Tuesday, May 14, 2013

Dubai: Landmark Group-owned budget hotel brand, Citymax Hotels, plans aggressive GCC (Gulf Cooperation Council) expansion, according to its top executive.

The company currently operates three properties in the UAE - two in Dubai and one in Sharjah.

“We are looking to have 15 hotels in this region in five to seven years’ time,” Russel Sharpe, Chief Operating Officer-Hospitality division, Landmark Group, told Gulf News in an interview.

He added that Citymax is planning hotels in more UAE markets including Abu Dhabi, Fujairah and Ras Al Khaimah. And in the region overall, the company plans expansion into Saudi Arabia, Doha and Bahrain markets, according to Sharpe.

With two properties in Dubai today, Citymax is looking to open four additional hotels in the emirate. “We would like to have one hotel each in Deira, in the Downtown area, Jumeirah Lake Towers (JLT), and definitely one in Dubailand, which is where the government recently announced the new theme park [IMG Worlds of Adventure],” said Sharpe.

Asked by when these four hotels would be coming into the market, he said: “We are looking at the next five years to build a property. We would like to have six properties in total in Dubai by 2020.”

The company, however, has no plans to take the brand to the Indian market. “At the moment, the GCC (Gulf Cooperation Council) market is our focus,” said Sharpe.

LAUNCHING NEW BRAND:

The company further plans to launch a new hotel brand called “Citymax Premium”, targeting the segment a notch higher than its budget brand, Citymax, said Sharpe. “Citymax Premium is a brand that delivers certain services that are four-star. There is a demand for that in certain countries like Saudi Arabia, for instance, where they request certain services,” he explained, adding that the company is currently in the process of signing two management contracts for Citymax Premium in Saudi Arabia. The company will, however, be officially launching the brand only next year, Sharpe said.

REVENUE GROWTH:

The company has been clocking revenue growth of “30-40 per cent” year-on-year, according to Sharpe. Asked for projections for 2013, he said: “I think that growth will continue. However, it might taper off a little because in the coming few years I don’t see a big growth in RevPAR (revenue per available room - an industry benchmark for performance) in Dubai. Because the hotels are currently running at very high occupancies, therefore, they can only increase their yields by increasing the rates, and there is a certain maximum rate that one can increase it [to remain valid in the mid-market category].

At the moment, there are only 14 international budget hotel brands in Dubai, Sharpe said, representing “less than eight per cent” of the accommodation segment. “In other parts of the world, that would be 30 per cent. So Dubai, which is currently growing at a rapid pace, definitely needs more mid and even lower market brands,” he said.

LAND PRICES AN ISSUE:

Sharpe says that the current land prices in Dubai do not justify the ROI (return on investment) for mid-market hotel developers and investors.

“Dubai is looking to double of the current 10 million tourists by 2020. And the emirate has around 65,000 rooms today. So we will also have to double the number of rooms. However, most of the existing stock is in the luxury end of the market. We would need to look at perhaps building hotels in the mid and also the lower market segments. This can prove to be a challenge because to get a proper ROI on a mid or even a lower market brand, the cost of the land [in the centre of town, where tourists would want to stay] currently is quite high,” he explained.

He added that there can be an additional escalation in the land costs if Dubai get the bid for Expo 2020.

“That means the mid-market brand is pushed out to the areas like the Dubai Investment Park or Dubai Silicon Oasis, where there is also no infrastructure like the Metro connectivity and so on. So what I am saying is that we need to be able to buy land at a reasonable price - generally, as investors. But if the land price is too high the ROI won’t stack up for investors,” said Sharpe.

By Shweta Jain Deputy Business Editor

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