According to MEED Projects, the online projects tracking service, the value of new hotel investments in the Middle East and North Africa (MENA) could hit a record high in 2018. “After a relatively subdued 2017 up to the end of November which saw $5.45 billion worth of new hotel construction contracts awarded, the value of hotel contracts due to be awarded in 2018 is more than $14 billion” says Ed James, Director of Content and Analysis at MEED Projects. James says this total will comfortably exceed the $8.5 billion awarded in 2016 and the previous record of $11.9 billion awarded in 2015. Investments in hotels in 2018 will account for about 7 per cent of the total $200 billion scheduled projects spending in the MENA region, making it one of the most important construction sub sectors. On a country basis, the UAE will be by far the largest market, with an expected $8.4 billion worth of contracts, followed by Saudi Arabia at $1.9 billion and Qatar at US$1.7 billion.
The 14th edition of the Arabian Hotel Investment Conference (AHIC) is being held on the 17-19 April 2018 at a purpose-built village in the grounds of the Waldorf Astoria at Ras Al Khaimah, UAE and is expected to attract around 800 hotel investors, major developers, leading financiers, and C-level hotel executives. Jonathan Worsley, chairman of the event organizer, Bench Events, and co-founder of AHIC says the new figures are exciting for the Middle East hospitality investment community which gathers annually at AHIC. “With oil prices now trading significantly higher than the January 2016 lows, we expect to see signs of recovery and stability in most regional economies” he says. “There is still enormous potential for hotel development in this region, particularly as the industry seeks to diversify and we foresee significant growth in the mid-market and serviced apartments segments, particularly in the UAE and Saudi Arabia. With ‘Focus on the Future’ as our theme for AHIC 2018, the program will include conference and networking sessions that tackle how to capitalize on these opportunities and maximize returns for the years ahead.”
AHIC is being held in partnership with Ras Al Khaimah Tourism Development Authority (RAKTDA). Established in May 2011, RAKTDA aims to attract one million visitors to the emirate by the end of 2018. The authority aims to develop the emirate’s tourism infrastructure and establish Ras Al Khaimah as a worldclass destination for leisure and business travel, creating sustainable investment opportunities and enhancing the quality of life for its residents. In order to achieve its goals, RAKTDA has a government mandate to license, regulate and monitor the emirate’s tourism and hospitality industry. Haitham Mattar, the CEO of RAKTDA says hotel investors need to rise to the challenge of meeting the shifting demands of travelers and the specific requirements of certain demographic and geographic groups, such as millennials, families, and baby boomers, as well as halal travelers and those from emerging markets such as China and India. “Investors need to understand these requirements and must also take into consideration from the outset which type of technology will drive the sector in the future” he says “They need to consider this right at the beginning or risk becoming rapidly irrelevant”. The biggest risk for hotel investors, says Mattar, is failing to embrace the changes and challenges and expecting traditional business to keep on coming. “It’s no longer a case of build it and they will come.” he says “It’s more a case of build what they want, and they will come. There’s a lot of competition on the global scene for the business of the new emerging markets. The hotel guest is now very much in the driving seat from the very design and product development phase.”
The AHIC 2018 program was developed at a meeting of the AHIC advisory board comprising 37 of the Middle East’s leading hotel owners, developers, operators and consultants. The board agreed on several key issues – building hotels for a better return on investment with land, development and construction costs all coming under scrutiny, promoting a better understanding of value engineering, the use of renewable energy sources and sustainable construction methods for decreased costs. Commenting on the meeting, Jonathan Worsley says this year’s discussion was dominated by a clear focus on the costs of development versus the reality of returns. “There was a thirst for knowledge around issues such as risk adjustment and returns, supply and security, facilitation of foreign investment, ownership models and even exit strategies for distressed assets.” he says. The advisory board also discussed new investment vehicles; innovative finance models; cryptocurrencies and digital payments; the impact of the co-living and working movement on the hotel model; how to maximize the religious tourism market in KSA; and where and what is the new mid-market. The advisory board also revealed a desire for insights from other business sectors and for the first time, AHIC 2018 features a ‘Spotlight on Innovation’ series with speakers from outside the hospitality industry taking to the stage. There will also be live-on-stage interviews with leading hotel operators, expected to reveal their approach to maintaining the competitive edge. Keith Barr, Chief Executive Officer of InterContinental Hotels Group, appointed in July 2017, is confirmed as a key speaker, along with Christoph Hoffmann, CEO and Partner, 25Hours and Amar Lalvani, CEO and Managing Partner, Standard International.
This year’s AHIC will kick off with a “Day of Disruption” designed to shake-up traditional ways of thinking and bring insight to the hospitality investment industry from forward thinkers operating in various sectors, from cybersecurity and cryptocurrencies to marketing and motorsports. “The hospitality industry is often criticized for not keeping ahead of trends or driving innovation” says Jonathan Worsley. “That’s because hotels are a rooms-based business model, offering bed and breakfast – something that will always be needed as long as people continue to travel. There is little motivation, quite understandably, to change this. However, as the hotel market in this region matures, competition increases, putting performance and profitability under pressure, so investors are quite rightly focusing on the future and carefully analyzing the potential of current and future assets alike. Many of the hotel owners we speak with at AHIC invest in other industries as well and are keen to see how the hospitality industry will adopt new technologies and create alternative operating models”
The Day of Disruption will bring together CEOs from some of the world’s most forward-thinking companies. These will include Frits Dirk van Paasschen, former CEO of Starwood Hotels and Resorts and author of “The Disruptor’s Feast” According to van Paasschen, established interests, change-blindness and set ways of working mean hotel brands will wake up too late to disruption, making it nearly impossible for incumbents to survive. “There is so much change still to come, and most of the industry is still asleep,” says Paasschen, who believes lodging capacity in the space between traditional hotels and first-generation peer-to-peer accommodations will be the major disruptor to the hospitality industry in 2018.
Maksim Izmaylov, CEO, Winding Tree, a specialist in blockchain technology, who holds a similar view to van Paasschen. “There is no innovation in the hospitality industry, that’s the main problem” he says. “There are no and will be no new disruptors in the industry until we break the monopolistic grip on it. We live in a technology-driven world. Any CEO of a travel company has to really come to terms with this. His/her company has to transform into a technology company as soon as possible. If they don’t do that, they will be delegating their technological expertise to some intermediary that will abuse it.”
Tim Sae Koo, CEO of social media marketing company TINT, who will share his experiences as a “digital nomad” with AHIC delegates, agrees that investors should be investing in digital technologies early on. “Hotel operators lagged a little behind, but there are quite a few companies now that are refreshing the business model and trying new things, such as Yotel, Citizen M, and Generator Hostels.: he says “People still want the human experience, but what that means is evolving and a lot of times includes more technology” The Day of Disruption will also include a live hack of the AHIC 2018 audience, led by Richard Neale of Counterhack; modern leadership advice from Ferrari’s Mark Arnall, Trainer of F1 star Kimi Räikkönen; and a panel session featuring ‘Challengers of the Status Quo’ moderated by Eric Fulwiler, Executive Director, London of VaynerMedia.
In addition to three days of engaging content, AHIC 2018 will present its first Project Showcase, highlighting regional and international hotel investment opportunities. Locally, these will include Al Marjan Island in Ras Al Khaimah, one of the few markets exceeding current performance trends with total guest nights up 17.7 per cent during the first six months of 2017 and room revenue increasing by 13.3 per cent. Haitham Mattar says these strong performance indicators clearly outline the potential for investors in looking at Ras Al Khaimah for their next hospitality venture. “As Ras Al Khaimah draws closer to reaching its one million visitors target by the end of 2018 and charts a path towards attracting 2.9 million visitors by 2025, the need for quality hotel rooms has never been so important” says Mattar.