A sound hotel investment with a conscience

First & Foremost Hotels and Resorts, a bespoke hotel asset, development and operations company which recently joined forces with golf’s four-time Major Champion, Ernie Els, is to present its case for investment, at the Arabian Hotel Investment Conference (AHIC) in Dubai on 6 May 2015.

The family hospitality sector represents a huge opportunity for Middle East investors and developers alike, as it continues to grow into a key economic driver outperforming many other hospitality segments.

The new brand concept, which is also partnered by Leading Family Hotels & Resorts (LFH&R), which already has more than 50 family retreats in Europe and will be the Gulf region’s first family friendly resort that is Autism friendly and investor friendly, offering double-digit returns.

“Our proposition appeals to all investors, but in particular Socially Responsible Investors (SRI), those focusing on what are sometimes summarised as ESG issues, which includes social justice, in terms of the distribution of wealth, opportunities, and privileges within a society,” explained Mike Scully, Managing Director of First & Foremost Hotels & Resorts.

Thanks to input from Ernie Els and his charity Els for Autism, the hotels will be autism friendly. Expertise and the latest systems from Els’ Center of Excellence will be utilised to produce highly trained staff.

“Family holiday time has always been a priority for me and I have experienced a lot of five-star hotels worldwide that do not really offer a complete family holiday product. You want a fun and relaxing environment for everyone!

“We are going to provide that with First & Foremost Family Hotels. In addition, we are going to ensure a safe environment for families on the Autism spectrum and also create substantial employment opportunities for adults with autism,” said Ernie Els.

Indeed investors in family-focused hotels will definitely be pleased with the outcome of recent research by US-based MMGY Global. The study revealed that Millennial travelers (those born between 1980 – 2000) are now leading multigenerational travel taking an average of 2.6 trips with children over the past 12 months, compared with Generation X who took 2.2 similar trips and Baby Boomers who took just two. So the future for family travel in general looks extremely promising if that trend continues.

Investors in Dubai’s hospitality sector are well aware that as the UAE closes-in on 2020, the imbalance between current hotel supply and demand is beginning to tell on hotel performances. “If Dubai has around 90,000 rooms today it will need another 60,000 rooms to achieve its target of 150,000 rooms, ahead of the Expo 2020 to accommodate up to 25 million visitors. That is going to put significant pressure on hotel operators to outperform their market fair share,” added Scully.

The latest STR statistics highlight the stress this is already putting on the market. Their Q1 2015 report recorded (Jan, Feb & Mar) 3.7%, 4.1% and 4.5% year-on-year increases in demand over the first three months of this year, but that was outweighed by increased supply of 6.8%, 6.1% and 6.9% respectively compared with the same period last year. Indeed revenue per available room (RevPAR) dropped from AED 979 to AED 838 over Q1 year-on-year, while average occupancy levels dropped by 2.8%.

“Putting this into context an average five-star hotel with 250 rooms would have sold 630 more room nights in Q1 last year than it did this year, generating over AED 3 million more in room revenue. These supply and demand dynamics maybe short lived as we build up to Expo 2020, but it does show how susceptible the market can be. It also highlights the need to diversify and family hotels can provide that crucial point of difference,” added Scully.

According to Scully, LFH&R run at 92% average occupancy with over 60% coming from repeat business, who book direct through the LFH&R website. This reduces their reliance on local market conditions and a loyal customer base reduces the cost of attracting new guests, alleviating risk for investors.

“Generally LFH&R generates more than double the revenue per room of competitor hotels. This is why we are confident of attracting investment and offering very favourable returns,” added Scully.

“We have already spoken to a number of investors and the feedback we have received is very positive, thus we hope to make an announcement in the near future about our first property in the Middle East,” said Scully.