The man behind Abu Dhabi's largest hotel has called on the industry to control the capital's burgeoning supply to avoid flooding the market with rooms.
Hotel chief wants more quality, less quantity
The man behind the largest hotel in Abu Dhabi has called on the industry to control the capital's burgeoning supply to avoid flooding the market with rooms.
"The market is under pressure," said Ali Hamad Lakhraim, the president and chief executive of Millennium & Copthorne Hotels for the MENA region. "Developing hotels should be always well controlled in a way to meet the demand."
The operator opened the five-star, 844-room Millennium Al Wahda hotel, the largest in the emirate, last October. More than a dozen other properties are expected to open over the next 12 months.
"You don't measure your demand by the spike of certain events," said Mr Lakhraim. "That's not the real demand. Abu Dhabi has huge potential going forward, but I think we need to start measuring our expansion in the hotel industry so as not to oversupply the market."
Profitability has fallen sharply for Abu Dhabi hotels in the past year because of the increase in supply.
Mr Lakhraim said that some of the city's lower-quality properties, particularly those that were originally built as office or apartment blocks, were partly to blame.
"I think some hotels need to be re-evaluated," he said. "You have really low-end hotels, [such as] the conversions of commercial buildings. When they saw the hotel market boom, everybody wanted to have a hotel. All of a sudden everybody is a hotelier."
Mr Lakhraim said it was difficult for higher-quality properties to compete with the re-purposed buildings, which often lack "back of house" facilities such as service lifts. "This will create pressure on big hotels to come down. A five-star operator cannot afford to compete with that guy who doesn't have any overheads."
However, Millennium is moving ahead with further expansion in the capital. Another of its hotels, with more than 600 rooms, is being built near the Emirates Palace. It is also planning to open a hotel apartments development.
Many more Millennium hotels were planned in the region, but the projects stalled because of the global economic crisis, as developers found it difficult to secure financing.
"We have others, which we don't consider as part of our count because they have been put on hold for some reason or another," Mr Lakhraim said.
"We have maybe two in Abu Dhabi put on hold, four or five in Dubai put on hold."
But Mr Lakhraim says that development conditions are picking up, and that Millennium plans to launch its "Hollywood-style" Biltmore brand in the coming months, with the first of these hotels expected to be in Abu Dhabi.
Since its launch in the region nine years ago, the Millennium brand has grown rapidly. There are now 14 Millennium hotels in the Middle East and some 50 more under development. Mr Lakhraim expects the chain to have 100 management agreements in the region by 2015.
"We will definitely have more hotels than most of the other international operators," Mr Lakhraim said.
"We are more aggressive, we are more hands-on. That's very obvious from the expansion. There is no operator historically that has signed as many hotels as we have in such a short space of time in the region."
The parent company, Millennium & Copthorne Hotels, is listed on the London Stock Exchange.
The appointment of a local partner to run a hotel brand's development is a rare arrangement for a global company. But analysts say it has proved effective.
"Millennium has been able to strike a chord with the local and regional developers," said Chiheb ben Mahmoud, the senior vice president at Jones Lang LaSalle Hotels for the Middle East and Africa. "They know how to get close to the owners and to take into account several cultural aspects of the operator-owner relationship. It is a rare set-up. Instead of moving slowly through management agreements pushed directly from their head office, they chose the local partnership route to have an outpost, and that definitely proved to be successful."
Millennium's first hotel in the region was the Millennium on Khalifa Street in Abu Dhabi.
Since then, its holdings have expanded to include properties in locations including Dubai, Kuwait and Qatar. It is the largest international hotel chain in Iraq, with seven properties, two of which are operational, Mr Lakhraim said. Others are being built across the region.
"This is from Abu Dhabi to Iraq to Jordan to Sudan to Yemen to even Tajikistan, Libya, as far as Morocco, Oman of course, and big expansion in Saudi Arabia," said Mr Lakhraim.
Another of Mr Lakhraim's companies, Pearl Azure, owns the Crowne Plaza hotel in Abu Dhabi, the Crowne Plaza on Sheikh Zayed Road in Dubai and the Sands Hotel in the capital.