Hala Matar Choufany, welcome to the Insider Podcast.
Thank you, Martin!
So, we’re sitting in Dubai, which I’m very pleased about, obviously, and I think just even traveling in by taxi from the airport, or certainly if you follow any of the developmental newsletters and online portals, I mean, we have seen, not just in Dubai but Abu Dhabi as well, an extraordinary growth in luxury hospitality properties in particular. Do you think that’s set to continue, or do you think those markets need a little bit of a pause for breath, if you like, to let demand catch up with supply? What’s your view on the outlook, with luxury in particular?
Yeah, I mean, definitely, I always start off by answering any question about the UAE as, you know, in my mind, this is indisputable success all the way. That’s how I refer to it, and because I probably also had the opportunity to experience it firsthand. So in 2000, I was back then working for Arthur Andersen, and we were studying adding 600 keys into this market. The current inventory was 600 keys. So you can imagine everyone’s reaction. Doubling the inventory in the cities, that was 2000. Then I moved out and moved back in in 2007. And ever since clearly Dubai and Abu Dhabi has been growing from one success to the other. Today we have around 160,000 hotel rooms in the city. This is ahead of London.
Yep.
Yeah, it’s very interesting, clearly supported. I mean, we have to consider the factors of success, right? And oftentimes I say, this is a powerful, successful model. Can it be replicated everywhere and anywhere? Not really, because there are components that have made it so successful: A) you’re pretty much designing your city and your tourism strategy from scratch, right? So that gives you clearly a leverage versus many ancient cities. So that allowed them to, to some extent, balance out also demand and supply, do the reforms that they needed to do, build their infrastructure to support that.
But year on year, with the exception of Covid, which hit pretty much the globe, even Dubai recovered so quickly after Covid. It was phenomenal, right? So to your question, I mean, when we look at the last 20 years, there has been consistent growth. Clearly between 2004 and 2010 were double digits. Because then you’re starting off a lower base. In the last five, six years, fully recovered, reasonable growth rates, it keeps growing. This is also very much related to the traffic at the airport in many ways, right? And the supply in the city, occupancies are solid.
So a city that is running with around 80% occupancy, which once upon a time was very seasonal, right. Once upon a time, this is a market that was sitting with some 60%-65% occupancies. So today, 80% market-wide average. This is quite healthy. Luxury supply up to 2019 was probably the largest segment of the market. We’ve seen the entry of more affordable luxury, mid-scale lifestyle assets. So overall, in terms of offering, the market is now very well balanced. Even the pipeline, although the majority of the pipeline still sits in luxury, interestingly, but it is not as aggressive as it used to be in the past.
Sure, sure.
And just like any other market, I mean, today we advise on many projects in Saudi Arabia. It is important to take this as a case study to look at the fact that no matter how ambitious and how aggressive you’d like to develop a city, there are so many factors that come into play, be it legislation, be it financing. I mean there are many different factors that slow down some projects or cancel out some. So, ultimately, supply and demand will eventually catch up. What is ahead for Dubai and Abu Dhabi – and I would probably talk about the UAE in general, because then we’ve got the pocket of Ras al-Khaimah with the Wynn Casino coming online in 2027-2028.
It’s lovely how these different Emirates complement each other, but in the last two years probably the most significant growth was in Abu Dhabi. So Abu Dhabi today perhaps is playing a more conscious role within the tourism sector, right? They’ve also built the infrastructure to support that, and they’re looking to differentiate and position themselves, likely so as the capital perhaps of the UAE, that they are focusing more on the cultural aspects of tourism. Dubai remains Dubai, with all the different segments, and potentially other Emirates will have their fair share of the business.
But correction? Just as with any market, ultimately, there will be a correction. When it comes to specifically looking at rates, for instance, because again, if we look at the last two to three years, the rates have been increasing significantly. It’s not just the UAE thing. I think it was global. So going forward, probably there isn’t much more growth in terms of RevPAR. There isn’t as much more in terms of the other revenues. So perhaps when we’re looking at optimizing performance, we’re really looking at how do we become more efficient. There isn’t as much that you can do on the top line. So now you really have to, without compromising the quality, without compromising the service, but what is it that you could do from a technology standpoint and other aspects that can enhance your profitability levels, which are under pressure?
Yeah. So, as a consultant, what was it that drew you into that world, into the consulting world, as opposed to, say, getting a corporate job in like a head office of a hospitality company? What’s it about consulting that really appeals to you?
Um, it’s interesting. I’ll answer it differently. Originally I was hoping and planning to become a lawyer.
Okay.
So perhaps that really speaks to the fact that I, you know, my personality is more around being quite independent and quite varied work, right? So this is probably where the whole consulting business comes into play. But then I didn’t study law, I studied hospitality management, and I did a couple of years in operations, which was great, and really very supportive of consulting in the hospitality world, really understanding that the real estate of hospitality is very different to any other real estate, right?
It’s not your retail, it’s not your residential or commercial. This is complicated – you have guests, you have segmentation, you have seasonality, you have any attack that might influence the performance. So that’s a very different asset type. When I did operations, selfishly, I decided that I don’t want to work when everyone is having fun, right?
Yeah!
And I sensed also that I’m definitely… I have a better liking to more the strategy and financial side rather than the day-to-day operations. So I opted for an internship with PwC in London. So I did a six month internship. It was exceptional, but also very much telling in the sense of the varied real estate sectors. And when I decided, when I completed my MBA and I decided to… look for my first consulting job, that’s when I decided to join HVS, which was much more focused on that sector in particular versus other sectors.
And of course a natural fit given that you’ve worked in the business, you’ve studied the business, so…
Which is very important. And again, when we look at hiring, we’re looking at hiring individuals with operational experience. Again, they need to really understand what is it that they’re advising on. So we find this to be actually the right fit.
Yeah, because when I speak to people who are in hospitality consulting or in that side of the business, or even working in head office roles, it is the beautiful complexity as you mentioned, all the moving parts and the fact that, say, unlike an office lease where basically you sign your lease and you’re locked in for 25 years, it’s pretty much fixed. There are the level of revenue, the profit that that investment can make or otherwise entirely depends on a lot of moving parts operationally. And I think that to me, I think what always gives such an appeal to this business is the ability to manage those moving parts.
Totally! It’s so dynamic and, you know, we run these simulations day in and day out. It’s your flow through, what we call as a flow through. It’s very interesting, you know. You may think it’s RevPAR in certain assets. It’s not even RevPAR. We’re challenging. We should be measuring the EBITDA per available room, because then there are many other revenue streams that really make up a key chunk of this valuation. So it’s very, interesting. And I’m… again, I mean, looking at it now, 21 years with HVS, this is what keeps me going. It’s how dynamic, how changing, and especially when you work with different market cycles. So a saturated market performs very differently to markets that are emerging, which happens to be now the Middle East and Africa. So you’re building into the future here.
Do you think on the industry side, do you think that the industry is getting more savvy to these different ways to measure things, as you say, like EBITDA per available room, other measurements? Has the industry sort of matured in the way it approaches things like that, do you find?
Absolutely. We’re seeing this more often, and definitely that’s what we offer in terms of services, is that RevPAR has been for a very long time a good indicator of performance. But interestingly, I mean, just by way of example, we’re currently working on a portfolio, and there are a couple of properties that the RevPAR is exceeding the market average. But then when you do a deep dive, they don’t have the right comparable market. So you’re exceeding a market that is not even comparable. As soon as you plug in the new hotels or hotels that are more comparable, then you realize that perhaps RevPAR is not as solid as… or maybe it is, but the property is not being managed efficiently. So that’s not really translating.
So I think it’s a combination. To your point, are we more sophisticated? We are as consultants. Clients definitely are much more sophisticated. Asset management or asset optimization seems to be the real opportunity in the next 10 to 15 years. So many of those metrics will have changed and will continue to change. And again, there’s no right or wrong. The more metrics you use in evaluating, the better informed decisions you could make.
Of course, of course. Now, this question, quite honestly, we could spend all of the rest of the podcast just on this one question I know. But just to give us a flavor, because obviously you mentioned HVS gets involved in projects, cradle to opening, whatever. What for you are the crucial success factors in getting a hospitality development to a successful opening?
Well, it really starts with understanding your market, right? So there should be at the very initial stages… it’s great that we’ve got clients with nice visions, but that shouldn’t be a starting point. What I mean to say is that oftentimes you’re doing the wrong project in the wrong location and it becomes very difficult to align. So, ideally, when we look at success factors, we’re saying the demand in the market pretty much dictates the opportunity. And once you identify the opportunity, then within that opportunity that presents itself, you need to then design and develop an asset that speaks to not the current segmentation of the market, not the current performance of the markets, but the future performance of the market.
And that is an extremely crucial starting point in any feasibility studies. Oftentimes running a P&L of an asset and doing an IRR with rough numbers suggest that you have relatively healthy IRRs. But the truth is, if there isn’t the right opportunity in the market, if you’re bringing in a five-star in a market that is quite price-sensitive, if you’re spending five, six hundred thousand dollars a key in a market where you can only achieve a $200 rate, no matter how strong your operator is, no matter how qualified your management is, you’re going to be in the wrong place.
So I think identifying the opportunity in the market is key. Getting a proper feasibility study and assessing certain sensitivities and do the risk assessment, right? So ideally you want to work with realistic. You don’t want to discount any future supply. You don’t want to take a view that, you know, there is an intention. In feasibility studies, you want be pretty much 100% accurate that whatever you’re factoring into this model is likely to happen. In the event it doesn’t happen, then this is where you run your sensitivity. So that financial modeling is also extremely important. And where I think it becomes even more relevant is that if you are going by just mainstream averages and you’re not doing the deeper digging of what are actual hotels in the market are performing at; and how the increases in wages, how the increase in utilities have really impacted EBITDA. So, if you don’t have this knowledge. How are you going to build it into your feasibility study?
And then ultimately, it’s value engineering, value engineering the project. I mean, we recently looked at a project with 160 square meter per room as an efficiency for what we recommend should be maximum 90 square meter. So how do you justify all this capital investment when you cannot actually sell? And interestingly, to the point that you mentioned earlier on, perhaps what I would add, beyond RevPAR and TRevPAR and GOP PAR and the usual terminology that we use in the hospitality industry, while I agree this is a very dynamic industry and it shouldn’t be compared with your commercial real estate, what is becoming more important now is to look at the revenue per available square meter. And we’re stressing on that because that ties back to the efficiency that I just discussed.
You need to make sure every square meter is producing revenues. Traditionally, 60% was front of the house, 40% was back of the house, right? I mean, these were like the guidelines. And of the 60%, maybe another 70% is only generating revenues. In today’s world, rising costs, complexities of the market, competitiveness of markets. Every square meter should generate income. Now not necessarily generated through the traditional model of an operator running the business, but it could be generated through retail income, it could be generated through other income streams that then complement the hospitality offering. It is not as easy, I must say, it’s not as clients would consider that, you know, when they come for a feasibility study. And this becomes even more obvious when we do operational assessments and valuations. Because then you can actually look as to how much profits or revenues are understated in comparison to the initial investment that was done or in comparison to the feasibility study that was at the start of an engagement.
There are no guarantees in life, but with a good feasibility study or a proper assessment of demand, you should be within an 80% to 85% range of confidence that a good operator, or an efficient operator, should be able to deliver. So the whole discussion or appointment of operator, whether under a franchise, whether under an HMA, is also a very important consideration.
Yeah, and I think also I’m chatting to individuals that are involved with revenue management, asset management, etc. One of the secret sauces, I think, is a little bit of creativity. In terms of like when you’re looking at space that’s underutilized, underperforming, it’s actually thinking up really, really good, efficient, profitable uses for that space. So it’s not, I guess it’s just not all mechanics, is it? It’s a little bit about like, well, what would work best in that space? What would bring the revenue up? So there is that element it too?
No, definitely. And this is why I think now hospitality is fun. It’s very exciting. You know, I again, I always compare back to my 20, 20 plus years in doing advisory work in hospitality and working across different continents, right? Because as well, you know, depending on the state of your asset, depending on the market. But in the last seven to eight years, we’ve seen much more creativity, because doing business has become also more expensive. The risks are elevated, right? Which in many ways is great because we’re being pushed now to think out of the box and to really come up with ideas… and there are certain hotels or destinations – I’d like to refer more to destinations because any hotel that was able to move out of a traditional type of rooms model into more of an experience model is exciting; because when you think about the experience then there is just so much that you can do within your asset, versus thinking it from the point of view that somebody is gonna check in, check out and, you know.
Yeah, but it’s also true, I’ve spoken to a few industry people even here since I’ve been in Dubai, and this whole idea of the customer experience, the experiential side, is now paramount. I mean, everyone’s telling me it’s no longer about the kind of room fitments, it’s all about what experience. What unique experiences are you gonna offer your guests to make them absolutely fall in love with the trip and ideally come back again. So that’s something that you would echo as well? You know, we now live in a world where experience is everything?
Yeah, 100%. I mean, I was speaking at a panel yesterday or the day before, it was on global trends in the travel and tourism sector. And, you know, we touched on the segmentation and clearly we’ve got the mainstream segments that most of these hotels are being designed to serve your leisure, your business, your corporate, right? But outside of those, the fastest growing segments are actually very different in the way they think. So whether we consider those looking at immersive experiences, or experiential depending on where and what destination. But interestingly, also those that are friends trip, which is becoming a very common travel segment and not just amongst the elderly. It is rather in the early adults, right? And that’s very interesting.
And actually the discussion goes to say how much operators are flexible enough to be able to speak to and to service all these different target segments, because they’re quite demanding, right? They’ve become very demanding, judgmental to many extents. They have the ability to compare, and they want value for money; and value for the money is not anymore the room; it is about that experience. It’s about how they feel, how they’re made to feel. So it’s not easy. I mean, if I was in operations, that’s tough.
Yeah, to actually get that right.
But clearly, I mean, some hotels are doing it very well, and some brands have been able to redesign or re-engineer certain concepts in order to speak to this growing segment. Overall, you know, again, it’s very exciting. I think hospitality, by definition, is very different today than the way you and I have experienced it.
Yeah, more traditional side. And that’s even before we get into things like wellness tourism, the demand for sustainability to be like kind of ecotourism. I mean, we’ve got all these different, as you say, all these different strands that are all basically meeting now in the planning offices of the hotel brands basically. They’ve got to respond to all of these challenges.
So I’m sure there are many factors. But if you were, just to pick out one factor that you would say is one of the big reasons why, and let’s face it, this region has been a phenomenal success story with the growth of, not just of commerce and business, but of tourism and hospitality in the Emirates, it’s an extraordinary story. What do you think is the number one reason that’s behind it? What’s the key factor in that?
Behind the success of the UAE?
Yeah, and its growth as a tourism and hospitality destination.
Definitely timing. Timing in the context of what’s happening regionally. It was timing to be able to step in and actually provide an alternative tourism destination, right? And I think with all the reforms and the incentives that the government has put in place, they were able to generate confidence, safety. And these are extremely important when we think about destinations, not just hospitality, and the perception of a destination.
And I think if there is one thing that has really supported the UAE in the last 15 years it’s that no matter what was happening in the region or even globally, it continued to be a very safe city, very stable economically with the committed leadership and vision. And seeing it through, right? And it’s very important. I think seeing through commitments is also extremely important. And perhaps later we can talk a little bit as what’s happening elsewhere or in Africa. I mean, the commitment from the government sector has been instrumental in also building the confidence.
Yeah, interesting. Now, I’m based in Europe, and I’m very used to a healthy hotel development market, but also a healthy hotel asset trading market. The hotel investment markets are worth billions of euros each year, billions of euros of assets transacted. Now, one thing I’ve noticed about this region is obviously there’s a lot of investment, but you don’t see a lot of assets being traded. I just wondered why?
Yeah, specifically for the UAE, I mean, we need to consider the ownership structure. And the ownership in the UAE is very different to Europe, for sure, or even the UK. I mean to some extent I would probably argue, because I also worked and lived in China, it’s not so uncommon that the government in China also holds the majority of hotels. So when we look at ownership, we’re looking at most of the hotels that were originally developed in the city the iconic assets and those that were used as the branding and the collateral of Dubai, right, to promote the city. These are owned by the government.
So from an investment standpoint, the investment into this project wasn’t with the view of exiting. It was with the view of credibility marketing. It was the view that we are a key player and we want to encourage foreign investment. So when we look at those projects and the majority of them, if not owned directly by the government are a semi-government kind of ownership. So the largest hotel portfolios in Dubai in particular are held by family offices without a need, I mean, usually for the transaction market as you know, you need to have a keen seller and a keen buyer.
Absolutely.
I don’t think we’re there, right? We’ve had limited transactions, which is nice, because I mean, as valuers, we want to be able to refer to some transactions to be able to validate the yields that we use. There has been some transactions, but then when we also look at the buyers, they were another government entity or Dubai sold to Abu Dhabi or Abu Dhabi bought into Ras al-Khaimah. So it’s very difficult to compare it to your international market.
So that’s one reason. Also, we have to keep in mind that only in the last couple of years, certain hotels are being developed in freehold neighborhoods. So the law also doesn’t allow for freehold across the entire country. This is changing and continues to change, which perhaps this will also encourage investors to look at potentially developing or acquiring certain hotels with a freehold license in place. To your point, no, it’s not necessarily a market where you would expect from a maturity standpoint that there are more transactions.
My personal view as well, there have been certain assets that have been on the market for some time. We have a keen seller, but the gap between the ask and the value according to the potential income stream is still large. We’re looking at a 35-40% gap. Which is very hard to justify if you are looking to making a smart acquisition in Dubai, right? So this has also discouraged or slowed down the transaction market. With many countries and looking at ownership structure, it’s no surprise that development budgets on some of those projects have been extensively overrun. So unless you’re prepared to pick up the pen and sign off that loss, you’ve probably no buyer out there who is willing to pay that price. So these are different factors.
Interesting, yeah, and it’s unlikely to change any time immediately anyway. So now, changing tack slightly, over the last few years, I’ve spoken to a lot of people around the battle for talent across the hospitality industry. I think particularly in the year or two immediately following the Covid pandemic, people left the business, there was a bit of a struggle to replenish that talent pool across, obviously not just in this region, but elsewhere as well. That talk does seem to have quietened a little, and people I speak to now seem to be a little bit more relaxed about that, but what’s your thinking, particularly about the regions that you cover? What’s your take on the current talent pipeline? And is there any imbalance between supply and demand on good hospitality talent?
I would say definitely in the GCC (Gulf Cooperation Council) countries we will continue and probably it’s going to be even more difficult to find the number of talents, the quality of talent, that you would need to actually service all this pipeline. I mean if we look at Saudi Arabia again as I said I mean probably the UAE another 20,000 keys will come into the market but if you look at the Kingdom they’re planning 400,000 keys! The reality? Maybe 280,000 keys will be added between now and 2030. How are you gonna staff it? It is a real concern in this part of the world.
Now, again, depending on what country, because the UAE has always been dependent also on expatriates. In Saudi Arabia, it’s slightly different. You’ve got a massive population, massive in the context of comparing it to the UAE’s! It’s not so massive, but it’s 36 million, 40 million probably, but you need to upskill. You need to train. I mean, again, Saudi Arabia, they’ve just a few years ago decided to open up. They’ve done great with that, but the reality is, we need to teach, we need to train, we need to upskill. So there’s a lot to be still done in this part of the world. And I guess, again, I mean, without, you know, trying to mask it… as an industry, are we doing enough to make it or to keep it as attractive?
And to do that learning and development piece so that people do progress once they are on board. So your feeling is perhaps that the industry’s still got a bit of work to do to make that happen?
I think the industry has a lot to do and we can learn from other industries. And my view again, I mean, because we do executive search placements, when we have clients looking to identify their C level or their senior management team, we’re arguing why does it have to be just from the hospitality industry? Why aren’t we looking to bring in someone from aviation? Why aren’t we looking at someone who’s worked in one of those medical facilities? Because it’s service, right? So perhaps just looking outside and… the ability to transfer skills and knowledge. I think we could benefit as an industry a lot from just opening up and looking at pulling in more talent from outside the industry, but that comes with the understanding of whether it is luxury.
I mean, we recently placed a senior HR for a very luxurious brand, hotel brand. We didn’t hire them from the industry. We hired them from the fashion industry; because luxury is luxury, right? If you know how, if you know that world, you know that world. So this is what I’m trying to say that we should be able to come up with first more of an attractive proposition through development, through retention, through clear career paths. But also perhaps we need to collaborate and attract those that come from similar industries. And actually they might bring very different perspective to our industry.
Yeah, that bit of cross-fertilization of it because a lot of the clients are the same. A lot of the customer base is the same, whether it’s private aviation, luxury retail, high-end cruising, and obviously luxury hospitality. You’re talking to a lot the same people, basically.
It’s changing mindsets. I think, you know, it’s very important that, you know, the, the world ahead is very different. We need to think differently. I mean, we do this on day to day basis, even with our current mandates, we need to think differently, we need to solve problems differently.
Yeah, yeah, and does that come down to soft skills, to those kind of classic things, empathy, problem solving, communication… is that the way you think the industry should be absolutely focusing its efforts?
Yeah, definitely. I agree.
Okay, cool. Now, you’ve mentioned Saudi Arabia a couple of times, and we can’t really talk about this whole GCC region without referencing back to it; and I know you’ve already talked about it a little bit. But I mean the scale of the ambition, the vision of the projects is really quite extraordinary. From your view, from a regional context, how significant is what we’re seeing there, I mean, in just, you know, from both a regional and a global context?
It’s massive, to say the least. The first time I arrived in Saudi Arabia was 2007. So I’ve been traveling there regularly. So to me, I’ve really seen Saudi Arabia pre and post, and I feel I have the right to comment. Not about the hard changes, hard structure changes. If we only look at the transformation from a social standpoint. It’s phenomenal, right? It’s amazing.
Give me a flavor of that, because I don’t know the country at all.
It’s amazing in the sense that, you know, today you’ve got women in the workplace. Today you have mixed, mixed seatings. You know, there is just what we never expected in Saudi Arabia is happening today. And there continues to be those social reforms, which is all great and all very supportive of the vision. And clearly this is a big highlight to be celebrated and the, actually the Saudis are very proud. So therefore they’re endorsing, endorsing the vision.
With that said, I mean, it’s not always great in the sense that growing and transforming a destination takes time, right? So there are challenges along the way and working through those challenges and ironing them out is critical for future development. So some growth from a development standpoint has happened. Much of what has been announced is in construction or under planning. So my personal view is that it may not necessarily all happen at the earliest dates that were suggested, but that’s okay. We’ve seen that also in the UAE, as I said earlier on, if you look at case studies, you will note that 600, 700, 800 days of delays on projects, this is mainstream, this is common, so give it another two years. If it was planned for 2030, it’s probably gonna come at 2032, and it’s okay, because so much is just happening on daily basis.
As long as you’re moving in the right direction, and you continue moving in right direction then definitely they are getting to their vision. But it is a game changer at every level. The fact that Saudi Arabia now is more open. They’ve changed their visa requirements. And clearly, they’ve been very well established in religious tourism, for those that don’t know. I mean, so religious tourism has been their key segment, very little leisure, if any, and then some corporate. Today they’ve relaxed the visa regulation, which means they can definitely service five and 10 times more their religious segments. And they’re developing the country in a manner where it’s gonna be able to attract cultural tourism.
You have already a good base of domestic tourism. And then adding to that is your corporate segment. And for those that are not also very familiar with Saudi Arabia, this is a very old country, with a lot to offer, right? So they, you know, making sure that they are promoting and positioning it in the right way and fashion. It is a large country with different offerings and every municipality or every city has its own flair as well. So the plan is there, they’re working towards the plan. There are challenges as we speak today from an investment standpoint, financing to some extent of these projects, attracting the right team. To be able to deliver on those projects, both under construction or in operation. The ecosystem, it’s not there 100% yet. I mean, we’re getting there. When we talk about the ecosystem, we’re talking about the airlines, we’re taking about your cabs, your taxis.
The real tourism basics, yeah, all that stuff’s got to work.
Yeah, I mean, if you want to move the needle and you want to attract millions, your infrastructure should be able to support your millions, right? So it’s moving in the right direction. I just think it will take longer. My view is that’s perfectly fine. On the contrary, that’s actually better for the supply and demand dynamics to kind of settle in. Let’s take a bit of time.
And better to take a bit of time to get these things right. I mean, these projects are so ambitious. It’s not to be rushed, is it, basically? I mean, with rushing comes danger, I would imagine?
100%. I mean, clearly they’ve committed to a couple of major global events, so that’s a good incentive for them to expedite, but I am of the view that realistically some of these projects will need to be scrutinized further, because if we go back to the whole concept of what we do at HVS, everything on paper looks great, especially if you’re able to prepare a sexy presentation that’s even better. The reality, the day you break ground, it’s the numbers that will eventually…
Yeah. I mean, you mentioned about the labor force. And I know that you’ve spent quite a lot of time, as you mentioned, in Saudi. Is there a kind of, has there been a change of enthusiasm for the hospitality industry and hospitality management among the young Saudis? I know perhaps historically it’s not been viewed as a particularly great career path, but are you seeing people waking up to the potential there is in hospitality for actually pretty decent careers; people you speak to, do you get that flavor?
It’s going to be difficult for me to answer that with certainty. I would probably, however, say because the opportunity that is given now for the people of Saudi Arabia to actually work, especially the women, especially the younger, and because this seems to be the fastest growing industry now, it perhaps is more appealing. With that said, I definitely think that there’s a lot that still needs to be done in terms of being able to educate them as to what are the different options and pathways. What are you interested in, right?
So I mean again in hospitality you could be a consultant, but you could be a chef, and both you can do extremely well. It depends where your passion lies and what your skills are. So that’s my own assessment. I would describe it now, that this is kind of a reaction; they just wanted to be out there and whatever opportunity is out there, they’re gonna jump at it at the moment.
With time clearly when there are more opportunities it’s going to be a question, do we want to stay within the hospitality industry, or can we find alternative? And that’s where it becomes even harder to retain. So the sooner, in my opinion, the sooner they develop their tourism programs, tourism degrees, tourism universities, the sooner they embark the younger generation on courses and training, it helps really retain some of them.
Yeah, yeah, and give them just give them the inspiration to take this on. But I think that one of the things that’s come out of all of this change – certainly from my perspective, and I’m as guilty as anyone of perhaps thinking, you know, Saudi, it’s just desert – but actually seeing things like the Dakar Rally coverage and some of the other events that have gone on, the cycling tours, is that country is beautiful! I mean, there is amazing terrain and places in Saudi. It certainly isn’t all characterless desert. I think that’s been a real eye-opener for quite a lot of people in the West, especially.
And that’s what they need to promote more. And that, in my view again, is how they can differentiate, right? There’s just so much to offer. I mean, at times when you have limited options, then you probably can only sell what your neighboring city is selling, right? But when you have something so cultural, something so religious, I mean these are great to have as a destination because that gives you at least your base occupancy. And then you can build on that to attract other types of sector.
Yes, absolutely. Now, another massive territory, which is also under your remit, is Africa. This is not a continent I’m overly familiar with, but I’ve had a few conversations, particularly with, there’s a Glion alumnus called Richard Robaix, who’s been involved in that industry in Africa for quite a long time. I had a chat with him and he gave me quite a bullish viewpoint, but with nuance, across the continent. Africa is a very big place and I know it’s not all the same. What’s your take on the challenges, the opportunities, in Africa right now in hospitality?
Yeah, Martin, if I can be fully transparent with you, I’m probably going to answer that by saying I’m still learning. I am still learning, you know. Once upon a time I thought, you know, I’ve got the Middle East now, fully 100%, you know. I can speak to pretty much every city. But now again, Africa, I mean… opportunity wise, let’s start with that, opportunity-wise for HVS, for investment, for pretty much any sector, the opportunity is great.
But the “but” is a big “but”. You know, there are many challenges. As far as I remember, speaking, attending different events that are focused on Africa, parts of Africa, West Africa, North Africa, whichever way we want to look at it. There seems to be the same challenges year on year and none has been resolved. And that is what troubles me is that if you know, if we’re not able, I mean, clearly the world is, you know there’s always challenges, but what do you do? You have a challenge, how do you overcome it? How do you move in the right direction? I mean might take two to three years depending on what the challenge is, but ultimately you have an end goal in mind.
I think the bigger picture of Africa is that huge opportunity, massive. I call the African continent is set to be transformational in the way that, you know, if everything works the way we would ideally want it to work. What I’ve experienced and not just observed, North Africa is different, quite different. I mean, Egypt for a very long time, very well established, tourism, you, know, on the tourism map. Morocco, definitely, benefited for a long time from domestic tourism, but also tourism from the neighboring countries, and now they’re opening up to the rest of the world.
So North Africa perhaps is at a very different cycle. But with that said, even in Egypt and in Morocco, we’re seeing the entry of operators, right? So traditionally they relied on local operators, on in-house capabilities, but now I’m looking at it from the point of view of operators or operating company, they see massive potential there. Rebranding, conversion, taking over leases. Yeah, so that still presents real opportunities. But moving out of North Africa into other parts of Africa where we are seeing some activity, I would probably say Nairobi is one. Zanzibar. I’m not going in any order I’m just going in my mind through to the places that I have visited at least in the last three months. Angola is another one.
So there seems to be some activity, but when you have those conversations with the tourism officials, when you actually discuss with investors or with hotels that are operating in the market, the common concern is the following: what are we doing from a connectivity standpoint? Connectivity, accessibility, that’s a big one, right? And we need to address that, right. And it’s not down to one single country to address it because that clearly also requires more of an open skies agreement to be put in place. So that’s one.
The second one is the vision. Is there a vision in place and who is behind this vision? Is it the private investors? Is it government? If it’s the government, how capable is the government? Do they have the funding for these projects? Or are they looking on attracting foreign investments? The entire world is looking for foreign investments, right? So now you’re competing with Saudi Arabia, for example. Right? And that is pretty much what investors are doing at the moment. They look at the different options and they’re evaluating, you know, based on a risk assessment, an appetite, and many other things.
Yeah, and that’s a hard-nosed equation. There’s no sentiment involved in that, is there?
Especially in markets where, again, I mean, when we think, and you asked me this question earlier on why the UAE… you know, economic stability, safety, law and order are very important when it comes to actually investing…
If you’re an investor, they’re absolutely paramount.
And this is what discussions usually are centering around: accessibility, government support, government financing, and then how do we attract travelers? How do we create the right ecosystem? It will happen, and it’s happening. I wouldn’t want to project as if very little has happened. But clearly, in terms of numbers, it’s very tiny in comparison to what the continent’s potential is. Untapped potential, beautiful, a lot to offer. But also, major investments need to go in, in order to be able to develop those destinations.
Perhaps if we move down to South Africa, I mean clearly Cape Town and Johannesburg. They have a much more solid, well-established hospitality market. And, you know, from what I’ve seen, I’ve been also in discussions with their tourism officials. They’re very much following the Dubai model now, right? Let’s run our tourism within our economic department. The truth is, oftentimes, when they operate in total isolation, then any decision you do in the Ministry of Economy could potentially impact your tourism sector – infrastructure, taxes, service charges, I mean all these additional top-ups could potentially also discourage your tourism. But South Africa, definitely, we’re seeing growth there and then probably if we look further away Mauritius continues to be a solid, has a solid hospitality market and more developments are happening.
Is there – and I don’t want to put you on the spot too much – but is there like an undiscovered gem anywhere there that you’re kind of keeping a particular eye on, that you think is perhaps off the radar right now? But you know, you think it’s got huge potential maybe because of its natural environment or whatever. Is there one to watch in Africa?
I’m not sure if I would say it’s off the radar, but Zanzibar definitely has so much potential and the proximity to Zanzibar I think this is what makes it even more attractive; proximity in terms of the neighboring cities so that way I expect to see much more pickup in Zanzibar’s tourism. And potentially Namibia on the other hand.
Okay, yeah. These are the ones we should keep our eyes on.
Probably. Yeah.
Excellent. Excellent. I want to change tack again, just to conclude the conversation. And it’s fair to say that, you know, you’re regularly seen on lists of the most influential women in this region in the hospitality industry. And I know you do have a very strong and influential voice – it was one of the main reasons I wanted to speak to you today – but with all of that in mind, do you do you think that women are fairly represented across the hospitality business, perhaps thinking about leadership positions, et cetera, throughout the region. And if not, what needs to happen to make that happen?
Fairly represented? Probably not. We’re getting there.
That’s good news!
I struggle with responding to this question in particular because, you know, I reflect on my journey at HVS and I reflect on my team and on the choices I have made. There are too many women on my team! So I think within the environment that I operate in, it’s fair. Definitely the industry can do more. And again, when I compare the events I used to attend, or the functions, social gatherings, 10 years ago versus now, it’s amazing. And I just celebrate how many more women are there. I used to feel overwhelmed in the past when I would be singled out. So on the contrary, I really enjoy the fact that there are many more woman attracted not just to our industry, but to all other industries as well.
This comes also with the fact that there is much more open-mindedness and support and encouragement in this part of the world. We have to, again, keep in mind that there are cultural aspects, right, that perhaps may slow down or prevent women from joining the workplace. With that said, I am still of the view that we talk about this topic more than we actually implement ways to make it accessible. And what I’m trying to say, my sense, having spoken to many out there, is they still feel discouraged or that they could potentially be judged, that they have to present many justifications if they were not able to be there 24-7, right?
And that’s probably where I keep challenging companies: are we doing enough to normalize that women are as capable of performing, they don’t need to feel that if they couldn’t show up because they have to attend to the family, that they need to write an apology email. Anyone should, right? I mean, if you’re running late, Martin, you’re going to say, sorry, I’m running late. A woman would write, sorry I’m running late. But when she doesn’t show, I wonder if as companies we’re still doing enough to normalize this; and I tend to argue as well, even in the way we speak to them, even in way we give them feedback. Not because we need to differentiate, but because it’s established that men and women think differently.
Men and women… you probably don’t want me to give you the same feedback and the length of feedback I would give you, the way I would to a female. You probably go like, Hala, I get it, two words, it’s enough, right? So, and that’s just an example to say that one thing is to say we want more women in the workplace, but what are we really, really doing to normalize the acceptance of more women in the workplace? And that’s where we can do more. As companies, but also as individuals. This is why this whole conversation, for me, has to shift from being a topic or an issue.
I struggle, as you can tell now. I mean, my tone is very different. I struggle with this question because I just feel that why are we still talking about it? I genuinely struggle. I mean I’m sure you can tell. For me, it’s like we’re equal mentally. Physically, we’re not. We also have to appreciate that physically we’re not equal, but mentally we are equal, in the workplace.
In the workplace situation, for sure.
And therefore, if there is an opportunity, and also I am, you know, I’m not in favor of quotas either. I mean, you didn’t ask me, but I would like to add this in there. We want to encourage more women, but it shouldn’t be because we have to fill up a quota, right? So we also need to be careful as to how we’re doing this. I mean there are times when I have 90% women on my team. What does that mean? Am I favoring them? No. It just so happened they were qualified, and sometimes it’s a 50-50, and that’s great as well. Right.
Sorry for asking the question!
No, but it’s okay. I mean, but clearly, I mean you could tell, it’s usually one of those topics that I’m like…
Yeah, it’s a topic that hopefully in maybe another 10 years’ time, we won’t even need to ask the question, basically. It’s hopefully become a redundant topic.
But definitely I think it’s always important to acknowledge that there is more women in the workplace and we also have a responsibility. And that’s probably what I like to add that I take it upon myself that the same opportunity that my parents gave me, my workplace gave me, my colleagues, my husband, my partner. I would love for every woman out there to give that same opportunity to everyone. Because, you know, we owe it to them. So that’s probably, you know, on this topic, this is always my message. Let’s mentor them, let’s grow them, let’s support them, but equally let’s not put pressure. If they choose not to, it’s perfectly fine as well.
Yeah, absolutely.
It’s a choice that you make.
So for my final question, I’m sorry I’m going to put you on the spot again, but on a more personal level this time, because I’m just curious what the future holds for Hala Matar Choufany. What else have you got to achieve in this hospitality business?
I’ve already started slowly, but heading in the right direction, I would love to be doing more in the education space. So I’ve been honored, lucky, to go back to ESSEC and lecture. I was at the Hong Kong Polytechnique lecturing the Master’s students. I’m just fascinated by the energy, and the learnings. I learn from them and I mean it to the word. And that’s why I really enjoy the younger people on my team, because there’s just so much learning. So if there is a next step for me, perhaps once a consultant, always a consultant. I would continue to do some work in consulting, but ideally, I wanna be able to transfer this knowledge into more… not necessarily the academic word as per se. But really the ability to mentor, to train, to teach, to guide the future generation and future leaders.
Excellent. Hala Matar Choufany, thank you so much for joining me today on The Insider Podcast!
Thank you for having me!
