Jumeirah Group eyes doubling of international portfolio by 2021
Jumeirah Group, owner of Dubai’s famous Burj Al Arab hotel, plans to double its portfolio outside the UAE over the next 18 months as it expands overseas, with Asia and Europe the primary focus, its chief executive said.
“Right now, we have 19 hotels outside the UAE and we’re growing to 27 or 28 quite rapidly over the next 18 months,” José Silva told The National in an exclusive interview. “Expansion is easy, but the right expansion is sometimes challenging and we’re happy to be reproducing what Jumeirah has done in Dubai internationally.”
The hospitality group, which is owned by the Ruler of Dubai’s investment vehicle Dubai Holding, owns a portfolio of 16 hotels and suites across the GCC, in Dubai, Abu Dhabi, Oman, Bahrain and Kuwait, as well as one in Shanghai and three in London – one of which is undergoing a $100 million refurbishment.
It will open two further hotels in China – in Guangzhou by the end of 2019 and Hangzhou next year, after opening in Nanjing last September – and one in Bali.
It also expects to sign deals this year to open in two western European cities, most likely in France and Italy, according to the chief executive, and intends to expand in southern Europe from 2020. Jumeirah Group has a hotel in Frankfurt and Mallorca, but Mr Silva said there is space for a second in the German business city and for the group’s first in mainland Spain and other European resort destinations.
“To do four substantial, quality projects in Asia in 18 months is quite an accomplishment and we’re looking forward to delivering our expansion in Europe,” Mr Silva said.
Having started with a strong local footprint, today more than 50 per cent of Jumeirah’s portfolio, including pipeline schemes, is international. However, Mr Silva said overseas expansion will not come at the expense of the group’s UAE presence and every five years it will start planning another major new project.
Its latest Dubai project is Marsa Al Arab, a 4 million square-foot leisure and hotel scheme on two man-made islands under construction near the Burj Al Arab and set to complete in three years. The next is likely to be “another beachfront location” in Dubai where there remains solid tourism demand, Mr Silva said.
Hotels in the emirates – and across the Middle East – have suffered steep declines in revenues and room rates in recent years due to low oil prices denting consumer purchasing power, and rising supply of hotel keys as the market matures.
Average daily rates for Middle East hotels dropped 8.9 per cent year-on-year in January, while revenue per available room slid 9.6 per cent over the same period, according to hotel data firm STR. Average occupancy stood at 68.2 per cent.
“This is a normal cycle of supply and demand,” Mr Silva noted. “We are still growing [in Dubai], but the supply of new hotels is growing faster than demand due to a five-to-seven-year delivery delay – but this will swing back in a couple of years.”
Jumeirah is seeing average growth in room rates of three to five per cent across its portfolio, but flat revenue per available room and occupancy rates in the mid-70s, in line with regional trends.
“We could, by not introducing rate growth, increase our occupancy, but that’s not our strategy because your costs increase,” the chief executive said. “We realise we lead the market and if we don’t show growth nobody else will. But that growth will no longer be 5-10 per cent. A mild rate increase is where we see the future.”
Over the longer term, he wants to build an ultra-luxury Jumeirah sub-brand called ‘The Burj Collection’, which would be a small collection of assets worldwide, similar in vein to the Burj Al Arab.
The company aims to partner with property owners for this – “it won’t be a forced expansion”, Mr Silva said. No advanced talks are taking place at present.