Ashok Ummat |
The Le Meridien Group, which operates 32 properties in the Middle East and South Asia, identifies the region as a growth market for hotels and the tourism sector, according to Ashok Ummat, Le Meridien's senior vice-president, finance and development for the Middle East and West Asia region.
The group is currently in negotiations with a number of developers for new properties in the Gulf and South Asia.
"Two factors determine the tourism industry's success in any region. One is the infrastructure and the other is the air connectivity. Dubai has both – an excellent tourism infrastructure as well as a strong and growing airline, Emirates, which is helping Dubai attract more visitors," he said.
"Every time Emirates flies to new destinations, it brings additional passengers, most of whom are our guests. It adds to the business in hotels, the tourism industry, car rental companies, destination management companies, catering, food and beverage outlets, and the hotel supply industry.
"Tourism is a labour-intensive industry. A new hotel means some hundreds of direct jobs and a few thousands of indirect jobs.
"Like Dubai, the rest of the Middle East is also catching up. The Middle East has recently woken up to realise the potential of the tourism industry and its benefits."
He said religious tour-ism is going to expand in this part of the world. Once the situation in Iraq stabilises, hundreds of thousands of visitors will visit the holy places in Iraq, especially Karbala and Najaf.
In an exclusive interview with Gulf News, Ummat elaborated on his company's expansion plans as well as the brand's presence in the market.
Gulf News: How large is your operation in the region?
Ashok Ummat: We are the fourth largest brand in the region in which the InterContinental group has 54 properties, followed by Starwood with 44 and Hilton managing 34 properties. Le Meridien manages 32. However, we have nine properties in the pipeline and before the end of this year, we will surpass Hilton to become the third largest brand in terms of the number of properties managed by each brand.
I see a hotel as a combination of retail outlets, in which rooms are one of the elements. We offer our guests a number of services, including laundry, food and beverages, conference and meeting facilities, banquet facilities, entertainment services, car rental options, and mobile rental services, among others.
So, a hotel is a retail supermarket for all these services. Revenues from the food, beverage and conference facilities make up about 35 per cent of our sales revenue annually.
In our 32 properties, we have 164 food and beverage outlets, Starwood has 199 outlets from its 44 hotels and InterContinental Hotels have 197 outlets in 54 properties.
GN: Which are the growth markets for hotels and the tourism sector and why?
AU: The Middle East and West Asia (MEWA). The economic growth will drive the development of the region's tourism industry in the coming years. The Middle East and South Asia, especially India, is showing stronger growth. It is virtually impossible to get a room in any of the good hotels in India without a prior booking.
We are constantly looking for opportunities in the region and negotiations are taking place on new properties. We are looking for properties in Qatar, Oman, India, Pakistan, Bangla-desh, Nepal and Sri Lanka as well.
However, in the long run, the US market will also grow and we have big plans to increase our presence in the American market.
GN: How many hotels do you have in the pipeline?
AU: In our Middle East and West Asia region spanning 26 territories, we have nine new properties under development, with an investment outlay to the tune of $600 million. Our development partners are building them for us to manage. All of these will be completed between this year and 2006.
These include the $200 million 1,320-room Le Meridien Makkah Towers, to be completed by June next year and the 275-room Le Meridien Riyadh, also scheduled to open in June next year.
In Kuwait the 70-room Le Meridien Kuwait will be opened this month. This is to be followed by another 70-room property, Le Meridien Mubarakiya Kuwait, and the 80-room Le Meridien Salmiya Kuwait – both to be completed by early 2006.
Construction work for the Grosvenor House Hotel and Apartments at the Dubai Marina is in full swing. It is expected to be opened in the first quarter of next year.
In Pakistan, currently under development is the 280-room Le Meridien Karachi, which will be ready for opening by the third quarter of the current year. We are also going to open the 102-room Le Meridien Kathmandu Gokarna Forest Golf Resort and Spa in December this year.
We have recently signed an MoU with an Indian developer to convert the Hyderabad Nizam's Palace into the 250-room Le Meridien Hyderabad hotel, which will be opened in the third quarter of 2006.
GN: How quick is the return on investment on hotel projects in the Gulf?
AU: It depends on a number of things, especially the interest rates. In this region, the return is quick, between six and seven years, due to low interest rates. In other parts of the world, it varies.
In India, for example, it takes about eight years. Interest rates, currently at about 5 per cent, make it easier for us to offer a quick return on investment. I think a good hotel operator should be able to return the developer's investment in six years.
GN: What is your sales revenue from this region?
AU: Last year, we generated about £180 million, which roughly represents 18 per cent of the Le Meridien's global revenues of £1 billion.
GN: How is the restructuring at Le Meridien headquarters going on?
AU: We have almost completed the process. Le Meridien had a £1.2 billion debt which has been bought by Lehman Brothers. By June the whole process of debt buy-out and restructuring will be completed. With an annual sales turnover of £1 billion, the debt was not a big issue.
That's why Le Meridien has enjoyed strong support from our partners, who have committed new projects with us.
We already have a new CEO who is currently on a worldwide tour to meet developers and discuss further development plans. We are in negotiations with a number of partners to add new properties to our global portfolio of 135 properties.
