Dubai: Sticking to a single investment strategy is paying off for the Landmark Zenath Group (LMZ Group). Rather than get distracted by venturing into upscale hospitality projects, the Group prefers to stick close to its core area of four-star hotels.
By end 2017, it plans to open five properties under the ‘Landmark’ brand and that would entail a combined investment of Dh100 million. Two of these will be in Dubai Investments Park, offering 370 rooms. A 185-room property is opening on Shaikh Zayed Road, while a 175-room hotel in Deira is scheduled for 2017. And for Fujairah, there is a 246-room venture.
“We will always remain in the mid-market segment as from an investment point of view,” said Deen Sadiq, Group Director. “It’s a lot efficient to operate mid-market hotels with better and quicker RoIs (return on investment). It’s also more attractive to secure financing for such an asset class, which does not necessarily carry the same risk luxury hotels do. When there is a down trend we are able to cope or sustain in a much better way.”
The Group manages all the hotel and properties it develops. But aren’t land prices and construction costs escalating even for mid-tier developments?
“Our primary model of operation and expansion is on lease and joint venture,” said Deen Sadiq, Group Director. “However, for developing, depending on the locality, the total project cost should be 20-30 per cent for a budget hotel and 30-40 per cent for mid-market hotels, which is our segment.
“Our strategy has been (to develop in) non-freehold. We develop and manage a diverse range of small and medium projects, including commercial, residential, showrooms, warehouses and staff accommodation.
Internal and external changes
“Despite freehold being a very good business, it’s a different ball game with a completely different business strategy. We don’t think getting into freehold is the right move for us at this stage as we’d have to make many internal as well as external changes to get into that vertical.”
Its funding needs are met through a mix of internal resources as well as by having “strategic investors for certain projects”. “We also arrange funds through banks ... but we prefer to opt for Islamic banking,” said Sadiq.
Apart from the UAE, the other market the Group sees as ripe for expansion is Saudi Arabia, where it already has two serviced apartment properties.
“We’ve strengthened our senior management in the kingdom in order to streamline the operations and expand the business,” said Sadiq. “We have plans of diversifying into new territories such as other cities in the UAE and the GCC.
“We’re also looking at opportunities in India — but the GCC is an easier model for us.”