When and how to roll out your new-look property
The Middle East and Africa (MEA) is one of the world’s fastest-growing hotel markets with 763 hotels spanning some 191,047 rooms currently under contract, the September 2015 STR Global Construction Pipeline Report reveals.
This represents a 26.3% increase in rooms under contract compared to September 2014 and a 42.1% year-on-year increase in rooms under construction, highlighting the on-going supply boom.
And with the majority of these properties due to open their doors by the end of the decade, it is forcing the region’s current hoteliers to re-invent their offering in order to remain competitive. As a result, the refurbishment topic is an issue being pushed to the top of their agendas.
There’s even more pressure to evolve in dynamic hotel markets like Dubai, which has the largest number of rooms under construction in the region, and if you consider the 19,719 rooms across 67 hotels under contract will open in time for the World Expo 2020, the heat is truly on.
It’s therefore no surprise that consultancy firm Faithful+Gould has noted a marked increase in demand for hotel refurbishment projects in the run-up to the event, which is expected to attract more than 25 million visitors to the emirate.
“Upwards of 10,000 rooms in Dubai need to be refurbished by 2020,” according to the company’s UAE country director and head of project management, Tom Hasker.
Fahda Barrak, senior architect at Draw Link Group, Dubai, agrees there is a “certain sense of urgency for hoteliers in the market to be the best and to offer the best” and this is “more so the case with the upcoming Expo 2020.”
Renovations are also a priority in Doha, Qatar, where 30 new hotels spanning 7,315 rooms are pipelined, according to STR Global. This is giving existing properties a run for their money as they look to attract visitors attending the 2022 FIFA World Cup.
“The massive size of the Middle East hotel pipeline is cause for concern for many existing operators in the region,” confirms head of TFG Asset Management, Mariano Faz. “Established operators are wary of the significant pressure new competition could place on RevPAR.”
He highlights the need to “pay more attention to existing stock”. “The majority of hotels have crossed the seven-year operational threshold and many are in need of refurbishment,” he says.
Keeping up with the Jones’s
In the case of Dubai, it really is a case of ‘keeping up with the Jones’s’, according to
Alexander Suski, sales and marketing director at Kempinski Mall of the Emirates, which is currently completing one of the region’s biggest hotel renovations to date at an estimated cost of $100 million.
“About 50 to 60% of the Dubai market are GCC guests and they expect brand new lobbies, rooms and restaurants,” he says.
“The international market also expects the newest things from Dubai and we have to ensure we keep up with their perceptions and the image that Dubai has.”
Kempinski Mall of the Emirates celebrated its 10-year anniversary in 2014 and needed to retain its status as a “flagship property”, says Suski. A complete refurbishment was the solution.
“It’s a very competitive market – every year up to 10,000 new room keys are added and at least 20 to 30% of those are in the luxury and upscale category,” he says. “If you want to be among the top 10 hotels in Dubai you need to evolve.”
The Kempinski Mall of the Emirates renovation was spearheaded by owner Majid Al Futtaim, which recently unveiled the $272m extension at Mall of the Emirates.
“The project was called ‘Evolution 2015’ and Kempinski wanted to be aligned with this strategy and vision,” says Suski.
Barrak agrees that Dubai is known internationally as a “pioneer in developing innovative concepts” and hotels are therefore “forced to keep up with this trend and innovation”.
“As for the wider Gulf region, demand for refurbishment is quite high as the focus is on attracting more tourism business,” she adds.
Wear and tear
Of course, one of the key determining factors driving hotel refurbishments is wear and tear, which in the UAE market can be an issue earlier on in a property’s life cycle than in markets with more moderate weather conditions.
“In general hotels in Dubai are built to very high standards, however, harsh climates can have a negative impact on the building itself and its facilities,” confirms Raki Phillips, who recently joined the Dubai-based International Hospitality Consulting Group (INHOCO Group) as senior vice president development, after a long tenure with Fairmont Hotels & Resorts in the UAE.
“High occupancies cause heavy wear and tear too, which will wear out product fast, plus the very competitive environment pushes owners to stay one step ahead of their competition.”
Bassem Salah, general manager hotels and hospitality at ISG, an international construction services company specialising in fit outs, says the trained eye of an architect, designer, hotel facilities manager or general manager, will easily identify “common signs” that a refurbishment is needed. These usually include dated furnishings, worn FF&E and tired finishes, but there are more technical signs that require “intrusive surveying or testing”, he continues to explain.
He says: “They include humidity and mould levels, air flows for mechanical ventilation, air quality tests, facade moisture ingress, heat flow scans and more,” he says. “These tend to look at how a building is performing and if properly addressed, can save the owner/operator a lot of ongoing operations costs while providing a better quality environment for the hotel guests.”
He says that “without a doubt” the Gulf’s arid climate wears down hotel buildings more rapidly.
“The quality of the construction work in some buildings also contributes to the shortened life cycles,” he says. “The mechanical services are also affected by these factors as they work much harder than they would elsewhere in the world to keep the building at optimal temperatures.”
Refurb versus upgrade
Iconsulthotels CEO Martin Kubler says while extreme weather conditions – sun, sand and high temperatures – play an important role in the Gulf in terms of determining hotel renovation schedules, it is important to “distinguish between refurbishment requirements and upgrades”
“Refurbishment should mainly be concerned with keeping a property in great condition inside and out, which isn’t necessarily competition-led, but more a matter of asset management and looking after your building and its contents,” he says.
“Competition factors often require more than refurbishment, but rather a product upgrade. For example, if my hotel has happily survived without the latest rainfall showers in its bathrooms, but suddenly all my competitors are installing rainfall showers, I obviously have to think about whether I want to follow the trend and upgrade my bathrooms, or whether I’ll be able to live with my current bathrooms.
“The same is true for changing travel patterns and behaviours – guests today expect fast and free WiFi, so if you’re hotel doesn’t offer it yet, it’s time to upgrade, regardless of when you last refurbished your property.”
Ask the audience
While a competitive marketplace puts pressure on hoteliers to conduct upgrades, Kubler stresses that the property’s facilities are only one ingredient of the “magic sauce” that keeps guests returning to a property.
“Before jumping into expensive refurbishment or upgrade projects, hotels should take a step back and look at the entire guest and employee lifecycle,” he suggests.
“Many visitors to Dubai appear to be very fond of ‘cutting edge’ and ‘new’, so new properties will always attract their fair share of interest, yet it’s clearly impractical to refurbish or upgrade every time something new comes along.
“Perhaps more important would be to see if a property is still able to serve its target audiences and successfully attract new travellers with its current offerings. Hardware is just one part of the picture.”
Phillips says customer feedback is crucial to determining the extent of the refurbishments and upgrades required.
“It is so important to be open minded and to ensure you are engaged with your customers through in-house surveys or review sites like TripAdvisor,” he argues. “Research is important for looking at the viability of each element of the refurbishment and its impact.
“Sometimes you can go overboard, particularly with technology – today’s traveller doesn’t always need complicated fancy tech points as people travel with their own technology these days.
Kubler adds: “The main question is not ‘when does a property become outdated?’ but ‘when does the hotel’s audience think a hotel requires refurbishment?’
“Guest expectations will differ according to market segment, location and many other factors, but refurbishment planning should largely be guest intelligence led.”
Salah says current market conditions are breeding two opposing hotel owner/operator attitudes when it comes to taking the decision to renovate.
“Some hoteliers are taking advantage of the high occupancy levels and high room rates and are therefore looking to refurbish later on when more stock comes onto the market and trade is more likely to be less profitable for them,” he says. “The danger with this is that they are sometimes too late to reposition and their reputation with clients is damaged because of the age of the stock; they lose appeal and ultimately, market share.
“There are other owners who would like to reposition the brand and the hotel before the onslaught of new stock comes onto the market. The danger here is that they are not capitalising on a great trading period and forego margins.”
He adds: “Somewhere in the middle of that is a happy medium of a slower refurbishment programme only taking out the vacancy levels so as to not impact on the occupancy levels.”
Faz says it takes a “brave hotelier” to commit to a full refurbishment when occupancy rates are 90% plus.
“Closing an entire hotel for any number of weeks is rarely feasible in today’s climate. Yet, in the long run, it is vital for hotel asset managers to balance the cost of opportunity with the risk of failing to take action,” he says.
Kubler says there’s “never really a right time to refurbish” but suitable times are dependent on the scope of the project.
“It could be that you can get away with carrying out the works immediately without affecting overall hotel operations, but it might also be that you’ll have to wait until the next period of low occupancy,” he says. “You might even have to split projects into phases, particularly if there’s a lot of work that needs to be done.”
Deciding what aspects of a hotel to refurbish is not always straightforward.
“It really depends on the number of years a property has been operating and the positioning of the hotel,” says Faz.
“If you want to attract the local community, then focus on your F&B outlets, but if you are mainly orientated towards groups, refurbish the rooms. During the first five to 10 years [of a property’s life cycle] there should be a constant ‘make-up’ refurbishment and after seven to 10 years, a property is looking at a major refurbishment.”
Faz’s tip is to hire a reputable and experienced design firm with the skills to “provide wow factor for a small investment”.
Phillips says top priority is to “look at revenue generators” – restaurants, rooms and banquets.
“The cost analysis of their impact on revenue generation plays an important role on how you refurbish,” he explains.
“It’s always optimal to refurbish an entire hotel at once from a customer journey and user perspective, however, from a PR and cost perspective it’s easier to do phase by phase so that there’s always something new to talk and get excited about.”
Barrak says both rooms and F&B outlets play an “important role in delivering the ‘first’ and ‘last’ impression for guests”.
“However, F&B outlets are refurbished more frequently because they not only cater to in-house guests [but in the case of the UAE], local residents too,” she adds.
Kubler notes a “clear trend towards making reception and lobby areas more welcoming and, more importantly, more functional”.
“Guest room design is also changing slowly to incorporate the needs of new segments of travellers – leisure guests for example, who combine leisure and business in the same stay and property, so require rooms that work for both,” he says.
“Looking to major markets abroad we’ll also see a trend to make technology more user-friendly – the dreaded room-control consoles are disappearing and are being replaced by switches. TVs are getting bigger, but also better connected and focused on travellers bringing their own devices and entertainment.”
Of course, many refurbishments must also take into account brand standards and Barrak says it’s all about “finding the right balance, without compromising on quality”.
“Draw Link has been operating in this market for more than 10 years and is adept at embracing new trends while adhering to brand guidelines,” she says.
“We have built a good reputation for bringing new trends to old spaces, while keeping its unique ‘touch’ and style the space embodies.
“The challenge is to not only add new materials, furniture and innovative facilities to the space, but to create an entirely new ambience and guest experience.”
Draw Link has witnessed increased demand for eco-friendly materials given increasing global concern about preserving the environment, while ISG has noticed a shift away from high-end bespoke finishes to more practical design finishes that are easily maintained and replaceable.
“There is also a big move towards the integration of technology within a space such as the use of mobile applications that integrate with access and lighting controls,” says Salah, and once the refurbishment is done, don’t forget to party, notes Phillips.
“Celebrating a change to a hotel offers great PR value,” he says. “If a hotel is proud of its work it is important to invite key people to get the message across.”