EAHQ Issue 5, January 2016

E A HQ January 2016 | Edition 5

Welcome Message by Thomas Keegan, Contol Risks The second is that consumers are forgiving of external issues, but not with bad handling of them. A lot is often said about those risks I mentioned earlier; terrorism, severe weather events or macro crises. The truth is that consumers are intelligent and understand that things outside of your control are not your fault. With this, however, comes a belief that those things in your control, the simple things you should always get right, are unforgivable. Additionally, during those events the consumer will not forgive bad handling or bad communication to a level of which you should be prepared.

My final tip is that you should prepare to fail and when you do fail, do it well. Rosabeth Kanter, a Professor at Harvard Business School, is quoted saying that ‘the difference between winners and losers is how well you lose.’ This has never been so relevant to hospitality as it is today. The increasing global supply, concentrated in key hub cities and tourist destinations, global economic slowdown; specifically impacting the Middle East from historical target markets of Russia, China and Europe and the rise of the global middle classes has resulted in excellence being the norm.

Welcome to the 5th edition of EAHQ, I’ve enjoyed reading a few back issues and must admit that as an industry related journal I found it really quite interesting!

Over the past few months and specifically after the issue at the Address Hotel on New Years Eve the topic of Risk and Incident/Crisis Management have been front and center of many hospitality professionals’ minds. Having worked advising governments and top global brands on these topics I would like to share a The only way to differentiate your brand is to ensure you can always deliver whatever issue you are few tips with you specific to the hospitality industry. facing. Understanding your Risks, having an ability The first tip is that perception is not always reality to adapt and evolve and continually deliver is a true when it comes to risks. The human psyche often differentiating factor for the leading brands when places things it fears above those it understands and is consumers demand instant gratification and aren’t familiar with producing a response to it that is usually afraid of turning to social media to tell the world when inappropriate. Take the majority of corporate travel they don’t receive it. security policies that will demand your key executives travel separately when using air travel. A plane crashing Managing risks and responding to incidents is one with two or more of your board is seen as a risk most of the greatest skills a hospitality professional can firms are unwilling to take, as it is big and high impact, develop and, in my experience, one that differentiates and therefore this is seen as appropriate treatment. the good from the great. Make sure you keep trying to Very rarely, however, is it stated that two key executives see around corners and when things do go wrong be ready to act and protect your consumers’ experience! cannot take the same taxi or drive in the same car.

Angela Anthonisz, Editor Rohit Srivatsa, Research Associate

In this Edition WELCOME MESSAGE

BY THOMAS KEEGAN

RECAP OF EAHQ 2015

ECONOMIC OUTLOOK

POLARISATION OF THE HOTEL INDUSTRY

MEGA PROJECTS IN THE UAE

EAHM TO PARTICIPATE IN THE DUBAI FOOD FESTIVAL 2016

THE GLOBAL HOTEL INDUSTRY IN 2016

January 2016 | Edition 5

Recap of EAHQ 2015 In 2015 the EAHQ highlighted a number of topical aspects and issues impacting on the hospitality industry, including economic and market fluctuations, new project launches, issues of staffing and empowerment and concerns about sustainability and growth in the sector. Many of these items will continue to impact on the industry as we go forward into 2016, although the initial signs for the start of the year are of more cautious growth. The areas we see continuing to be in focus include: • • • • •

The Russian Market – 2015’s decline in visitor numbers is likely to recover as the Dubai government continues to invest in marketing promotions.

The Chinese Market – While 2015 saw rapid growth in visitor number to Dubai the economic slowdown in China did result in a drop in spending with the recent devaluation of the yuan against the dollar this trend seems likely to continue into the first half of 2016.

Growth in the Theme Park Sector – The 5 new theme parks commissioned in 2015 continue to move ahead with IMG World of Adventures set to open in the first half of the year and Legoland Dubai forecast to open in October 2016. The growth in theme park attractions should contribute to the expected growth in international arrivals on the run up to EXPO2020.

Sustainable Management – As a sub theme of the EXPO the hospitality industry will continue to focus on sustainable management from both a construction and operations perspective. Jumeirah was one of the first hotels to attain the Green Globe Certification in 2015 and it is likely that many other hotels will follow this example.

Empowerment of Front Line Employees – This highly topical discussion is likely to be an agenda item going forward into 2016 with many hotel brands seeking to improve customer satisfaction through the provision of an engaged and empowered workforce.

Economic Outlook Latest STR figures in US Dollars for the end of 2015 present a mixed picture for the region overall. The Middle East as a whole highlighted a 2 % drop in occupancy rates by comparison with the year end 2014. ADR and RevPAR were also down slightly.

The downward trend was particularly noticeable in Dubai where increasing room supply has created a much more competitive market and a negative impact on overall room occupancies and other performance indicators. While year-end occupancy figures were down 2.3% overall on 2014 ADR dropped 7.5% and RevPAR fell by 9.7%, possibly as an outcome of the loss of the high spending Russian market in 2015 and the drop in the yuan against the dollar.

Abu Dhabi had a more positive year end with overall occupancy up to 74.5%, a 1 % increase on 2014. ADR dipped marginally by 0.8% overall but RevPAR was up by 1%.

Projections for 2016 appear to indicate that occupancies and revenues will stay the same as the industry absorbs more new hotel openings. As the new theme park projects come online and Dubai’s attractions increase we may see a more positive trend towards the end of 2016. It is important to remember that despite the marginal drop in occupancies over the last few months that the hotel industry globally continues to expand with the Middle East & Dubai still demonstrating robust performance overall.

Global Hotel Industry Revenue 2008-2016

Angela Anthonisz, Editor Rohit Srivatsa, Research Associate

January 2016 | Edition 5

Polarisation of the Hotel Industry - Revisiting the lack of thinking in 2000!

At the end of 2015 Marriott became the largest hotel group in the world after securing a $12 billion deal to acquire Starwood Hotels. As a cash rich company they were able to create a franchise operation of 5,500 hotels with 1.1 million rooms worldwide. This in a period of service sector market growth (despite recession), and where borrowing was cheap and risk minimized as long term projections are for manageable interest rates despite recent movement in the USA, and a period where real estate was appreciating . On a smaller scale Accor then announced that it will complete the acquisition of Fairmont, Raffles and Swissôtel later in 2016.

A confirmation for Marriott, if they needed it, that the market agreed with them. The obvious advantages of creating such a large international presence from a business perspective are the economies of scale afforded by size and that ready borrowing would mean easy absorbsion into the existing portfolio, including relaunch of brand etc. Though to assume that larger hotel chains in general will perform better than their smaller counterparts is perhaps a good PR line for those large conglomerates, but does it really mirror today’s economic plurality?

EAHM to Participate in the Dubai Food Festival 2016 As part of this years Dubai Food Festival, two teams from the Emirates Academy of Hospitality Management will be represented at the Beach Canteen on Kite Beach from 25 th Feb to 12th March. The students will present two highly innovative and exciting food concepts entitled ‘Burger Print’, a burger concept with a twist; and ‘Tori Matsuri’, a Mediterranean Japanese fusion.

The Hospitality Review in 2000 reported on the ‘overwhelming and dramatic changes to the UK hotel industry’. Swallow Hotels (a weak brand) were being converted to Marriotts (a strong brand) and Radisson had built what was then considered to be one of the most extensive hotel systems with operations in 53 countries. Concerns were expressed about the polarization of the industry and dwindling number of small to medium sized hotels who just did not have the resources at that time to compete with the bigger players. Research from Manchester Business School highlighted the bi-polar model emerging in the hotel industry and the creation of a ‘death valley’ in which the middle sized operator would disappear. The model seems to ignore economic reality and provide us with lack of thinking from MBC. The history of the market is that if you create a temporary gap in provision the industry sees an opportunity, and not a threat as entrepreneurs enter the new market with new product and ideas. Instead of this being ‘death valley’ it is actually ‘Phoenix Valley’ with new brighter birds emerging. Premier Inn is an excellent example of today’s new middle market as it continues with robust growth in the centre ground, a growth based upon identifying the market place and location by analysis of big data as customers search for beds on line. Again borrowing is cheap, and the locations are now being chosen by their real estate prices relative to the demand. Another example of smaller operators are Malmaison and the Dorchester Collection who continue to thrive through developing more unique hotel experiences that cater to the modern day ‘prosumer’ needs.

As part of the undergraduate three year degree programme provided at the academy, the students learn all aspects of the kitchen, restaurant and hotel operations. In October 2015, several groups of students presented their restaurant concepts to a distinguished panel of internal & external judges. The best two concepts were chosen on the basis of what would be most suitable for a food festival and add value and foster the entrepreneurial skills of the students.

We are extremely proud of the students who have been working very hard on the project and are involved in designing the canteens, preparing food & drink menus, managing human resources and finance at the same time. This is a once in a lifetime, fantastic opportunity that will not only enhance the reputation of the Academy but will also help showcase the students caliber and skills in this entrepreneurial competitive venture.

This is essential experiential learning which will contribute to students life long learning. Students can also show their creative side, put their innovation into practice and be fully immersed in the “live” business operation. We look forward to seeing you there!

The market was ever thus and will continue to be so otherwise where would the little fish come from for the big fish to eat? It means they can watch the market, wait to see which ones survive and show sustainable growth and then ‘gobble them up’. The middle market entrepreneurs will, of course, enjoy being ‘gobbled up’ as they realise there portfolio holdings within the companies they formed. The question now is which new companies will be left when we reach 2030 and what will they look like?

Angela Anthonisz, Editor Rohit Srivatsa, Research Associate

January 2016 | Edition 5

The Global Hotel Industry in 2016 The global hotel industry revenue is predicted to reach $550 billion US dollars in 2016. The industry revenue was worth $457 billion US dollars in 2011, which showcases an increase in revenue of almost $100 billion US dollars in the past five years as we move into 2016, if this prediction proves to be true.

Across the industry, there are key business, technology and hotel marketing trends that are set to take root and impact the industry as a whole in 2016. These range from the rise of the millennial traveler as the dominant consumer group by 2017, to the increased interest in using mobile devices and apps to enable more personalised hotel guest services. As competition increases, hotels will need to focus on providing more innovative products and services to meet with the demands of the millennial traveler.

These trends are reflected across the industry in Dubai where continued growth is reflected in a number of new hotel openings in Dubai in 2016 and new deals such as the Nakheel management agreement with Starwood which will see the opening of a new St Regis on the Palm in 2018. The Palm will be a part of Palm Tower, Nakheel’s 52-storey luxury mixed-use development and the centrepiece of Palm Jumeirah island. The hotel will feature one of the world’s highest infinity pools some 210 metres above ground. The pool will border all four sides of the building, offering 360 degree, panoramic views of Palm Jumeirah, the Gulf and Dubai skyline.

Nakheel also moves forward with all-inclusive plan for a new 750room hospitality concept . Dubai’s first all-inclusive resort - by master developer Nakheel and Spain’s Riu Hotels & Resorts has moved forward. The companies met in Dubai to discuss the design and construction of the planned project, which will be located at Deira Islands, Nakheel’s new 15.3 square kilometre waterfront city in Dubai.

Under the partnership, announced in May, Nakheel and Riu plan to create one of Dubai’s biggest resorts in terms of rooms, and the first RIU resort in the Middle East. The company already has 45,000 rooms across more than 100 hotels in 19 countries. Nakheel is planning 10 new hotels across Dubai as part of its expansion into the hospitality and leisure sector. Five will be at Deira Islands, one on Palm Jumeirah, two at Dragon City and two at Ibn Battuta Mall.

New hotel product offerings also include the development of the new ‘Snoozebox’ concept, the outcome of a ‘strategic partnership’ between Dutco and the UK based company. Snoozebox, which is listed on the London stock exchange has said the portable hotel rooms, which do not require mains electricity or water, will be in demand for major events in the region, like Dubai Expo 2020 and Qatar’s World Cup 2022.The company’s portable hotel rooms have proved popular at sporting events and music festivals, including the recent Rugby World Cup, Glastonbury and Edinburgh Fringe Festival.

Angela Anthonisz, Editor Rohit Srivatsa, Research Associate

Mega Projects in the UAE Here is this edition’s update on the latest UAE mega projects planned and already under contruction Dubai Festival City Mall expansion The $400 million expansion is expected to be completed by June this year, according to a senior mall official. The expansion will add 20 percent more area to the existing 2.4 million square feet mall and increase the stores’ tally to 420,” The investment will also create a 300-metre long waterfront promenade, with 22 restaurants opening by early next year. An open air 50,000-square feet platform will be set up on reclaimed land from the marina in the next two months, which will cost an estimated $8 million.

Laservision Mega Media will create a “mega spectacular” at Dubai Festival City Mall. It is believed to be a water and lights show similar to the Dubai Fountain near Burj Khalifa.

Revealed: ticket price for Dubai’s IMG Worlds of Adventure IMG Worlds of Adventure, the World’s largest indoor theme park is in the final stages of development and is gearing up for the grand opening. The main structure and civil works have been completed and the rides, food and beverage, and retail are currently in the testing, commissioning and fit-out phase. Entry to the four zones of the park (Cartoon Network, MARVEL, Lost Valley - Dinosaur Adventure and IMG Boulevard) will cost AED300 ($81) for adults with the price of children’s tickets to be announced soon.

Dubai Parks and Resorts’ spending reaches $1.3bn Construction at the Dubai Parks and Resorts remains on track for the attraction to open in October 2016, as cumulative spending on the project reaches $1.3 billion. In the third quarter update on progress of the project, the project has reached a critical milestone, with the opening of the region’s first integrated theme park resort now less than 12 months away. The project structure works is 73 percent complete as at the end of third quarter, up from 57 percent in the second quarter. Riverland Dubai, which is the gateway to the destination and provides access to all the parks, features over 50 dedicated outlets.

Dubai’s DWTC awards $196m deal for phase 2 of expansion Dubai World Trade Centre has awarded Al Futtaim Carillion the main construction contract to deliver the phase 2 construction work on its Dubai Trade Centre District (DTCD) project. The integrated mixed use development comprises 535,000 square metres of gross floor area located between the current Dubai International Convention and Exhibition Centre and Jumeriah Emirates Towers in the heart of the city’s Central Business District.

January 2016 | Edition 5