Al Habtoor Group CEO eyeing fresh challenges after split with Marriott

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

Al Habtoor Group CEO eyeing fresh challenges after split with Marriott

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


Global chip shortage offers silver lining to KSA’s local industry

Global chip shortage offers silver lining to KSA’s local industry
Updated 01 March 2021

Global chip shortage offers silver lining to KSA’s local industry

Global chip shortage offers silver lining to KSA’s local industry
  • The shortage has pushed chip stocks to record highs, and analysts expect that chips will continue to be in short supply at least through the end of 2021

RIYADH: A global semiconductor chip shortage as a result of the coronavirus disease (COVID-19) pandemic has increased the need for the Kingdom to boost its local production so it is less dependent on foreign manufacturers, a Kingdom-based IT expert said.

The shortage has pushed chip stocks to record highs, and analysts expect that chips will continue to be in short supply at least through the end of 2021.

Maribel Lopez, principal analyst at San Francisco-based Lopez Research, told MarketWatch the chip industry is facing “a perfect storm” of demand and supply issues that is unlikely to resolve soon.

“Unless we have a major economic meltdown, which is obviously possible, one of the things that’s happening right now is that almost anything you buy is going to have a chip in it,” Lopez said.

Reuters reported that chip prices could increase by up to 6 percent this year, but the delay has also seen production cut short. Carmaker Ford said it could see production cut by 20 percent as a result of the shortage of supply. Last week, US President Joe Biden announced $37 billion in funding to address the situation.

“The importance of semiconductors cannot be ignored due to their massive need in the Internet of Things, computers, smartphones, and consumer electronics devices. However, the global semiconductor scarcity and its unprecedented demand amid the pandemic have aggravated the situation for a wide array of industries. It has forced automotive, defense, industrial and other manufacturers to cut production and even shut down assembly lines,” Dr. Muhammad Khurram Khan, professor of cybersecurity at King Saud University and founder and CEO of the Global Foundation for Cyber Studies and Research in Washington, told Arab News.

He added: “If the current situation persists for the next few months, there are higher chances that the Kingdom may also observe a price hike for electronic items. So, it is better for local importers, businesses, and consumers to plan accordingly.”

The professor said that the current global supply shortage could be the catalyst for Saudi Arabia to invest more in this sector and develop its local capabilities.

“This would reduce dependence on imports, meet the local manufacturing demands, boost the economy, and create job opportunities in the Kingdom as per Saudi Vision 2030,” he added.


Saudi Arabia to allow Boeing 737 MAX to return to service

Saudi Arabia to allow Boeing 737 MAX to return to service
Updated 28 February 2021

Saudi Arabia to allow Boeing 737 MAX to return to service

Saudi Arabia to allow Boeing 737 MAX to return to service
  • Boeing 737 MAX aircraft was grounded globally in March 2019
  • National carriers do not operate the Max model

LONDON: Saudi Arabia’s civil aviation authority announced on Sunday that the Boeing 737 MAX plane would be allowed to return to service in the Kingdom.
The General Authority of Civil Aviation (GACA) said the decision came after completing a review, taking the necessary measures, and completing all required tests by the US Federal Aviation Administration, the European Aviation Safety Agency and other civil aviation authorities around the world.
Boeing’s top-selling MAX was grounded globally in March 2019 after two fatal crashes involving the same model in five months.
The authority said that national carriers do not operate the Max model, but several foreign airlines operate flights to and from Saudi airports, and several flights cross their airspace with the same model.
GACA said the temporary suspension was lifted after “close coordination with the international civil aviation community, regarding changes, licensing and training, to ensure the highest level of safety.”
The civil authority also published a navigational notice permitting the MAX model to return to service. 
(With Reuters)


KPMG: 98% of Saudi CEOs set to invest in cloud technology in 2021  

KPMG: 98% of Saudi CEOs set to invest in cloud technology in 2021  
Updated 28 February 2021

KPMG: 98% of Saudi CEOs set to invest in cloud technology in 2021  

KPMG: 98% of Saudi CEOs set to invest in cloud technology in 2021  
  • Artificial intelligence, robotic process automation and 5G also set for more investment, according to survey
  • 88% of Saudi-based CEOs see technological transformation as an opportunity rather than a threat

JEDDAH: Senior company executives in Saudi Arabia are embracing the digital revolution, with 98 percent planning to raise their investments in cloud computing this year, according to a new survey.
Cloud computing is at the top of the technology agendas for CEOs in the Kingdom, with investments in artificial intelligence, robotic process automation and 5G also popular, according to the global consultancy firm KPMG’s 2020 CEO Outlook survey.
While technological advances can bring security challenges, 88 percent of Saudi-based CEOs see technological transformation as an opportunity rather than a threat.
“The pace of technological adoption has quickened this year as organizations react to the new working reality. Most of the CEOs believe the pandemic has accelerated the creation of a seamless digital customer experience and [that the] creation of new digital revenue streams has advanced during the pandemic,” said Mazhar Hussain, chief disruption officer at KPMG in Saudi Arabia.
“Nonetheless, the pandemic has seen an uptick of cyberattacks, which has increased awareness and investment into cybersecurity. The number of vulnerabilities in most organizations’ operations has increased with remote work. Hence, companies must resist the urge to direct budget cuts toward preventative cyber measures and [view] the sharp increase in global cybercrime as a reason to keep advancing their cyber defenses,” he added.
At the same time, the pandemic has shaken CEO confidence in global economic growth, according to the KPMG survey. Almost 32 percent said they are less confident about global growth prospects in the next three years than they were at the beginning of the year.
While cloud computing investment is a priority, a survey in January by German business software company SAP found that while more than four-fifths (89 percent) of Saudi senior public sector executives agreed that data sharing helped them to improve on how they connected with citizens, many had not invested in training to implement this.
SAP found that while 83 percent of respondents said data sharing improved their innovation in current goods or services, only 22 percent did this with partners. And when it came to training, only 33 percent of respondents had retrained employees on how best to analyze data. This skills shortage was cited by 61 percent of respondents as being a barrier to meeting strategic change initiatives.


Saudi fast-food chain Herfy expands in Bangladesh

Saudi fast-food chain Herfy expands in Bangladesh
Updated 28 February 2021

Saudi fast-food chain Herfy expands in Bangladesh

Saudi fast-food chain Herfy expands in Bangladesh
  • Herfy inaugurated its first branch outside the Middle East under a franchise system in Bangladesh in December 2017
  • Herfy Food Services Company was established in 1981, and the first Herfy restaurant opened in Riyadh that same year

JEDDAH: Herfy Food Services Company, Saudi Arabia’s largest fast-food chain, has opened its fifth restaurant in Bangladesh, following the success of previous branches in the capital city.
The financial impact from the opening will reflect in the first quarter of 2021, the company said in a Tadawul statement.
Herfy inaugurated its first branch outside the Middle East under a franchise system in Bangladesh in December 2017. 
According to an agreement signed with Bangladeshi private-sector company Greenland Services Ltd. in 2016, Herfy aims to open 30 outlets within “a few years.”
In 2020, Herfy reported an estimated annual net profit after zakat and tax of SR 53.6 million ($14.29 million), a drop of 73 percent year-on-year, as revenue for the year fell 16.6 percent to SR 1.074 billion.
Herfy was hit by the closure of its restaurants in malls and shopping centers. Moreover, working hours at stores had been reduced while administrative and general expenses had increased.
At its Bangladesh branches, Herfy offers training for employees and provides its franchisees with its own products, including meat, chicken and sauces — all made in its Saudi-based factories.
Herfy Food Services Company was established in 1981, and the first Herfy restaurant opened in Riyadh that same year. As of September 2020, the company owns a total of 40 restaurants and leases 345.


Huge surge in GCC demand for Ivy League university coaches

Huge surge in GCC demand for Ivy League university coaches
Updated 28 February 2021

Huge surge in GCC demand for Ivy League university coaches

Huge surge in GCC demand for Ivy League university coaches
  • Companies like Crimson Education coach students on how to improve their chances of being one of the few who receive an offer letter
  • Demand can differ from country to country, with those in the UAE preferring British institutions

DUBAI: Getting into a prestigious Ivy League university is no easy task. 
According to the latest figures, California’s Stanford University was especially picky, with a 2019 acceptance rate of just 4 percent. Columbia and Harvard followed with 5 percent, while Princeton and Yale were slightly easier with 6 percent of applicants getting offers.
The race to get these coveted places is also getting harder as the number of applicants has gone up and universities have become even stricter. Dubai-based Crimson Education has reported a surge in clients looking for help to gain access to institutions in the US, as well as into Oxford and Cambridge.
“The number of students who joined Crimson Education in the region over the past six months was 200 percent up from the same period the previous year,” Soraya Behesti, regional director for the Middle East and Africa at Crimson Education, told Arab News. “The company had a big push to hire new strategists in order to meet the surging demand. Crimson grew 250 percent from 2019 to 2020 and is projected to grow more than 150 percent this year.” 
The demand makes sense. 
A 2015 report from the US Department of Education found that the average salary of Ivy League graduates a decade after they finished university was $70,000 a year, compared to the average salary for non-Ivy League graduates of $34,000.
Companies like Crimson Education coach students on how to improve their chances of being one of the few who receive an offer letter, and Behesti said the acceptance rate among their clients was three times the global average.
There are also a number of trends which has seen demand for such services skyrocket in recent years.
“The number of students who applied early to Ivy League colleges skyrocketed in 2020, although the acceptance rate reached record lows,” Behesti added. “Applications to Columbia and Harvard’s early rounds increased from the previous year by 49 percent and 57 percent, respectively. Applying early to their top-choice university usually gives students an advantage but last year, the early round acceptance rate was closer to that of the regular round, with Harvard admitting just 7.4 percent of early applicants, from 13.9 percent in the previous year.”
Students have started enrolling for help earlier because of the increased competition, and Behesti said Crimson had seen a rise in demand from clients as young as nine.
“When we work with students from a young age, our sessions and objectives are not focused on universities per se, but building really strong foundations, developing a growth mindset, cultivating good study habits, learning entrepreneurial thinking and even developing core skills such as coding, debate or languages.”
Demand can differ from country to country, with those in the UAE preferring British institutions, while Saudi students show a preference for US ones, especially Columbia, Harvard and Yale. 
Having the right aptitude is good, but money also really counts. Crimson said that studying at an Ivy League university cost between $30,000 and $45,000 per year, although between 40 and 60 percent of students received some form of financial aid.
“For GCC students, governments offer attractive scholarships — but usually only for students who gain admission to the top 100 universities. We have worked with Emirati and Saudi students of all abilities, from A-grade academics to students struggling at school, to ensure their admission to the top 100 schools through academic tutoring, admissions support and extra-curricular coaching, thereby allowing them to receive government scholarships,” Behesti said.