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With 19 properties operating in different emirates, apart from 11 in the pipeline, the Hilton brand is clearly on a roll in the UAE. Its mid-scale properties are particularly gaining momentum, as the company plans to double its portfolio under the Garden Inn and Hamptons brands. The energetic pace of growth is reflected across the region, as Hilton is expected to open more than 80 hotels in the next five years.
In an exclusive interview, Carlos Khneisser, Vice-President of Development - Middle East at Hilton Worldwide, explains the strategic concept behind its new properties in the UAE and why particular brands only work in certain locations.
* Which brands from Hilton Worldwide are doing well in the region?
DoubleTree is the fastest-growing hotel brand here with more than 26 hotels trading and in the pipeline in the region.
In the UAE or in Dubai we will be doubling our portfolio with the mid-scale brands. In the UAE in total, we have 19 trading properties and 11 under way. There is a great appetite for mid-scale with our Garden Inn and Hamptons brands. We’re looking forward to opening one hotel a month for the next two or three years. And 80 per cent of our pipeline is under construction.
* Based on your experience in the region, how has the market evolved?
Hilton Worldwide was one of the early entrants in the market about 65 years ago with our hotel in Cairo. We expanded from there with our Hilton brand. Blackstone took over in 2007 and we merged domestic brands in the US with Hilton to become a company with a large portfolio of brands including the Waldorf Astoria and Conrad. We also have Hilton DoubleTree, Garden Inn, Hamptons and just last year we launched our Curio Collection and Canopy by Hilton, which are accessible lifestyle brands. The company already has more than 150 hotels either trading or under development in the Middle East and Africa [MEA]. On average one hotel will open per month for Hilton Worldwide across MEA, with 80-plus hotels under development and set to open over the next five years.
* While there is continued appetite for luxury, how is the non-luxury segment being catered to?
The government is persuading investors to invest in this segment. It is incenti-vising owners by offering 10 per cent tax in the first five years. This is a very intelligent move — with mid-scale you’re opening a different segment and attracting different clients.
* Is this the case in other parts of the region as well?
It’s the same in every market. Each city has a plan that we have to align to our own based on the country’s vision. In Egypt they were not open to having mid-scale brands until three years ago. Before that we have been develop ing our full-service brand. The moment we started seeing a demand for Hilton Garden Inn, we decided to enter this market with that brand. In all of the Middle East and North Africa, starting from the UAE, Saudi Arabia, followed by Qatar and Egypt, there is strong demand for mid-scale property.
* Is the government’s vision of community-based developments adding to the maturity of the market?
You cannot develop a mid-scale brand anywhere. It would die. You have to develop them where there is energy, vitality of food and beverage and entertainment offerings. A Garden Inn, for instance, cannot be developed in an area where you cannot walk out and have a bite to eat at a different level from what the hotel has to offer.
* As a brand, how do you advise owners to opt for one brand over another?
In some locations, mid-scale brands are more developed. For instance, in secondary cities in Saudi Arabia such as Hail or Tabuk we would not target a luxury brand. The demand is not there. You have mid-scale and upscale brands there.
Brands follow locations. If you have a location next to Burj Khalifa you won’t go after mid-scale property. If you look a bit north or south, the cost of land is cheaper and you can afford to build a mid-scale property. The approach of brands follows the location itself. However, keep in mind that primary and secondary are relative terms and it is possible for prime locations to exist within secondary ones too. For example, in Bur Dubai and Deira we’re developing new mid-scale hotels in a prime location. Historically, the mid-scale segment did not exist in Dubai.
* Have the ownership patterns changed?
More than 60 per cent of our new deals are with existing owners. The culture here is that most ownership is either local individuals or local companies, which are attached to their assets. They would prefer to keep ownership for a long period of time. While the ownership structures differ in freehold and non-freehold areas, even in freehold areas where you see foreign investment, the percentage of local investors is higher.
Source: Shalini Seth, Special to Property Weekly