Middle East hotels’ F&B segment remains a strong earner despite pressures: Panel

Middle East hotels’ F&B segment remains a strong earner despite pressures: Panel
Michael Grove, chief operating officer of industry benchmarking outfit Hotstats, said that food and beverage profitability has become a challenge even in some parts of Europe, where hotels return as low as 12 percent profit margins. However, the Middle East region is “still significantly higher than that.” AN photo
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Updated 26 September 2023
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Middle East hotels’ F&B segment remains a strong earner despite pressures: Panel

Middle East hotels’ F&B segment remains a strong earner despite pressures: Panel

ABU DHABI: The Middle East hotels’ food and beverage segment contributes strongly to topline numbers despite operational pressures and challenges to the hospitality industry. 

“This region still has quite a strong proportion of the revenue capital that comes from food or beverage … So when it comes from a percentage perspective and in fact, if I widened it to the Middle East, about 40 percent of hotel revenue is dumped into the beverage. So it’s certainly a really important factor for investors in this region,” Michael Grove, chief operating officer of industry benchmarking outfit Hotstats, said on the opening day of the Future Hospitality Summit in Abu Dhabi. 

The three-day industry event gathers over 1,000 hospitality leaders around the theme “Focus on Investment,” with over 150 speakers expected in panel discussions, one-on-one interviews, roundtables and innovation pitches. 

The region has seen a “dramatic growth in average rates or rooms performance,” Grove said, such that some indicators, when indexed on a 12-month rolling trend, showed that a big chunk of revenue stream among UAE hotels came from beverage sales. 

Another trend, according to the Hotstats executive, was the resurgence of conferences and events: “You know competition is coming back.” 

“We have seen certainly ... the fears we had during the pandemic as to what would happen due to hybrid working (and) all of the other things, and how that would impact not just restaurants but, of course, the actual spending on the conference. It is again a huge chunk of revenue from the large hotels in the region,” Grove said. 

“What we’re looking at is how much things have changed versus pre-pandemic by area of the business. You can see we’ve seen growth in all areas of the business. But actually that chunk of food or beverages … that we’ve really seen a bit of a decline. 

“There is a lot more ability for people to eat and drink outside of hotels now, which again, going back a few years ago, hotels were the real place people could go. You could eat and drink in your bedrooms again; this region, I think, really maximized that opportunity,” Grove continued. 

He added that food and beverage profitability has become a challenge even in some parts of Europe, where hotels return as low as 12 percent profit margins. However, the Middle East region is “still significantly higher than that.” 

But Middle East hoteliers nonetheless have been able to offset cost challenges — such as the cost of inputs and labor — by making significant operational changes to run more efficiently during the pandemic. 

“Actually, we can see from the numbers that there’s been quite a shift in the way that we operate through the beverage industry. We definitely operate more efficiently, and I don’t think to the detriment of our hotel performance,” Grove said. 

In one of the discussions at the event, food and beverage executives said celebrity chefs and their accompanying franchises were important from a performance standpoint, but due diligence was needed because franchising is a long-term commitment and very difficult to disengage. 

“A lot of people sell franchises with all due respect, but what’s the sign … that you get that top-notch service on any franchise that is signed up with?” asked Marvin Alballi, the head of food and beverage at Arenco. 

“We need to also understand if the brand fits in the local market… to understand if there’s going to be some traction and if the brand has a huge amount of followers and get attractive, specific training.” 

Tatiana Veller, managing director at Stirling Hospitality Advisors, meanwhile told the panel: “As asset managers, definitely our function is to make sure that every square meter on the property that industry builds makes money for them … and this little secret, of course, is that profitability for the food and beverage square meters is declining.”

Speaking on labor issues, she added: “Your outfits are only as profitable, and you can only deliver … to the extent that you can bring the right people in. And it has been a huge issue here and continues to be a huge issue. Yes, our margins are good, but it’s still difficult to hire high quality that can deliver that power and service.” 


BP plans to invest $1.5bn in Egypt gas projects 

BP plans to invest $1.5bn in Egypt gas projects 
Updated 7 sec ago
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BP plans to invest $1.5bn in Egypt gas projects 

BP plans to invest $1.5bn in Egypt gas projects 

LONDON: BP is preparing to invest about $1.5 billion to develop gas projects and drilling in Egypt over the next three to four years, the company said on Wednesday. 

The plans were earlier reported by Bloomberg News, citing a company spokesperson. 

Earlier this month, BP and state-owned Abu Dhabi National Oil Co. announced plans to form a joint venture in Egypt that will initially focus on natural gas. 

The joint venture, expected to be established in the second half of this year, will be 51 percent owned by BP and 49 percent by ADNOC, the companies said. 

BP will contribute its interests in three development concessions and exploration agreements in Egypt while ADNOC will make a proportionate cash contribution that can be used for future growth opportunities. 


Oil Updates – prices slip further on US demand, interest rate fears

Oil Updates – prices slip further on US demand, interest rate fears
Updated 27 min 8 sec ago
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Oil Updates – prices slip further on US demand, interest rate fears

Oil Updates – prices slip further on US demand, interest rate fears

SINGAPORE: Oil prices on Thursday extended declines from the previous session after a larger-than-expected build in US crude stockpiles stoked worries about slow demand, while signs that US interest rates could remain elevated added to pressure, according to Reuters.

Brent crude futures fell 14 cents, or 0.2 percent, to $83.54 a barrel by 7:20 a.m. Saudi time. US West Texas Intermediate crude futures were down 4 cents, or 0.1 percent, to $78.50 a barrel.

US crude oil stockpiles rose while gasoline and distillate inventories fell last week as refiners ran at below seasonal lows due to planned and unplanned outages, the Energy Information Administration said on Wednesday.

Crude inventories rose for the fifth consecutive week, increasing by 4.2 million barrels to 447.2 million barrels in the week ended Feb. 23, the EIA said, compared with analysts’ expectations in a Reuters poll for a 2.7 million-barrel rise.

“Large stockpiles heightened investors’ worries over a slow economy and reduced oil demand in the US,” said Satoru Yoshida, a commodity analyst with Rakuten Securities.

“The anticipation of delayed US rate cuts also weighed on the market sentiment as it could undermine oil demand,” he said.

High borrowing costs typically reduce economic growth and oil demand.

Traders have already dialled back expectations for US interest rate cuts after a slew of strong data, including hot consumer price index and producer price index readings. They expect an easing cycle to kick off in June, compared with the start of 2024 when bets were on March.

Market participants are now waiting for the US personal consumption expenditures price index, the Federal Reserve’s preferred measure of inflation, for more trading cues.

The index, to be released on Thursday, is expected to show prices ticked up 0.3 percent on a monthly basis in January.

The market also eyed the possible extension of voluntary oil output cuts from OPEC and its allies, known as OPEC+, which has limited price declines for now.

“With the demand outlook remaining uncertain, we think OPEC will extend the current supply agreement to the end of the second quarter,” ANZ analysts Daniel Hynes and Soni Kumari said in a client note.

The price outlook remains unchanged, the analysts added, projecting 2024 annual average prices at $86 a barrel for Brent and $81 a barrel for WTI.

The conflict in the Middle East is also expected to keep a floor under oil prices, Rakuten’s Yoshida said.

Hamas urged Palestinians on Wednesday to march to Jerusalem’s Al-Aqsa Mosque at the start of Ramadan next month, raising the stakes in negotiations for a truce in Gaza, which US President Joe Biden hopes will be in place by then.

But both Israel and Hamas have played down the prospects for a truce and Qatari mediators have said the most contentious issues are still unresolved.


Tourism Development Fund signs MoU with Dan Company for Saudi Arabia agritourism projects

Tourism Development Fund signs MoU with Dan Company for Saudi Arabia agritourism projects
Updated 29 February 2024
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Tourism Development Fund signs MoU with Dan Company for Saudi Arabia agritourism projects

Tourism Development Fund signs MoU with Dan Company for Saudi Arabia agritourism projects
  • Dan Company specializes in agri, eco, and adventure tourism that offers a mix of daytime hospitality experiences and overnight stays

RIYADH: The Tourism Development Fund has signed a memorandum of understanding with Dan Company, a subsidiary of Saudi Arabia’s sovereign wealth fund Public Investment Fund, to support investments in the Kingdom’s agritourism sector.

Dan Company specializes in agri, eco, and adventure tourism that offers a mix of daytime hospitality experiences and overnight stays.

The agreement was signed by Qusai bin Abdullah Al-Fakhri, CEO of the Tourism Development Fund, and Abdulrahman Abaalkhail, CEO of Dan Company.

“This memorandum reflects our firm commitment to developing and enabling all investments in the tourism sector and creating qualitative investment opportunities for the private sector to support the future of the tourism industry in the Kingdom and enhance its competitiveness, providing unique experiences for our visitors,” Al-Fakhri said in a statement.

“Integrating rural agricultural elements into tourism programs will enrich visitors’ experiences and provide them with a unique opportunity to discover the beauty of nature and its competitive potential and to connect with the local agricultural culture.”

Abaalkhail meanwhile said: “The agreement… aims to contribute to the development of a sustainable local tourism system by providing financing solutions to our partners, farm owners, to enable them to diversify their activities, build prosperous businesses, and enhance the economic and social situation of local communities.”

“It will also provide opportunities for visitors to learn more about traditional and modern agricultural practices, discover amazing outdoor activities, and enhance their connection to the nature of the Kingdom.”


Saudi Arabia makes $38m contribution to global education fund

Saudi Arabia makes $38m contribution to global education fund
Updated 28 February 2024
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Saudi Arabia makes $38m contribution to global education fund

Saudi Arabia makes $38m contribution to global education fund

RIYADH: Investments in the education sector of lower-income countries will receive a boost as Saudi Arabia officially joins the Global Partnership for Education with a $38 million contribution.

Speaking to Arab News on the sidelines of the Human Capability Initiative in Riyadh, Laura Frigenti, the fund’s CEO, outlined that the contribution will be utilized for the body’s mission of transforming the education sector in underdeveloped countries and preparing young generations for the modern job market. 

The Global Partnership for Education is the largest fund exclusively dedicated to improving the education sector’s performance in low-income and middle-income countries.

It was created “about 22 years ago,” the CEO outlined, adding that “between our own funds and the funds that we have leveraged,” the body has invested about $11 billion in education globally. 

She said: “We are operating in about 90 countries, all the low-income and most of the middle-income countries, including countries that are in a very fragile condition. And we provide both technical assistance as well as financing, to help the government really bring back on track the performance of the education sector.”

She added: “I can tell you, that GPE is very, very active in countries that are of strategic interest to the Kingdom of Saudi Arabia. I’m thinking about Yemen and thinking about the countries in the Middle East, Jordan, Lebanon, I’m thinking about Egypt, Sudan, etc.”

Fringeti commended the Saudi government’s emphasis on the sector and its understanding of the integral role that education plays in diversifying the economy. 

She highlighted that the Kingdom is paving the way for its “very young” population that will require the right skills in order to adapt to a fast-changing labor market.

Around the world, including in the Middle East and North Africa region, countries are confronting a mismatch between youth skills and labor market needs that risks leaving millions of youths—particularly young women—underprepared for tomorrow’s jobs, a release by the body said. 

Youth unemployment across Arab states is around 25 percent, while unemployment for young women has reached 40 percent.

With this new partnership, GPE and Saudi Arabia have committed to working hand in hand to increase investment in education as a powerful force to spur growth in the region and beyond, giving children the skills they need to grow and flourish, a release by the body noted.

The CEO further outlined enthusiasm toward the Kingdom “finally” joining the partnership due to the fact that Saudi Arabia serves as an example that can be utilized as a model for nations globally, saying: “This is one of the reasons why I am so excited about Saudi finally, officially joining the partnership, because there is a lot of the experiences that have been made here that can actually be relevant for other countries, and I’m very excited about the fact that the Saudi being part of the partnership will actually be able to tell their story to the world.”

She concluded: “Saudi is a little bit of a unique case in a sense that it is a country that doesn’t lack resources. So this massive investment may not be replicated at the same scale in other parts of the world. But I think the focus, the understanding of the connection and the trajectory that the government has put in place here is definitely something that will be very relevant to many.” 


Saudi defense minister appointed new SAMI chairman after board reshuffle

Saudi defense minister appointed new SAMI chairman after board reshuffle
Updated 28 February 2024
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Saudi defense minister appointed new SAMI chairman after board reshuffle

Saudi defense minister appointed new SAMI chairman after board reshuffle

RIYADH: Defense Minister Prince Khalid bin Salman is the new chairman of Saudi Arabian Military Industries after a reshuffle of its board of directors, according to a statement.

The minister has replaced Ahmed Al-Khateeb in the key position in the defense and security company, which is entirely owned by the Kingdom’s sovereign wealth fund.

SAMI focuses on advancing and reinforcing Saudi Arabia's defense sector, and plays a crucial role in driving the localization of 50 percent of the Kingdom’s expenditures in this economic sphere – a pivotal objective of Saudi Vision 2030. ‎

Minister of Industry and Mineral Resources Bandar bin Ibrahim Alkhorayef is also on the board, as is Chairman of the General Authority for Civil Aviation Abdulaziz bin Abdullah Al-Duailej, and Assistant Minister of Defense Talal bin Abdullah Al-Otaibi.

Membership also includes Khaled bin Hussain Al-Biyari, Yasser bin Abdullah Al-Salman, and Omar bin Hamad Al-Madi, as well as Abdulaziz bin Abdullah Al-Suqair.

Representing SAMI, CEO Walid bin Abdulmajeed Abu Khalid extended gratitude to the prior board of directors for their tenure, which played a pivotal role in positioning the company among the elite ranks of the top 100 specialized defense firms worldwide.

Established in 2017, the company operates across aviation, aerospace, land systems, maritime, and defense systems, in addition to advanced electronics. 

The company is ranked 79th among the top 100 specialized defense firms globally, and is aiming to reach the top 25 by 2030.

Early this month, SAMI signed a memorandum of understanding with South Korean automobile manufacturer Kia Corp. at the World Defense Show 2024 in Riyadh with the aim to boost cooperation in the local production of military vehicles, thereby strengthening Saudi Arabia’s defense and security sector.