The hotel operator is expanding footprint in Africa as well
Abu Dhabi's Rotana plans five-fold increase in Saudi Arabia hotels portfolio by 2030
Abu Dhabi-based hospitality management firm Rotana is expanding its footprint in Africa and plans to increase its portfolio of properties in Saudi Arabia, as it looks to capitalise on demand in the kingdom's hospitality sector, as well as the broader Middle East and African markets.
Rotana plans to increase the number of hotels it operates in Saudi Arabia at least five fold by 2030, Omer Kaddouri, the president and chief executive of Rotana told The National in an interview in Dubai. The biggest regional hotel operator, currently runs four properties in the kingdom and plans to increase that to seven by the end of this year, with another seven in development stages, he said.
“I like to think by 2030 …… Rotana has 20 operating hotels [in Saudi Arabia] and 10 in the pipeline -- that’s the target [we’re] setting,” Mr Kaddouri said. “We are well on the way and it could be better but I got to be a careful and I can’t promise too much.”
Saudi Arabia, the Arab world's largest economy is undergoing a transformation under its overarching Vision 2030 programme. Development of leisure and hospitality sectors are among the priorities identified by Riyadh as the kingdom vies to boost tourism and build a mega entertainment city and futuristic $500 billion Neom project.
A three year oil slump crimped economic growth in the kingdom, however a rebound in oil prices this year is set to open new avenues for investors and hotel operators to expand operations in the kingdom. The country, among the world’s biggest religious tourism markets, has earmarked $45bn to develop the domestic tourism industry, PwC said in a report released this week.
“You got new leadership in the kingdom, which has set up Vision 2030….. and within that vision our industry is going to play a big part,” Mr Kaddouri said. The kingdom is going to market Saudi Arabia around the world so “what’s there not to like about being part of a society where the direction from the top is to build more hotels.”
Within Africa, Rotana is targeting both eastern and western African markets and plans to open at least 10 hotels within the next seven years with another five or six properties in the pipeline by 2025, he said.
“We are growing in Africa – both East and West,” he said. "It’s a focus area and that’s where we know growth is.”
The company already operates a property in Kinshasa and plans to open another in Dar Al Salam by the end of this year. There are properties under development in markets such as Lagos and Luanda, he said.
Nairobi, Cape town, Johannesburg, Senegal and Ghana are among the destinations where Rotana plans to expand further, primarily, targeting mid-market segment. In North Africa, where it already operates hotels in Egypt and Sudan, Rotana is eying further expansion in Morocco, Mr Kaddouri said.
However, despite aggressive expansion plans elsewhere, the operating environment in the UAE home market is challenging. The average daily room rate, or ADRs, a yardstick to gauge the level of revenue and profitability, has been under pressure as inventories continue to rise and geopolitical tensions, and currency fluctuations make it further tough to maintain growth.
Still, the UAE market is showing signs of recovery, he said.
“ADRs have started to get a little bit better but by no means are we out of the tunnel here. We are starting to see less year-on-year decreases,” Mr Kaddouri explained. “Owners are still making profits, not as much as they used to but the business is still going on and it’s all part of the cycle.”
The company sees a further build up in the inventories ahead of Expo 2020, the global trade fair which is expected to bring about 25 million people to Dubai. However, Mr Kaddouri said the market is resilient and can negotiate this passage of the cycle as well.
“Heading into Expo 2020, we are going to see little spike [in the business] and then I don’t see it falling off the cliff. I see it falling down to pre-expo levels,” he noted.
Rotana plans to have 100 hotels under management by 2020, compared with 60 it operates at the moment.