Dubai Hoteliers Surge as Part of Global Hospitality Explosion

Growth of global markets is providing an array of opportunities for hotel companies to expand worldwide. And certain pockets are exhibiting particular potential. The United Arab Emirates, for instance, is becoming a hot spot for global hotel development, with a couple of different focuses: “Dubai wants to be the financial center of the Middle East and wants to set itself up as an alternative tourist destination,” said Lodging Econometrics Inc. president Patrick Ford. The emirate has a pipeline of 156 luxury and upper-upscale hotel projects totaling 56,000 rooms. Abu Dhabi, by contrast, has positioned itself as more of a cultural center. Its pipeline includes 69 luxury hotels encompassing 21,000 rooms.The market is also exporting its hotel prowess. Dubai-based luxury-hotel company Jumeirah aims to have 60 hotels either under construction or operating by 2012, 40 percent of the rooms in the Persian Gulf and Middle East and 60 percent in Asia, Europe and the Americas, according to chief sales and marketing officer Apo Demirtas. The firm currently operates eight hotels and sees fruitful expansion possibilities in the Persian Gulf region and the Middle East, owing to low labor costs compared with those in Europe and the Americas. Demirtas also believes that demand for hotels will outpace supply in the region.In the more-established hotel markets, the United Kingdom had the largest hotel development pipeline in Western Europe at the end of 2007, with 260 projects totaling 40,000 rooms. Spain was second with 187 projects and 30,000 rooms and then Germany with 69 projects and 13,000 rooms. Hotel development in Russia concentrates on large, branded properties in big cities. Moscow has 20 projects in the construction pipeline, and St. Petersburg has 12. Russia’s smaller cities have not seen a significant amount of hotel development, Ford said.As large hotel companies increasingly focus on deriving their revenue from franchising and management fees rather than ownership, they are finding that new global markets provide the opportunity to expand that model as well, according to Leslie McGibbon, senior vice president of global corporate affairs for InterContinental Hotels Group Plc. Franchisees pay franchisors for marketing and advertising, as well as reservation systems. The hotel company then reinvests that money into the brand, which should increase guest satisfaction, leading to fuller hotels and owners that then want to transact more deals with the franchisor. “It’s called the virtuous circle,” he said.It is also wide ranging. Sixty percent of the world’s hotels are unbranded, according to McGibbon, providing further growth opportunities to increase a brand’s global footprint through existing properties.Also contributing to growth possibilities are the expanded use of the Internet and proliferation of discount airlines, which put travel within reach of a larger share of the world’s population. And longer life spans are also playing a role. According to McGibbon, “Instead of retirees heading to the rocking chair, they’re heading to the airport.”For more on global hotel growth, see the May 2008 issue of CPN or search for key words “Passport to Prosperity” in quotation marks.