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Budget hotels have ‘seven-star’ potential

Budget hotels have ‘seven-star’ potential

In the pre-recession days of ‘bling’ developments like Dubai’s Burj Al Arab, Mideast hotel owners weren’t interested in developing mid-market properties. But they are now.

May 7, 2010 9:33 by

Rezidor is just a hotel operator. It owns no properties in the Middle East; it merely manages them. Ritter says he has never declined to open a Radisson, even though he advises companies to open mid-market hotels like the Park Inn instead. “Of course, if we get the chance to open one, we do. I was asked, ‘If you have four hotels in the pipeline why would you open one more?’ And the answer is, of course it is enough, but if it’s not us who operates it, it is somebody else,” Ritter says. “We don’t initiate projects, we are asked to cooperate with somebody and make a contract. We judge if it’s a good offer and if it is then we go for it because the hotel is coming anyhow.”

Ritter says part of the reluctance to move to mid-market hotels has to do with perception. “I think it’s a pity that they only build this top line because if you take the United States or Europe, it was more than 20 or 30 years ago they [moved] to that bracket. But here owners are still very much luxury oriented.

“In Europe and in the States you have a totally different ownership. It’s pension funds, it’s insurance companies and they just look at the profit and loss, they don’t look at the emotional side,” he says.

That emotion could be costing owners at a time when the appetite for luxury goods remains relatively low. The CB Richard Ellis study showed the percentage drop in occupancy in 2009 in Dubai was higher than in other global cities. The volumes in Dubai were down roughly 30 percent in 2009, according to Rezidor area vice president for the Middle East Marko Hytonen.

Other markets have fared better. “Saudi Arabia has been very strong. Regardless of swine flu, Jeddah has been performing very well and Saudi in general has been very strong,” Hytonen says. “In other markets, Beirut has been doing extremely well for a number of reasons. It came from a low place though.”

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