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UAE hotel rebrandings a sign of discontent in the sector

  • Owners accuse brands of neglect
  • Demands include contract changes
  • Operators ‘too busy expanding’

Growing discontent among UAE hotel owners about the treatment they are receiving from operators has resulted in a wave of hospitality rebrandings.

More than a dozen major hotels across the UAE have been reflagged in the past year. Emirati, Spanish and Chinese hotel brands have also disclosed plans to pursue the same strategy as part of expansion pushes around the wider region.

Multiple elements are coming together in this perfect storm, according to industry professionals. 

Global hospitality names are expanding across the region at such a rapid rate they have little time for the specific needs of individual properties. Increasingly sophisticated asset owners are growing restless – and are more knowledgeable about the kind of attention they can demand. 

Vijay Raghavan, director of the Arenco Group – a company that owns multiple hospitality assets in Dubai and only directly operates some of them – told AGBI on the sidelines of the Hotel Show this week that he has only gone through a couple of reflaggings in 30 years, but it’s now a growing trend.

“There has been a lot of reflagging. The owners are under pressure, especially from the financial standpoint, to meet their commitments in terms of the loan covenants,” he said. 

As some of the older management contracts come to an end, owners now have an opportunity to look around for new brand arrivals that might have better offerings.

Turab Saleem, Knight Frank’s head of hospitality for Mena, said: “For the owner that one hotel is everything, their life, their money. For the operator, it’s just about signing another facility.

“What [brands] are doing is like McDonalds, they give hotels their standard operating procedures, loyalty programme and name. But every property has different issues, you need to tailor those policies.”

According to Saleem, among hotel owners’ biggest complaints is the increasing amount of business that comes through the likes of for which they have to pay separate fees. 

The seeming inability of big hospitality companies to operate successful restaurants inside hotels, which can produce income rather than turn into a liability, is another bugbear.

Lower fees, shorter management contracts of 10-15 years, down from the traditional 20-30 years, and stricter performance-related clauses are among the contract items in demand these days, he added. 

“The owners are now asking questions, and that started after Covid, because it hit them very badly,” Saleem said.

“None of the operators have answers. They are too busy expanding rather than taking care of the existing owners. So they get p***** off and kick the operator out.” 

The Hilton Beach Resort in Ras Al Khaimah is being taken over by Rixos HotelsWeidong Xiao/Alamy via Reuters
The Hilton Beach Resort in Ras Al Khaimah is being taken over by Rixos Hotels

James Wrenn, executive director and head of capital markets at Colliers in Mena, said contract terms have now become more favourable for owners, compared to 20 to 30 years ago.

The Hilton Beach Resort in Ras Al Khaimah, owned by RAK Hospitality Holding, is slated to become part of the Rixos Hotels Gulf family beginning in July, the latter company announced on LinkedIn this month.

Marriott International said in February that within a month it would turn a property in Al Ain flying the Rotana flag into a Four Points by Sheraton. 

At least six high-end hotels in Dubai went through the process between the end of last year and earlier this year, five of them following deals between owner Abu Dhabi National Hotels (ADNH) and hospitality companies Marriott International and Kempinski Hotels. 

The prestigious Emirates Palace Hotel in Abu Dhabi switched from Kempinski to Mandarin Oriental just over a year ago, but many more are expected to be announced soon.

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