Even within the context of a region well versed in rapid ascents, exponential growth, towering ambitions and world firsts, Hilton Worldwide’s recent Middle Eastern successes have been remarkable. One in five new-build hotels now sports one of the group’s six brands available for development in MEA. The hospitality behemoth is targeting one regional opening a month over the next five years.
The man spearheading this assault comes equipped with some equally impressive numbers. Anointed the most powerful individual in the Middle East’s hospitality sector two years on the bounce, 2014 marked not only 40 years since Rudi Jagersbacher first joined Hilton – the UAE dirham hadn’t even celebrated its first birthday – but also the first time since his 2011 appointment as regional president that the group’s pipeline outnumbered operational properties.
"When I first got here, we had around 40 hotels and today we’re talking about 150 operating and under construction," he explains. "That requires successful management and leadership, but it also speaks to being able to offer brands across the board, which as the market grows, means we can seize upon a variety of opportunities."
Jagersbacher has a track record when it comes to opportunities seized. Having first joined the group in 1974, his career has also included senior leadership positions at the Savoy and Claridges. He re-entered the Hilton fold as GM at the Langham and then the Park Lane Hilton, before taking up a succession of vice-presidential roles in London, Dubai and Brussels. This grounding in front-line hospitality is increasingly rare at the very top of the international hotel game, but the Austrian national insists that it has been invaluable in helping drive his and the group’s success during his time at the helm.
"To be a true operator, I feel you need to have gone through that hotel school experience and witnessed the business at all levels," he explains. "It informs everything you do and when discussing strategy or addressing challenges, you can explain things through experience. It also helps gain the respect of team members. You are proof that it is possible to chart a career path through the company and reach the top."
Middle management
Rather than the top, however, much of his recent attention has been directed towards the middle. Having previously masterminded the Middle Eastern debuts of the group’s luxury brands, Waldorf Astoria and Conrad Hotels & Resorts, the group’s mid-market and select-service offerings are now coming to the fore. Back in April, Jagersbacher unveiled plans for the region’s first Hampton by Hilton, having signed a management agreement with wasl hospitality & leisure to develop the brand’s biggest hotel yet, a 420-room property in Al Qusais, Dubai. The agreement also included the addition of a third Garden Inn into the city’s pipeline, with 25 under development for the region as a whole.
"Clearly, the opportunity to drive growth of the mid-market not only enables us to further our presence in the regional capitals, but to also expand into secondary markets," says Jagersbacher. "Here in Dubai, we have the new airport being built, the growth of the city towards Jabel Ali and significant tax incentives for hotel construction – that’s before you even mention the demand being generated by Expo 2020.
"The major regional carriers continue to expand their routes. Regional travel is growing and new source markets continue to emerge. The World Cup is coming to Qatar. There are so many factors driving opportunities and we have a track record of success."
A move towards the mid-market can often necessitate a significant shift in development focus, however, in how deals are structured and the types of developers with whom those deals are getting made. Jagersbacher acknowledges that new players are entering the fray, but insists that growth will be founded upon established working models.
"Of course, we are still building with existing owners, where successful relationships already exist and all parties know what is required," he explains. "But there is certainly a new band of investors paying particularly close [attention] to the mid-market and realising the opportunities in terms of capital appreciation. That’s especially the case at a time when cash in the bank is seeing a very low return on investment, with interest rates so low. We’re dealing with a number of emerging players and that’s very exciting."
Franchise players
While full service, upscale brands demand a high degree of autonomy, one wonders whether Hilton Worldwide might be tempted to investigate franchising opportunities in order to accelerate mid-market growth. Unlikely in the immediate future, Jagersbacher responds.
"We’ve had great success in the US and Europe with the franchising model," he acknowledges, "but in the Middle East and Africa we have to be extremely selective were we to move along that path. Do enough management companies exist with the qualities to take on one of our hotels on behalf of the investor? I’m not sure – and it’s a big risk to take when we know we can do a great job directly.
"I can’t see that picture changing in the near future. We’ve been in the region for decades and have established strong relationships during that time, built upon our ability to manage on behalf of our investors. We’d look at every deal on a case-by-case basis, who knows what the future brings, but we have already established a successful way of operating and I don’t see that changing significantly."
One significant change is the rapid evolution of source markets, with fast-growing economies, emerging middle classes and Hilton Worldwide’s success in other regions driving new customer bases into the group’s hotels. "One area we’ve seen exceptional expansion is China," Jagersbacher reveals. "Outbound visitors are up 25% on last year and that’s really growing the customer base entering the Middle East.
"Regional tourism is also extremely important, and especially during national and school holidays we’re seeing a huge influx of GCC guests into key markets like Dubai and Abu Dhabi. Egypt is also once again experiencing a return of Saudi, Kuwaiti and UAE business, which is great to see."
The human factor
Another shift, driven by the size of the pipeline, comes with human capital and how one manages to source, develop and retain the talent essential for delivering successful growth. It is an issue faced by all operators in the region and Jagersbacher’s appetite for the challenge is testament to his previous experience working on hospitality’s front lines.
"Whenever I travel, I always try to get out there and speak to team members of all levels and at local schools, to really sell our industry and explain to people what a great career it can provide," he says.
"We’re currently building 26 hotels in Saudi Arabia, so for that particular market we’re looking at around 6,000 team members, 33% of whom need to be local talent. We opened an office there a year and half ago and installed HR managers who have been visiting high schools and universities, trying to convince people to join our industry. That 33% is the minimum though; as an overall strategy, we truly believe that these different hotels in different markets should be managed by local people. There are fast-track and training programmes in place to make that happen, and we’re developing a culture that encourages and drives these young people towards responsibility and success."
Here and now
With so much focus on the future, there is always the risk that one fails to pay requisite attention to the present. So much of the talk around Hilton Worldwide in recent years has revolved around the development pipeline, but maintaining and building upon existing operational standards plays a vital part in growing the brands.
"Different people have different objectives and it’s vital there’s no conflict between managing existing business and growing the portfolio," agrees Jagersbacher. "You have to keep doing what you’re doing well and never lose sight of that. We have dedicated people whose sole focus is looking after openings, working with technical services and investors, making sure everything is present and correct, and making the process as smooth as possible. We also need our general managers to not just be hoteliers. They’re running a business; the capital investment is huge and doing a successful job within an extremely competitive, complex marketplace requires a wide range of different skills
"It all comes down to creating a great team of committed people focused on delivering amazing results every day. The only way you can make a large and diverse region like ours work is though being with your team members, working with a bottom-up approach where people share in achievements and are rewarded accordingly. That has been the key to our success."
A read through the regional growth forecasts for the next five years suggests that it’s a strategy the regional president will not be amending any time soon.
