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How alternative developer models have influenced investment

Date: 2013-05-28 17:12:51

RCI, the global leader in vacation exchange, and The Registry Collection programme, the world's largest luxury exchange programme, collaborated for the fourth successive year to co-host their half-day Masterclass, which was titled 'Recovery and Growth through Innovation'in 2013 at this year's Arabian Hotel Investment Conference, hosted at Madinat Jumeirah, Dubai.

This year's interactive event included a panel of distinguished speakers who offered key industry stakeholders, hotel brands, resort owners, investors and industry consultants valuable insight into developer finance, customer loyalty and lessons learnt and pitfalls to avoid in 2013 strategies.

After a brief introduction by Jonathan Worsley, Chairman, Bench Events, the first panel of the day, Bridging the Finance Gap hosted by Chris Hewitt, TRI Hospitality welcomed Fergal Harris, Head of Real Estate Middle East, Standard Chartered; Simon Hasdell, VP Asset Management, IFA Hotel Investments; Todd G Wynne-Parry SVP Global Hotel Development and Aquisition, Trump Hotel Collection and Greg Doman, SVP Development, Fairmont Raffles Hotels International.

The panelists shared their experiences on various strategies and highlighted how the alternative models have influenced the investment profile of the leading developments they have managed.

When panelists were asked about the state of the hotel investment market, Fergal commented that as the market matures it encourages a lot more transparency, more liquidity and confidence is coming back due to lots of current high-profile projects. There's more information and data available to make decisions including tourist flow, spend, hotel REVPAR etc...which also promotes learning in the marketplace. He went onto highlight Lebanon and Egypt remains a troubled market with Abu Dhabi starting to evolve.

From a mixed-use resort development financing perspective, he stated that there was no funding whatsoever available to finance developments with pre-sales, and any pre-sale funding that remained in the finance market had stopped.

Todd commented that the MENA hotel finance sector is very much market by market driven now, particularly as a result of the Arab Spring uprisings with some 'hot' and many 'soft' markets. The one big game-changer being that seed equity is now a pre-requisite for hotel and resort development. When pressed on the equity / finance split, Tom stated around 30-40% equity, 30-35% presales (contradicting Fergal) with the remainder debt.

Fergal stated he would not loan to a hotel and real estate development as Standard Chartered perceived residential sales and pre-sales as too speculative in the current market.

When asked about the benefits of mixed use resorts Simon representing IFA remarked about how well the model delivers short, medium and long term cashflows through the hotel, residential sales and hospitality services offered. Greg concurred and delivered a brief overview of the Raffles Fairmont in Manila which offers a residential rental option as part of the mixed use hotel development offering. "Both A (hotel) and B (residential) need to work effectively together - Emaar's mixed use offering in Mecca is another example."

Todd continued, stating that Trump is actively reducing the size of some of their new build hotels and increasing their residential component. All agreed that standalone projects are difficult to sell and only 'come to life' from a revenue and profitability perspective when other resort services are added - eg. food and beverage offerings, sports etc…

Chris then asked the panel to comment on what in their view are the critical success factors for Mixed Use Resorts? "It's hard to make the market and create demand which isn't there" said Doman citing failed Oman developments as examples - "demand may be there for a hotel, but will the finance be available too?" he questioned. "Location, location, location is nowadays not enough and banks need to feel confident you're using great architects bringing the project to market that has a particular uniqueness and edge over the competition" said Todd. "The project needs to 'sing' and be different. The management team has to have a successful track record, together with deep pockets," he concluded.

Customer Loyalty - making it work for your businesswas the next panel session which promised a new look at customer loyalty, often the bane of hoteliers. The session focused on how to attract and retain customers and whether loyalty programmes and membership cards really work or are they just a 'front' for offering deep discounts? Moderated by Shafi Syed, Regional Director RCI and Registry Collection, MENA, the panel members were: Ayman Al Deik, Group Director Brand Loyalty and Acquisition, Jumeirah Group; Richard McIntosh, MD, Hilton Grand Vacations EMEA and Alexander M Kappes, CEO, Groupon Middle East.

Ayman started the session by explaining Jumeirah's approach to loyalty was based around engagement and creating bespoke guest experience highlighted by Jumeirah's tagline "Stay Different". Richard adding that Hilton Grand Vacation's 200k+ members approach to CRM was based around 'slicing and dicing' it's membership base, saying that "around 35k of these are part of 'Club Elite' which offers members extra experiences for a premium. This delivers Hilton Grand Vacations additional revenues, more profit and increased loyalty. Groupon's approach to loyalty is based on technology and innovation and we "offer short-term, new and different, spontaneous experiences to encourage new hotel customers that would otherwise have not visited", said Alexander. Clearly 'discounted spontaneity' is popular with Groupon members and Alexander intimated that it was the hotelier who needs to drive longer tail, higher priced loyalty following the guests' Groupon experience.

The final session of the day focused onLessons Learnt, Pitfalls to Avoid in 2013: The Dubai Recovery - sustainable and long term - as Dubai continues to benefit from the regional crisis and grows from strength to strength how is the region gearing up to sustainable growth.Again moderated by Shafi Syed, the panel consisted of a selection of real estate and hospitality leaders: Abdulla Bin Sulayen, CEO Seven tides and Asteco; Shaun Langdon; SVP Damac Hotels Management LLC; Ian Albert, Regional Director Middle East, Colliers International and Jaidev Menezes, Director Residential Development, Fairmont Raffles Hotels International.

Abdulla's view was that now is the right time to buy and build, but he was cautious of future construction within the region in 2015 and 2016 as a result of the hotel supply pipeline scheduled to hit the market over the next two years or so. He expected material costs to increase and Ian was optimistic on price stability within the region over the short to medium term, "prices may soften slightly, but I don't expect them to drop." he said. Both Shaun and Jaidev were excited for the growth potential of the MENA serviced apartment and extended stay sector. Shaun went on to outline his company's plans for the future and recent one billion sales success at the Damac Towers by Paramount development.

Many of the world's largest serviced apartment and extended stay developer owners, operators, investors and service providers are scheduled to convene at the forthcoming inaugural Serviced Apartment Summit, July 8 - 9, Andaz London.

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