Al Taameer, the Kuwaiti company boasting assets in excess of $150 million in 11 countries, is positioning itself in the lucrative hospitality and leisure markets. On a visit to Lebanon for the launch of its first Ramada hotel in Beirut, Al Taameer’s vice chairman Najeeb al-Saleh sat with Executive Magazine to discuss the company’s latest venture.
E Al Taameer has recently acquired the franchise for Ramada hotels in the Middle East. What motivated your decision to open your first hotel in Beirut?
The Ramada franchise deal, which was signed in June last year, encompasses six countries — Lebanon, Egypt, Morocco, Libya, Jordan and Iraq. We decided to pick Lebanon as our first destination because we had an excellent opportunity with this venue, which is located in downtown Beirut. Another reason is that Lebanon’s hotels can be positioned on both segments of tourism and business hospitality, contrary to other countries where either business or leisure hospitality activities are emphasized. Here at Ramada we tend to focus on both aspects. Another essential reason lies in the very nature of the Lebanese people who are generally multicultural and multilingual, which makes the Land of the Cedar a good place to headhunt and train qualified staff to supply our new Ramada chain. Not many countries offer a workforce at ease with so many languages!
E How many hotels do you plan to open and how much will your company invest in each venue?
We plan to open some 35 hotels all over the region in the next years. Earlier this year we also bought another Ramada hotel in the Moroccan city of Fez. We are also currently negotiating seven more hotels, including two in Libya and another two in Iraq. The Beirut venue comes with a price tag of $20 million; each investment will however vary depending on the size of the project and its location.
E What prompted the decision of Al Taameer to branch out from its real estate activity into the field of hospitality? What added value does the hospitality segment bring to your real estate activity?
Al Taameer is a publicly listed Kuwaiti company that is owned by Al-Masaleh real estate (also a publicly listed company), which focuses on the development of commercial and residential buildings. As a real estate development company, Al-Masaleh decided it would diversify into the hospitality industry using Al Taameer. Al-Masaleh is very clever when it comes to identifying locations, negotiating acquisitions and construction, while Al Taamer excels in the field of property management.
E Do you believe the economic crisis and the resulting credit crunch will affect your new hotel business?
The possibility of an adverse economic context motivated our decision to enter the hospitality business by acquiring a four-star hotel chain, which will be best able to weather the crisis. If worse comes to worst, people will not stop from vacationing or doing business and a four-star hotel is thus perfectly well positioned to tap into various market segments. This unfavorable environment might provide us with excellent opportunities: good locations at reasonable prices.
E What type of customers does the new Ramada chain target?
Ramada is a reputed brand; it belongs to a hotel chain that boasts some 6,500 hotels worldwide. The chain’s particular positioning on both tourism and business hospitality levels will allow its various venues to operate efficiently all year round. We offer an excellent service at the right price and our hotels are ideally located.
E What type of structure have you adopted in terms of management? Will your company run all the Ramada hotels in the Middle East?
We will not necessarily own the 35 hotels we intend to open, which will be run based on a management contract or rental agreement. We might also resort to branding existent three-to-four-stars hotel. Such agreements will certainly cut our investment costs. However, we intend to buy two or three hotels in each country.
E What type of growth do you expect Al Taameer to achieve in the next few years?
We had full occupancy during the summer and the Eid holidays, which bodes well for us. We have also witnessed encouraging results with our first Moroccan venue and expect about a 20% growth every year for the overall company.
E How long before each project breaks even?
We are targeting a five to seven year bracket, depending on the project.
E Where do you believe lie the main areas of growth in the MENA region?
Egypt and Morocco show potential when it comes to tourist destinations, while Libya and Iraq as well as Jordan are excellent markets in terms of four-star business hotels. I believe our territories are all very attractive and well diversified.
E Some of these territories, like Libya and Iraq, are considered to be risky business environments…
Recent history has proven that risk might lurk in the most unusual places as witnessed in the recent economic crisis. We believe that markets such as Iraq and Libya, although risky, offer excellent opportunities, in spite of a possibly trickier initial launch.
E Who are Ramada’s direct competitors in the Middle East?
The first one that comes to mind is Accor, the French chain, which also features Ibis and Novotel hotels. The segment Ramada is currently targeting remains, however, relatively untapped in the Middle East.
E With what type of support did local governments provide you?
We were able to obtain funding from local banks in Lebanon; a tourism fund providing subsidized loans has been also made available by the central bank. In Morocco and Egypt, governments have been also offering tax breaks for tourism projects.