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Regional expansion

Hilton sees opportunity to grow despite setbacks in Lebanon

by Sophie Rimingtonpounder

The Hilton Group has been busy, particularly in the Middle East, which according to Rudi Jagersbacher, area president for Hilton Worldwide, Middle East and Africa, is the “fastest growing region” for the corporation. He explains how, thanks to this formidable growth, there will be a new Hilton property opening in the region every month for the next five years.

Indeed, Jagersbacher recounts how in 2011, Hilton Worldwide operated 40 hotels in the Middle East and in just four years, by the end of 2015, they now operate 90 hotels with approximately 100 deals signed for the next few years.

Executive sat with Jagersbacher to learn more about what drives the Hilton Group and how Lebanon is positioned in the company’s strategy for the region, especially with the long-awaited opening of their downtown property, set for 2016.

E   Will you be bringing more of your mid-market-focused service hotel brands or your luxury brands to the region?

From a global perspective, there’s a similar type of scenario. It is to do with the economy of the various places, and if you look at the Middle East, for instance, a lot of hotels had their full service luxury brands already rolled out and this inevitably leads to mid-market-focused service hotels being available.

You can only have so many luxury hotels within an area, so we are bringing Waldorf Astorias and Conrads wherever there is a market with sustainable income and a return on investment which are the thresholds.

Clearly, there are opportunities for business people or people who travel for leisure. When you have two or three rooms, [people] want to be in the secure environment of a big brand but with the safety, security and brand standards all reflected in the lowest denominator.

We have 2,000 Hamptons [our three- to four-star brand] globally, and it is highly successful because there are a lot of people who stay overnight for business and all they need is a clean bed and a great shower…they don’t need three restaurants; they just need to go in and do their business and have good value for money.

So bringing that kind of thing to the Middle East was actually a strategy in terms of asking, “What is the next wave? Which countries are able to take these brands into their portfolio? And who are the investors we can attract to these brands?”

E   What are the main markets you are considering for your growth in the region?

We have two or three markets where we know we have a sustainable economic formula where we can roll out 20 or 30 brands across the country or region.

Saudi Arabia and the United Arab Emirates (UAE) traditionally only went for luxury and the big brands. We opened two hotels, Hilton Gardens, the first in the UAE of this type, and we have many more lined up. The same goes for Qatar. 

We also look to Egypt and the Levant which brings us to your area. Egypt has a similar kind of strait although they are still focusing on the full service, which means the Hilton brand, and the same goes for Lebanon.

We also believe that, particularly in the Levant, there is a lot of opportunity in the mid-market-focused service.

E   How about Lebanon?

For Lebanon, obviously the market is a lot smaller. We have been working on a project in Downtown for many years and for lots of different reasons it never went through, but the good news is that we are definitely going to open by 2016.

A lot of work has been done over the last seven years but there have been issues that are out of our hands, mainly owners’ issues.

E   So you still see downtown Beirut as a viable location for a Hilton property, despite the instabilities that are manifest in the area?

Our location is superb; everybody is building around it. I don’t think there is any better location; even if the port develops or the buildings come up, this will be in 10 to 15 years. And even then, the heart of the city is not changing; that will always stay the same. So inevitably, those types of boutique hotels or special destination projects with great restaurants and bars will always remain in that center. 

E   What made Hilton Group decide to take over the management of the two Habtoor properties?

When we looked at this property, Habtoor, we already had Downtown available and we needed to decide what we were going to do. Since the downtown hotel is rather small, particularly from a banqueting point of view, and because we loved the location here, we went with it.

HILTON-9 Photo

E   So it was part of your strategic vision for the Group in Lebanon?

Yes we wanted to be here (Habtoor) because it has the biggest conference and meeting rooms. It’s also in a great location and I don’t have to fight with everybody in Downtown over rates and occupancy. Here, the people who stay have different types of needs, such as big conferences and meetings, so we have a lot of business travellers.  Also, the location which we have here (Habtoor) is going to grow from a corporate point of view with a lot of new businesses moving to the area.

People who want leisure go to Downtown, which is fine, but there are so many hotels there and I think that, in terms of fair share, we at Habtoor are not in the same ballpark. We have our own business model.

The second thing is that it’s a strong residential area with a lot of mid- and upper-class residential units being developed, and then of course you are in the middle between here and the mountains so it also brings a lot of things down here. So strategically, this location is superb.

I think from that point of view, we are settled.

E   Is that it for your growth in Lebanon?

You can never say that. There may be mid-market or focus-service opportunities. We always look at possible opportunities going forward and the criteria for this are really simple: We’re a management company which means we bring in investors to invest. We need to ensure that the financial thresholds have a return on investment and also [establish] the stability of the business environment to ensure we have sustainable profitability and interest payments.

This is really important because once we start employing people, we need to make sure we can grow, develop and train them further so we are not going up and down in the cycles of business which many in the country are experiencing right now.

E   How would you place Lebanon in the overall strategic vision for Hilton Group in the region?

Like we’ve said, we have 600 rooms in three properties in the country which is already a lot. At this stage, we want to make sure that we open our new property in Downtown; that’s our focus for today and for the next couple of years before we look at anything else.

That’s because of the business trends in Lebanon. Five years ago it was booming and look where we are today. But that means the potential is really great and the future is very bright. I think if everybody can get their ducks in a row and the right priorities are taken from all levels of the industries then the investments and developments in Lebanon will be really strong. It’s got a great following and it’s a big brand, not just regionally but globally as well.

E   What is driving your growth in the Middle East?

Investors and demand. Let’s talk about Dubai, the biggest model because, in 15 years, the whole environment there has changed totally.

One of the most important things they did is they were able to create an airline which was bringing customers. Today, they have 55 to 57 million people coming through Dubai, which is huge. Although most of them are in transit, obviously many are staying over in Dubai; this is a huge growth with new builds and destinations.

Creating a safe and secure environment was their key. We always say democracy is a very important feature in our lives but it doesn’t work everywhere as well and hence, in terms of the decision-making process, they have an invigorated leadership with a great strategy which they have followed regardless of comments around the world and I think they are very dedicated. When you look at the growth with Emirates Airlines and at the financial institutions moving in, it’s a great recipe for moving forward.

Now Dubai is only one spearhead, with other areas like Ras Al Khaymah [and] Fujairah.  Abu Dhabi has also developed its own airline, and the same with Qatar.

E   How does outbound tourism from the Middle East and North Africa (MENA) region to other areas affect your business?

The strategic outlook in terms of the outbound strategy from the MENA region is also very important. A lot of people who live in MENA are outbound during holidays and it’s a big piece of business. This is why you have to have good representation in each country in MENA. It all goes back to flight connections; today it is easy to take flights anywhere from the Gulf. Therefore we as a hotel group need to think from a strategic development point of view to help us ensure we can move our customers in a global landscape. We have 42 million Hilton Honors customers across the globe who visit us internationally and therefore new destinations and offers are very important for us to roll out.

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