa Industry worth Dh1.5 Billion in 2016." GulfNew TheNationalUAE. "Investors in Middle East Remain Interested in Hotel Acquisitions | The National." The National.20 Sept. 2015
Real Estate Capstone Project
29