Al Habtoor Group CEO eyeing fresh challenges after split with Marriott

Illustration: (Luis Granena)
Updated 05 August 2018
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Al Habtoor Group CEO eyeing fresh challenges after split with Marriott

DUBAI: Sitting down in the majlis room at Al Habtoor Group headquarters last Thursday, CEO Mohammed Al-Habtoor had time to reflect on the events that led him to end a relationship with Marriott International, the largest hotel operator in the world.
The move was described a couple of days earlier as a “mutual decision reached amicably between the parties,” but Al-Habtoor was in a forensic mood when asked to explain what had happened at Al Habtoor City, the group’s prestigious development in the heart of Dubai.
The relationship with Marriott has been a significant one for Al Habtoor, mutually beneficial in both Dubai and Europe, where the business partnership will continue despite the Al Habtoor City breakup.
Opened in November 2015 to much fanfare, Al Habtoor City was designed as a new “go to” destination on the Dubai tourism circuit, with three top hotels — the St. Regis, the W and the Westin — managed by Marriott as part of a 20-year contract with Al Habtoor.
But in a highly competitive market in a part of the city with no shortage of upmarket hotel accommodation, the relationship struggled to work. “I think it was something new to them to have three hotels in one complex in a relatively small area. It was confusing to have three hotels offering different levels of service and pricing in one area,” Al-Habtoor said.
He described the contract with Marriott as a “close” one, which explains why the announcement last week took some time to prepare, after speculation swirled for a few months that all was not right at Al Habtoor City.
Al-Habtoor refused the blame the location, which some industry observers said had made the commercial challenge more difficult. “It’s a great location, a lifestyle location, with the best restaurants and entertainment in the city. Now it has good access, with four main roads leading there, and later this year we will be opening more retail and residential facilities, right next to the Water Canal,” he said.

 

 
The site is a historic one for Al Habtoor, since it was the location of the Metropolitan hotel in 1978, the brainchild of his father Khalaf, the group chairman.
Regarded by many as Dubai’s first “modern” hotel, it symbolized the southward growth of the city and sparked Al-Habtoor’s fascination with the hotels and leisure business. The Metropolitan and its adjoining leisure complex was demolished to build Al Habtoor City, and has been rebuilt further down Sheikh Zayed Road.
The three properties are now renamed as upmarket brands of the Hilton Group — Habtoor Palace LXR Hotels & Resorts, V Hotel Curio Collection by Hilton, and Hilton Dubai Al Habtoor City — but, crucially, will be managed by
Al Habtoor itself. Eight of Al Habtoor’s 14 hotel properties worldwide will now run in partnership with Hilton.
“We will take their name on the brands, and their software and systems, but the management will be Al Habtoor Hospitality. It will be our responsibility to maintain staff and service standards to the highest levels. We will also be responsible for the financials — we will control expenditure and costs,” he said.
Getting the numbers right at Habtoor City is the immediate challenge. Al-Habtoor conceded that the project had lost money during the dispute with Marriott, when business relations became strained. However, he said that Habtoor continues to partner with Marriott in other hotels in Dubai and in Europe, and insisted that the cost of the dispute had been provided for in Habtoor financial accounts, and could be made up imminently.


“We’re expecting to double business over the next few months with Hilton and under our own management infrastructure,” he said.
He sees La Perle as a big draw in Al Habtoor City. The Cirque du Soleil-style extravaganza, in a 1,300-seat theater in the heart of the development, is an allegory for the story of Dubai’s transformation from pearl village to global tourist hub, and Habtoor says it is adding synergy to the hotel, restaurants and bars of the City.
“It averages 600 people per show and 10 shows per week. From Tuesday to Saturday, we estimate 65 percent of the people in the bars and restaurants in the City have been to see La Perle. It was all a big investment in Al Habtoor City, but taken all together it is a good investment.
“Tourists come to Dubai, stay in Al Habtoor City hotels, go to La Perle and eat in the restaurants in the complex. We will be launching a big marketing campaign across the GCC to attract Saudis and Kuwaitis to the show,” he said.
The Dubai hotel industry needs a boost. Figures for tourism released recently showed a flat performance for the first half of 2018, as new hotels and other types of accommodation add rooms to an already well-served market.
With new accommodation increasing the size of the market, Habtoor said that it was “logical” that revenue per available room (revpar, the key hotel metric) has slowed. But he insisted that occupancy — outside Habtoor City — had risen in the past year.
The Al Habtoor Group is not just a hotel and hospitality company, and its interests in the car business, education and real estate make it a barometer for the wider economy of the emirate. Some analysts recently have asked whether the Dubai economy needs a further round of government stimulus if it is to match the high growth rates of the past, especially with the build-up to Expo 2020 well underway.
“On the broader economy, there is no chaos or crisis, but neither is there much growth. At least there is stability. Maybe we were spoiled in the past because of the very high rates of growth Dubai experienced,” Al-Habtoor said.
“Maybe now it is time to kickstart the economic cycle again. We are expecting more growth by the final quarter, with more projects and government initiatives,” he said, pointing out that there were financial resources currently locked up in government funds that could be injected into the economy.
The motor retail and leasing business has been problematic, he conceded, with big drops in some sectors. Al Habtoor Group has the dealerships for luxury brands such as Bentley, McLaren and Bugatti, which are to some degree resilient to economic cycles, but it also has mass-market brands such as Mitsubishi and Chery, which are more dependent on fleet purchases, reflecting underlying trends in real estate, contracting and construction.
“There has been a big drop in the car business in general in the UAE. It is not just a fall-off in individual buyers, not just Mohammed, Ahmed, John and George who have stopped buying a new car, but also the big fleet contractors. A lot of that business depends on the general state of the economy, and we expect that to pick up later this year,” he said.
Traditional real estate business — outside the hotel and leisure industry — is not a big part of Al Habtoor’s business, but it does own and operate villas and compounds in some of Dubai’s more desirable areas, which he said are “99 percent” occupied. There are also apartments in a residential tower in Al Habtoor City, which he said was half sold and was progressing well.
In education, there has also been a surge in investment in new build in Dubai to cater for projected growth in the expatriate population. The government recently capped school fees for the coming year. Al Habtoor has been in the education business since 1991, and its two schools in Jumeirah and Emirates Hills are doing well, Al-Habtoor said.
Al Habtoor began as a Dubai-focused company, and that remains its main center of attention. But Al-Habtoor also spoke of bigger strategic moves ahead: A big push into Saudi Arabia to take advantage of the changes in lifestyle and entertainment in the Kingdom; and possible plans to revive the initial public offering (IPO) seriously considered three years ago, but eventually abandoned.
Now that the “divorce” in Al Habtoor City has been finalized, it is time for Al-Habtoor to move on to bigger things.

FASTFACTS

BORN: Dubai 1968 EDUCATION: Dubai Al Ittihad School, Al Mamzar, Dubai, ATI Career Institute, US, Professional qualifications from Universities of Surrey and Slough (UK) and Cornell (US) CAREER: CEO and deputy chairman, Al Habtoor Group, Founder of Dubai Polo Gold Cup


INTERVIEW: Sam Darwish, Group CEO at IHS Towers - the accidental engineer who found his calling

Updated 25 May 2019
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INTERVIEW: Sam Darwish, Group CEO at IHS Towers - the accidental engineer who found his calling

  • The CEO has made it big in telecoms, in a career shaped early on by Lebanon’s bloody civil war

For some, student survival means merely coasting along at university in the hope of bagging a 2.1, as well as invites to as many parties as possible.

For telecoms executive Sam Darwish, however, survival took on a more literal sense, having embarked on his studies in the dying days of the Lebanese civil war.

Teenage life was tough for Darwish, who is now 47 and a US citizen. Growing up in Beirut in the 1980s meant a constant backdrop of violence —  “there were many wounded,” he said — plus the daily struggles of putting food on the table and regular electricity blackouts.

But it was this experience that taught Darwish a certain “pragmatism” that he continues to put to use today as chief executive of telecoms company IHS Towers, which has to date raised more than $5.5 billion in funding.

Sitting in the IHS office in London’s plush Mayfair district, Darwish recounted how, when he was a student, his father would give him a small sum of money each day. He could either use it to take public transport to the American University of Beirut campus — or buy lunch, and risk the walk through the war-torn streets.

“Decisions like that make you pragmatic. It makes you solution-orientated. It makes you appreciate what the basics in life are,” said Darwish.

“You need just to survive. You need to find a solution. Electricity would disappear for a few days, then people started charging their batteries in their cars, and at the end of the day remove the battery to put on a light or small TV,” he added.

“It taught me to not take anything for granted. You needed to think and rethink every little thing that exists.”

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BIO

SAM DARWISH

•47 years old

•US citizen, grew up in Lebanon

•Married, three children based in US

EDUCATION

•Bachelor’s engineering degree in computer communications, American University of Beirut

CAREER

•Network chief engineer, Libancell, Lebanon

•Vice chairman, director of projects, Lintel

•Deputy managing director, CELIA Motophone, Nigeria

•Co-founder, IHS Towers

OTHER INTERESTS

•Founder, Singularity Investments

•Founder, DAR Properties

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This practical attention to detail — along with an awareness of the importance of finance, power and security — are very much required in Darwish’s role today.

IHS Towers’ business model is relatively straightforward: The company buys mobile towers from telecoms companies, or builds them itself, then leases them back to the operators.

Darwish co-founded the company in Nigeria in 2001, and it now has operations in Cameroon, Cote d’Ivoire, Rwanda and Zambia.

Renting out mobile communications towers is hardly the most glamorous of businesses — it is “simple and low profile, we don’t make it flashy,” he said — but the economics stack up.

Selling mobile towers allows telecoms companies to free up cash, while companies such as IHS can rent space on the masts to multiple carriers, which is more efficient. It is a model that Darwish believes the entire industry will one day embrace.

“When (a single operator) owns a tower, often it’s not optimized in terms of the revenue that that tower can get,” he said.

“They end up with hundreds of millions, sometimes billions of dollars on their balance sheet (with) towers (that are) inefficient, and simply depreciating. Sharing means more efficiency, and more margin for everyone.”

There is also a certain advantage to dealing with purely “basic” infrastructure, given the global furor about the security of telecoms networks.

IHS deals with the actual steel masts, rather than the more sensitive communications kit or software they house.

For that reason, it does not face as much scrutiny as a company such as Huawei, the Chinese equipment firm that the US believes poses a security risk.

“There’s a big difference between us and what Huawei does. We’re providers of passive infrastructure,” said Darwish.

“Our towers are simple towers … It’s a location, it’s a tower, it’s power, it’s security —  that’s what we provide,” he added.

“But at the end of the day, we’re also part of critical infrastructure for countries … So there’s always the aspect of ‘who are these guys, who are their shareholders, what’s their track record, what’s their governance like?’”

That is partly why Darwish runs IHS as if it was a “a public company by Western standards.” The company’s governance is “very strict,” and its high-profile shareholders include Goldman Sachs (through a special fund), the Singapore sovereign wealth fund GIC, the Korea Investment Corp. and IFC, the private equity arm of the World Bank.

At the end of the day, we’re part of a critical infrastructure for countries.

Sam Darwish

Such backing — Darwish said IHS has raised between $5.5 billion and $6 billion of capital since it was formed —  and governance standards bode well for a potential initial public offering (IPO) of IHS.

The company last year shelved such a plan, but Darwish said it is thinking about “moving ahead” with plans for a listing in New York or London.

“There are hundreds of thousands of towers out there that could be bought, or built, over the next few years … That’s why a potential listing is important to us at some point in time,” he said.

Such a move would potentially expedite the company’s expansion in areas such as the Arabian Gulf, which is currently its “main focus.”

IHS has already struck regional agreements to buy towers from telecoms operators Zain Kuwait and Zain KSA.

Upon completion of those two deals — which are still subject to regulatory approval — the Mauritius-headquartered IHS will have approximately 33,100 towers in its portfolio. It is currently the world’s second-largest independent, multi-country tower operator.

Darwish said Saudi Arabia is “where we’d like to grow,” with IHS recently having obtained a foreign investment license from the General Investment Authority, with plans for an office staffed by 100-200 people.

He cited the economic reforms underway, which include weaning Saudi Arabia off its reliance on oil and encouraging more women into the workplace.

“The Kingdom is going through a transformation now. This transformation is fascinating, and it’s something that needs to be watched very carefully,” he said.

“They’re using this cash they have now to start planning, and start transforming — theaters, entertainment, industries, manufacturing, all these massive investments they’re doing.”

Whilst inhabiting an industry that lacks a certain glam factor, there is something of the “Davos man” about Darwish.

Dressed casually in a designer jacket in his Mayfair office, he explained some of his interests that run parallel to IHS.

He is the founder of Singularity Investments, a private investment firm with a focus on technology and media companies in the US and emerging markets, along with DAR Properties, a property investment company.

Darwish also has a strong interest in corporate social responsibility, having supported incubator programs for aspiring tech entrepreneurs in Lagos, served as a mentor to local business executives, and worked on several health and education projects in Africa.

His personal passion, however, is the IHS Academy, launched one and a half years ago, which offers online education in the field and has seen some 40,000 course completions.

“The training for me is the single most important thing I can give, and it helps us at the end of the day,” said Darwish.

“I personally believe in the power of education — that’s what transformed my life. My father worked three shifts to basically make sure we stayed in the best private schools … He believed in what education can do in transforming lives.”

Darwish’s own studies in Beirut, however, nearly took a different turn. Though he graduated as an engineer in computer communications with “the highest distinction” — setting him out on a 20-year career in telecoms — it was never the path he envisaged.

“I wanted to be a Nobel Prize physicist. (But the university) dean called me, and he was like, ‘no — we need you in engineering’,” Darwish said. “It was just by accident that I became an engineer, but it paid off.”