Midscale outperforms upscale

The economy and mid-market hotel segments have been identified as a significant opportunity for hotel owners and operators alike at the Arabian Hotel Investment Conference held in Dubai from April 25-27, 2017.

Jonathan Worsley
Chairman, Bench Events, Board Director, STR and
Co-Founder of AHIC

The mid-market has been discussed at Arabian Hotel Investment Conference (AHIC) for several years, but in 2017, we have witnessed a significant shift as the compelling investment model for lower development costs and higher, quicker returns has put the mid-market in favour. It was fascinating to explore the long-term view, looking at costs, rate strategy and returns with our many speakers and sponsors. Testament to the potential for the mid-market in the Middle East is the launch of US-based hotelier Choice Hotels International in the UAE and Saudi Arabia, with a pipeline of seven signed hotels already and many more to come.

Stephen P. Joyce
President & CEO,
Choice Hotels International Inc.

We think the timing is now finally right for a company like Choice to enter the market in a fairly significant way and establish a strong/moderate tier lodging component, which is purpose-built, value-oriented, yet high quality. Our operating model is ideally 20-25 employees in the hotel. It should run relatively high margin production and low cost to operate, but at the same time, satisfy the guests’ needs in a way that isn’t being done currently.

Elie Milky
Vice President, Business Development MEA,
The Rezidor Hotel Group

We are very active in the mid-scale market in the Middle East, with 20 percent of our properties within that bracket. However, we have more in the pipeline along with serviced apartments. Operational efficiency starts at the development of the product; you may not need a comprehensive back of house and you can reduce the staff-to-guest ratio.

Christian Nader
Vice President Development, Middle East & Africa,
Kempinski & Shaza Hotels

Kempinski & Shaza Hotels’ new venture, Mysk by Shaza, is carefully positioned in the upper-mid-scale bracket. While Shaza is five-star, we studied the ROI to position Mysk above the four-plus star rating. Owners are taking a different approach than they previously were, moving away from the need to have a luxury five-star property. However, they tend to demand add-ons such as ballrooms. We are managing their expectations by explaining that the Mysk brand and what it is offering is sufficient for the market.