Dubai: Marriott’s split with Habtoor City, where it once had three flagship hotels, was a result of the pair disagreeing over their vision for the complex, the president and CEO of Marriott International has said.
The hotel group announced its intention to part ways with investor Al Habtoor Group, which owns the buildings on Shaikh Zayed Road, in July of this year, taking with it the St. Regis, W, and Westin brands.
They were swiftly replaced by Hilton hotels, but under a new agreement in which Habtoor would be allowed to manage the properties and simply franchise the Hilton name.
Analysts say that this was a clear point of contention between Marriott and Al Habtoor Group, owned by Emirati billionaire Khalaf Al Habtoor. Marriott does not franchise its flagship brands, including the St. Regis and the W, in order to protect service standards, while Al Habtoor would’ve wanted the lower service fees associated with simply franchising a hotel brand, experts say.
On a recent visit to Dubai, the head of Marriott International Arne Sorenson told the gathered press that there had been a divergence in vision for the three hotels.
“The owner had basically a different vision for the approach for that complex than our vision,” Sorenson said. “Certainly differences between franchised and managed is a piece of that ... it became clear to us that factoring in all things, including the economics, it made sense to take this step.”
The Habtoor Group continued to be a substantial owner and partner of Marriott International, regional managing director Alex Kyriakidis added. “It made sense to amicably part on this project,” he noted.
When asked if the decision to deflag 1,400 hotel rooms, the largest such incident in Marriott’s history, had hurt the company’s brand in the region, Sorenson said: “Not one bit.”
Some questioned the wisdom of placing such a large hotel complex directly opposite the high-performing JW Marriott Marquis, but the chief executive countered this notion. “Interestingly what we’ve seen is we perform better with more market concentration.”
Marriott International, the largest hotel group in the world, retains a healthy development pipeline in Dubai, with five new properties expected by the end of 2018, bringing the total to 11 for this year alone.
On where the company derived its confidence from amid a subdued hospitality market, Sorenson said that he remained bullish.
The question of supply, and concerns over rate growth, was one that had come up “repeatedly” in the Middle East over the past two decades, Sorenson said.
Despite ongoing worries, he added, the industry had experienced “continued, extraordinary growth.”
“The opportunities in the emirates are still profound. This is a market which is extraordinarily exciting.”
Dubai’s position as a crossroad between Asia and the West would make it an important hub in tourism for decades to come, he said.
Saudi Arabia, too, remained an important market, according to Kyriakidis.
“Demand for religious tourism will continue unabated ... the kingdom is responding to that,” he said.
Kyriakidis also pointed to the pent up demand of local Saudis for hospitality.
Crown Prince Mohammad Bin Salman, he said, was attempting to channel the billions of dollars being spent by Saudis overseas back in to the local economy, via elaborate and expansive tourism development plans on the Red Sea coast and elsewhere.
“It’s down to the hard ... task of implementation. We’re very optimistic ... and we are stakeholders in the future of the kingdom.”
One of the biggest points of discussion to emerge out of the $13 billion acquisition by Marriott of rival Starwood Hotels and Resorts has been the merging of loyalty programmes.
Earlier this year, David Flueck, Marriott’s senior vice president for global loyalty, said that bringing the technology together had been “a very challenging undertaking.”
Responding to this, Sorenson said that while Marriott “knew it would be complicated, it was probably a little bit more bumpy than we anticipated ... and the bulk of the chatter has really been around that.”
But more importantly, he said, was how Marriott had done with the substance of the rules.
“By and large I think we’ve navigated that pretty well,” Sorenson said.
“Among 110 to 115 million loyalty members, there’ll be some noise around the edges.”