Comment: The changing face of hotel management

Published: 9 July 2019 - 10:45 a.m.
By: Hotelier Middle East Staff

Bani Haddad, founder and managing director of Aleph Hospitality, argues that in light of declining performance and the ever-growing shift towards mid-market expansion in the region, owners are looking for flexible, results-driven alternatives to traditional hotel management contracts.

As we enter the second half of 2019 and reflect on the first six months’ regional hotel performance in 2018, two clear trends are having a significant impact on the way owners are approaching hotel management.

Firstly, the days of remarkable year-onyear performance growth in this region are gone. According to STR’s full year data for 2018, RevPAR for Middle East hotels was down by 5.7% compared to 2017.

Supply is consistently outpacing demand and with only a few exceptions (suchas Beirut and Jeddah, where RevPAR increased in 2018), new inventory is having a negative impact on all metrics – occupancy, ADR and RevPAR.

Looking at the pipeline, it seems likely this will continue.

There are 740 hotels in the total pipeline for the Middle East, according to the latest data from STR: 419 under construction; 121 in final planning; and 200 in planning. This equates to a total of 195,863 upcoming rooms in the region.

In Dubai specifically, there is expected to be a significant supply build up over the next three years.

A staggering 56,000 new rooms are scheduled to enter the market by 2021; 43,000 of which are in construction and 36,000 of which are due to open for Expo 2020 Dubai in October next year, reports STR.

Let’s put this in perspective. Between 2015 and 2018, an average of 6,158 rooms opened per year in Dubai. Looking to 2019-2021, an average of more than 19,000 rooms are expected to open each year, according to STR data presented at this year’s Arabian Hotel Investment Conference (AHIC 2019).

Occupancy has been resilient to date but ADR has decreased and STR has forecast a -11.6% decline in RevPAR for Dubai this year.

This puts huge pressure on operating margins, which means owners are placing more emphasis than ever on ensuring lean operations and, therefore, widening the net when it comes to how they approach hotel management.


Secondly, big global hotel brands are increasingly shifting their focus from luxury operations in the region to midscale and budget segment hotels. This is a result of both performance trends and consumer demand. After all, the visitor profile to the region is changing, with leisure travellers – millennials in particular – being extremely price sensitive, hence the expansion of brands like Aloft and Hotel Indigo from the global hotel companies and Rove and Zabeel House from regional chains.

This shift is positive; diversifying the market will help to increase demand. However, by their very nature, midscale and budget operations cannot absorb large overheads, thus again leading regional owners to look at all their options when it comes to how best to manage their hotels.


As noted in Deloitte’s Middle East Real Estate Predictions: Dubai, this preference from owners for increased control over their assets marks the “starting of a shift away from the traditional HMA model, which currently dominates the market, with more interest in franchising likely to be seen in 2019”.

This is something we are clearly witnessing at Aleph Hospitality.

After all, when Dubai, one of the world’s most competitive markets is under pressure – despite an increase in overnight visitors and its top-ranking position for visitor spending in the 2018 Mastercard Global Destination Cities Index for the third consecutive year - that’s a statistic that’s bound to get owners thinking.

Hotel owners need to take positive steps to streamline overheads, control costs, ensure a market-appropriate positioning and differentiate themselves.

One way of doing this is to consider working with an independent hotel management company, in what is becoming an increasingly attractive alternative model for hotel owners seeking to generate superior returns on their assets.

This model for white label and thirdparty hotel management has dominated the United States and parts of Europe for years, but is only recently emerging in the Middle East as a response to the shifting market conditions.

There are numerous benefits to owners; more control over their asset, more visibility into operations, and more flexibility with contractual terms. From the owner’s perspective, it’s simple: the team responsible for managing your forecasts and financials is the same team that oversees the performance of your asset, thus improving both projections and accountability.

In just the first six months of managing Getfam Hotel we increased RevPAR by 30%, stabilised the hotel property team, increased guest satisfaction scores and introduced an outside catering business for the hotel, generating cash flow from an entirely new revenue stream.

For other hotels, we’ve worked with developers to optimise designs and space utilisation to maximise ROI, including increasing room counts and streamlining back of house operations, helped owners secure financing for a hotel property, and unlocked a brand franchise for an 80-room hotel in a secondary location not previously considered by the brand.

We also place significant focus on continually improving GOP. This is achieved through a combination of rigorous and intelligent cost control, such as driving down procurement costs and clustering resource where appropriate, as well as through the implementation of our world-class in-house systems and SOPs – which cover everything from revenue management to IT.

At Aleph Hospitality, we manage hotels directly for owners; some under a white label basis, such as Getfam Hotel in Addis Ababa, Ethiopia, and others, including Best Western Plus Westlands in Nairobi, Kenya and Four Points by Sheraton Monrovia in Liberia, under franchise from a global brand.

Our market knowledge and regional expertise has also enabled us to perfectly align with international hotel brands seeking to grow their brand portfolio, as with Marriott’s entrance of the Four Points by Sheraton brand in Liberia, for example.

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