Being with the company since its very inception as general manager of Beach Rotana in Abu Dhabi, Omer Kaddouri, president and CEO of Rotana, has watched the company grow to become one of the most successful regional players in the hospitality industry and Mahak Mannan speaks to him about wat lies ahead.
If you compare the UAE today, to 26 years ago, the one thing that strikes first is the growth, development, and progress the country has seen in such a short time. In similar fashion, the people, businesses, investments, and infrastructure has grown in ways unimaginable. An example of this mutual progress in the hospitality industry would be the Rotana group.
“When the founders of the company came to building Rotana, never in their wildest dreams would they have thought that 25 years later they would be sitting with over 100 hotels in their portfolio, all of it stemming from the Beach Rotana in 1992,” Omer Kaddouri, president and CEO of of Rotana Hotel Management Corporation says.
“As far as the owners are concerned they have done really well and are very proud of what has been built, especially because today, we compete with everybody. Is Rotana a regional company competing with only regional companies? No, we deal with everybody.” This can be defined by the performance of Rotana hotels within their competitive set, the CEO explains.
“In our competitive set for all our hotels, we compete with the likes of major multinationals. In some cases we do better than them and in some cases they do better than us, but we are nestled very comfortably in between the multinationals. We do not compete against the likes of the Four Seasons because we don’t have properties that are on the same level as Four Seasons although if you take a good look at Saadiyat Rotana, it’s a little bit close. We do not have a luxury brand of hotels, what we have is the upper class,” he says.
“Every major chain here looks at Rotana to find out how we do it and why this regional company competing with us. I know there is a lot of respect for Rotana in the region and having grown here, works to our benefit. A lot of people want to come here and have a cultural experience, so they pick a chain that is from here to get that added cultural benefit.
“Moreover, because we are competing with all the multinationals we have to work that much harder. Look at some of these companies, the resources and the booking engine strength they have. We don’t have that, so we have to work that much harder and it has worked for us. We have nudged some of the multinationals out of their position and taken it and we need to do that. Over the past few years there have been a lot of challenges, but we have been able to hold on to our market share and that is something to be proud of.”
With a decrease in room rates and increase in inventory and costs, the hospitality industry in the region has been facing a number of challenges over the past few years and like every other hotel company, Rotana had to adapt to the market. “The situation in general has been very tough for the past five years,” Kaddouri says.
“With the increase in inventory, the challenges due to the price of oil, which is creeping back now so it is positive, and so many things happening in the neighbouring countries, it has really put a damper on not just our industry but a lot of industries in the region. We are not the only industry suffering and what we had to do was adapt commercially to drive business through every channel that we can. When we lost the Russians we had to travel to Eastern Europe and find the Hungarian, Slovakians and more. We really needed to angle our markets, change our pricing strategy and go out in the market to let everyone know that we are here and that’s why we have been able to safeguard our market share. Are we out of trouble right now? By no means. Is there still difficult times to come? Yes, but things are starting to improve a little bit.
“We are hoping for 2020 to start seeing a positive growth starting that year, but if people are thinking that every hotel is going to be running at 100% occupancy at Dh1000 all year round, then that’s not going to happen. The mind set should be that not all the hotels are going to be full. The UAE is maturing as a market, primarily in our industry. It is obvious that there will be high and lows and right now we are in a low and this low is making us stronger. We have to adapt to situations. This is a cycle that we are in and I believe, we are just starting to see a bit of light at the end of the tunnel.”
The average room rate has also considerably dropped over the years and it is something that in unavoidable in current market conditions, according to Kaddouri.
“Because rates are coming down and revenue is reduced, dropping room rates is an essential way to deal with the market. 99% of ownerships will not tell their general manager to keep their rates high, and run on low occupancy. Majority of owners understand that you have to play the market. We had to come down with rates too and the only blessing in the UAE especially in Dubai was that occupancy has been consistent. Occupancy has dropped only about a point or two year-on-year in some cases whereas average room rate has gone down 20%,” he says.
“A lot of owners understand that the cycle of the economy impacts business. You can cut costs all day long but what is the result of it? If the quality of food and service goes down then people will not come to you. The past four years have been very exciting, I would have rather not have had this excitement but if things start to get better we are going to hold on to all our systems that have resulted in cost efficiency and driving revenue, and we can be stronger coming out.”
Cutting costs can be tricky and the channels need to be chosen wisely, Kaddouri says.
“Certain things you just don’t compromise on like food quality and service has to be at a certain level. During days when you have an average room rate of AED1000, you can afford to have a couple of extra staff behind the reception to really enhance that comfort feel for the customer. Those are things that we have had to look at to make sure we have the right manning levels. Our food quality we haven’t touched but looking into things like letting the water run for too long or lights which are wasting money by remaining on, have benefitted us. We have programs in which we look at cost saving utilities and sustainability.”
Being passengers on the same boat, the F&B market, like the hospitality industry, has also been hit due to the challenging conditions, according to the president.
“F&B has been affected because there are so many new restaurants that have come up and occupancy is not on the level where every restaurant will be full. It’s like the room rates, more inventory, means dilution. One of the problems is that owners of real estate have kept their rates very high. If I am the owner of a restaurant and the rent is really high, I am going to try to charge high prices to keep up with the rent but if I charge high prices, no one is going to come to me. We have seen a decrease in our F&B revenue in the past few years, every other hotel has and independent restaurateurs have also suffered. Our business psyche in this region has been whatever goes up, keep going up and when it did start hitting the curb, it was a little bit of a surprise for some but it’s been going on for so long, people have started to adapt and understand.”
While keeping an eye on the international market, Rotana’s ethos for expansion focus more on growing organically, marking a strong hold in the region before moving out to more mature markets.
“We are a regional company with aspirations to grow outside the country, but we are not overly ambitious to say that we want to be in the US, UK or Canada, we are very happy where we are and plan to grow organically from the region, like Turkey and Africa,” Kaddouri explains.
“Rotana has the support and culture from the corporate office to fit anywhere, but our ambitions are to take it easy. There still are a lot of opportunities in the region to grow. Saudi Arabia is a big growth market, we are still growing here in the UAE and Bahrain too. We could be putting resources out to grow hotels in Europe and the US but we want to grow organically.”
When looking at potential growth markets, areas where people from this region travel to plays a very important role, Kaddouri says. “Our expansions plans are focused mainly within the region and the next biggest space would be Saudi Arabia and the UAE. Outside of this region Africa is a big focus for us. We are opening a hotel in Dar As Salam, Tanzania and there are so many opportunities in Rowanda, Nairobi, we have signed hotels in Lagos and have four hotels in Turkey as well. We wanted to get a little deeper into India and Pakistan and signed a few hotels in Mumbai but unfortunately they have been put on hold for the time being. We are hopefully close to doing something in Pakistan, however nothing is official yet, so our bread and butter is here. There was a time when we were looking at Asia, Europe, and Australia but came to realise that there is still so much scope here, so let’s make sure we cover our space on our home turf and then get excited about moving out. Turkey and Africa are not too far away and where the regional people travel to is a very important factor for our expansion.
“We want people from here to pick up our booking engine and identify where they go to regularly. Turkey is very important and so is Sarajevo, to this market. But this does not mean we will not look further, if today we were to open a hotel in London we would know a lot of our people travel there and would stay in Rotana but we cannot depend on that because London feeds the world.”
With the opening of Saadiyat Rotana Resorts and Villas and the recent signing of a hotel in Sarajevo, the company will also focus on its 3-star brand, Centro, which was a first of its kind when launched in 2006.
“I am very proud to say that we were one of the first in the market to come up with a mid-market brand. Centro came in before anyone else. We thought there was a niche in the market and now have 22 Centros operating and under development. It is also good to to see that other companies are taking this route because since the downturn in 2006, everybody wanted to travel to the UAE but did not want to spend $500 on a room night, they wanted to spend $100 or less and we fit that need. Now with the likes of Zabeel house by Jumeirah and Rove, which are lifestyle brands similar to us you can tell there is a huge demand. If you want to make a destination successful you need to reach every market.”
The success that this industry has seen in the region has been a combination of key factors which include support from the government and the talent on offer.
“We are blessed to have the likes of the Department of Tourism and Commerce Marketing in Dubai and the Department of Culture and Tourism in Abu Dhabi. As a hospitality industry we are lucky to have this support, people waking up every morning wanting to bring more tourists to the UAE. We work with hotel owners who build and invest in the industry so the more support we get from them the better and although they have done a lot, we need more because there are so many of us,” he says.
“People, are another important factor. 40% of the staff at the new Saadiyat Rotana Resorts and Villas came from other Rotana hotels and about a good 80% of that 40% were promoted. There are a lot of internal development programs we have and our colleagues have joined us because they know they can grow with Rotana. We focus a lot on our people because without it you are nothing, and this goes for any company.”