Budget hotels an untapped market in the UAE

In conversation with Laurent Voivenel, CEO, Hospitality Management Holdings

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In 2013, 2- and 3-star hotels in Dubai registered higher occupancy rates than their 4- and 5-star counterparts. Big Project ME speaks to Laurent Voivenel, CEO of Hotel Management Holdings (HMH), a firm believer of the growing ‘budget accommodation’ niche.

What is the scope for 2- and 3-star hotels in Dubai? How do they impact your operations?

Hotel stock in the UAE, like the rest of the Middle East, is predominantly geared towards luxury and up-market accommodation leaving a huge gap and opportunity for budget hotels. We are eager to penetrate this largely untapped market for mid-scale and economy hotels in the region. 2- and 3-star hotels are completely different from their counterparts in the 4- and 5-star category. Typically speaking, mid-market/budget hotels require lower construction and operating costs as well as give a faster and higher return on investment. We are not looking to provide luxury here; rather, our focus is on value for money, affordable quality and standards. The product is more functional with less emphasis on high-end luxury and facilities.

Do special considerations have to be made based on the zone the project is being developed in?

In Dubai, there is a standard hotel classification system defined by Department of Tourism and Commerce Marketing (DTCM). This ensures consistency of product and services according to hotel rating. Talking about zones in the city, there may be more 5-stars in Downtown or Jumeirah as compared to Karama. But a 5-star is a 5-star no matter where it is located. What may vary is the design preference based on the taste of the developer or if the designer wants to blend it with the surroundings of its location.

What is the extent of design and build operations in the region’s hospitality industry?

Design and build is not so commonly practiced in the Middle East but developers are beginning to see its advantages. The biggest benefit is that the employer has only one organization to deal with once the contract is awarded. It also reduces the overall project delivery time from inception to completion due to the fact that construction can start earlier. When compared to a typical project, it is not really any more challenging rather less complicated provided the specifications are not too open to interpretation. What is required is a better understanding of the concept to get the maximum benefit from it.

Are more buildings getting retrofitted into new hotel or apartment developments?

It is an emerging trend in the region offering a second life to hotels and apartments to maintain the necessary standards. Some buildings were not conceived with features and technologies that we have today and therefore they need to be retro-fitted in order to maintain their ratings. There are considerable environmental and financial benefits of upgrading buildings. However, it is definitely not an easy task and needs to be carried out by reputed companies having the right expertise and experience. Prior to any such decision, a detailed audit of the building is necessary to understand what sort of a retrofit must be done and how it would be installed. It is critical to do it at the end of equipment life cycle in order to get the payback. The biggest challenge comes from engineering – how new bits would fit into an old building.

What are the challenges associated with renovating structures for established hotel brands?

When it comes to established hotel brands, it is important to stick to brand values and ensure that there is no compromise on the quality and comfort of guests. Large retrofits should only be done after 10 or 15 years and therefore it is important to take a long view assessing the needs of the project carefully. All established hotel operators have a diverse portfolio of brands serving the various market segments. It is an advantage rather than a constraint. So, I do not see why an established 4 – and 5-star hotel operator would face any difficulty when entering the 2- and 3-star market.

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