Arabian & African Hospitality
Investment Conference

20-22 September 2021 | Madinat Jumeirah, Dubai, U.A.E

Podcast

AHIC Talks Episode 11 - Muhammad Ali Syed & Prince Alwaleed Bin Nassir


In this episode, Jennifer Pettinger-Haines handed the reins over to Muhammad Ali Syed, Founder & CEO of Mingora Consult. He was in conversation with Prince Alwaleed Bin Nassir who is President of Qoot, about their recent collaboration on a joint report focusing on Saudi CEOs and COVID-19 sentiments in the Saudi restaurant industry. COVID-19 has hit the Saudi restaurant business hard, significantly weakening the business's financial position. Yet their leaders seem committed to holding on, but they can only do so with a little bit of help from the Saudi government. These were the findings of the report, and Ali and Prince Waleed will be discussing them in detail over the course of this episode.

SUBSCRIBE TO AHIC TALKS

TRANSCRIPT:

[Intro]

Welcome to AHIC talks, a podcast for the Arabian & African Hospitality Investment Conference: The annual gathering of the hospitality and investment community for the Middle East & African region. Tune in each week to hear our team at AHIC share insightful conversations with industry leaders and innovators in the hospitality and investment community. And now, let's dive into this week's episode.

Jennifer Pettinger-Haines: Welcome to the podcast. I'm Jennifer Pettinger-Haines, Managing Director of Bench Middle East and Co-founder of the Global Restaurant Investment Forum. This week, I've handed the reins of the podcast over to Muhammad Ali Syed, Founder and CEO of Mingora Consult. Ali is a man on a mission. A mission that I fully support; and that is to get timely and accurate data to the region's restaurant industry. He has teamed up with Prince Alwaleed Bin Nassir, President and Founder of Qoot, the Saudi Restaurant Association to produce the first joint McGurk Qoot Insight Report, which focuses on Saudi CEOs COVID-19 sentiments. Now this is focused obviously on restaurant CEOs, and Ali and Prince Waleed are going to discuss the findings. So sit back, enjoy, and I hope that you will also join us at AHIC in September, where both Ali and Prince Waleed will be taking part in a presentation and panel session. So enjoy, and I'll see you in September.

Muhammad Ali Syed: COVID-19 has hit restaurant businesses in Saudi Arabia hard, as it has done all around the world, significantly weakening company's financial positions. Yet the leaders remain committed to continue to invest in the Saudi market. But they can only do so with a little bit of help from the government. These are the findings of a Sentiment Survey of 57 CEOs and COOs of large, medium and small sized businesses representing over 2000 restaurants in Saudi Arabia. It was jointly conducted by Qoot, Mingora and MacArthur Firm at the first anniversary, if you'd like to call it that, of COVID 19 pandemic.

Hi, my name is Ali. I'm the founder and CEO of Mingora Consult, Middle East Restaurant Performance Company. We are on a mission to democratize data for restaurants and food service businesses, making good insights accessible to all. With me here to talk about our survey is the ever smiling Prince Alwaleed Al Saud, CEO and Founder of Mukatafa Company for Advocacy and CEO of Saudi Arabian Restaurants and Cafes Association, which is also called Qoot. Prince Waleed, welcome.

Prince Alwaleed Bin Nassir: Thank you Ali, thank you very much.

Muhammad Ali Syed: Before we dive deep into the sentiment survey findings, could you tell us a little bit about both the companies you lead Mukatafa and Qoot, and their role in public-private partnership?

Prince Alwaleed Bin Nassir: Well Mukatafa, the company was established to bridge the gap between the public sector and private sector in terms of aligning their strategy and enabling the private sector to become an enabler for vision 2030 programs and KPIs. Qoot on the other hand, is an association, a trade association for the restaurants and cafes in Saudi Arabia, where we focus on improving the legislation that are related to the industry and improving the best practices or the practices in general and the industry, be it operational, HR, and so on.

Muhammad Ali Syed: Great, thank you Prince Waleed. Indeed, what I've seen over the last year or so, a couple of years that since I've known you, you are taking on the biggest challenges that are facing our industry. So that's great. So with your permission, I'm going to talk about what we learned from the survey. Is that cool?

Prince Alwaleed Bin Nassir: Very good, please.

Muhammad Ali Syed: I have to say our respondents have poured their hearts out. First things first though, the elephant in the room, the restaurant sector is struggling for the most part. 89% of leaders in our survey say they are weaker or significantly weaker than pre-COVID levels. As you know, Mingora publishes weekly reports called Sales Track in Saudi Arabia and UAE based on actual data contributed by major restaurant chains. Our data shows that many businesses have lost 40% - 50% of sales volumes compared to pre COVID levels and profitability even worse, what with restrictions and the shift to delivery and all. And yet the Sentiment Survey also shows that over 50% of restaurant leaders still intend to put new investments into their businesses. 15% percent actually say they will go to pre-pandemic level investments. And 1/3 of CEOs are still looking at acquisitions this year, which is very positive. I'm just wondering, how well worst is Saudi government on the struggles of the restaurant sector. Again, thanks to you and your company as well, and is Saudi government well worst in the idea that restaurants or businesses are still going to invest into the market

Prince Alwaleed Bin Nassir: See Ali, the problem is that, and this is one of the areas where we look for Mingora to play a bigger role. The problem we have today is the lack of data. The government looking at very few sources of data, especially on the ATM transaction, the debit card transaction, and analyzing that as the only source of growth. And it's deceiving when you look at it, because now it's showing VAT versus non-VAT transactions. So, for a regular analysis, we'll see there's a growth in the industry, which is not the case. The other problem is that there is a growth and the delivery business, which is not contributing much to the bottom line, but contributing to the top line. So the industry is struggling to say the least in terms of sales. And so that's part of the growth. That's why we see two different directions taken by the industry. Either they're trying to scale up by acquisition and opening new stores. So they can actually make money not from the top line but from the savings, the efficiencies and operation and so on. On the other hand, we see companies that are struggling, they're trying to maintain their position, hoping that the economy will improve sometime in the future. And they will go back to be being in the black. The problem, not only on the growth, but on the cost of doing business; cost of doing business keep rising in the market. So we have the cost of the employment, the cost of the utilities, and so on, so forth. So that's rising as well. Then we come to the ease of doing business. There is some good improvement, but still there is a struggle to maintain running the business under the new regulation of the Ministry of Health because of the regulation of the COVID. So that's reducing the capacity or the source, increasing the cost of employment as well for having extra expenses and human resources to manage them. So there's many challenges that are happening in the market,

Muhammad Ali Syed: Prince Waleed you talked about data, can you talk about three things data, ease of doing business, cost of doing business? In terms of data, what are other industries providing to the ministry that is missing from the restaurant sector?

Prince Alwaleed Bin Nassir: So let's talk about the basic information, which any leader needs to produce quality decision. So, general data:

1- is the accurate number of stores in Saudi, per city and so on, per type.

2 - is the actual growth. Is the industry growing or not. Because if it's growing, then they can make the right timing for some of the decisions, if it’s not growing, then that will improve the decision as well.

Muhammad Ali Syed: I can tell you it's not growing. But based on our data, yes. I mean, if it compared May 20, maybe, but compared to 2019. No way, I mean, compared to pre-COVID.

Prince Alwaleed Bin Nassir: See what we want, actually the data, the government want to see, and I really appreciate the efforts that Mingora is doing. But the government want to see as a stable source with a track record that we stopped, using referring to all of us as an industry and as a public sector as well.

Muhammad Ali Syed: Got it. Okay, and I'm going to probe on the other points you made as well, but they are coming as we look at other questions in the Sentiment Survey. The second question we asked was, how well do you feel supported by external stakeholders. For example, government, landlords, aggregators, banks, investors, etc. I was quite surprised CEOs actually feel highly supported by the public sector. I mean, more than 50% are happy with the level of support, which is the highest of all, together with landlords. So government and landlords actually did better than many other players, which I will come to. But just in terms of government, what are the top two or three things that will make the biggest difference for our industry, apart from as you said data?

Prince Alwaleed Bin Nassir: First of all the government are coming closer to the private sector of the challenges that they're facing. They supported the industry during COVID, waiving many of the government fees, forcing banks to delay loan payment. A lot of support to the employment, support in terms of unemployment support and funding from the Human Resources Development Fund. There was a lot of support coming from the government, understanding the challenges and providing the support in a very quick time. But when it comes to the aggregator, it was disappointing, actually, during the COVID time. Banks is the same, they did not really play a positive role.

Muhammad Ali Syed: Yeah, I mean, the survey shows it. I mean, these are the top two concern areas for restaurant leaders. I mean, 71% feel unsupported by aggregators, which is the highest of all and 50% feel let down by banks. Just specifically on aggregators, what can the government do really?

Prince Alwaleed Bin Nassir: This is a difficult question to answer.

Muhammad Ali Syed: There is a lot of banks not just in Saudi, but all around the world with aggregators, as you know, and obviously, they are in this business, they are providing a service, they have costs as well, they have to grow their own business. And in many cases, people go to aggregators, because they cannot do the stuff that aggregators do. So there is value in those services. That's why people are going. But then on the other hand, there's also sort of seeds control and seeds profits in aggregators. And so what can governments do?

Prince Alwaleed Bin Nassir: I think the role of the government should be definitely to support and regulate the aggregator market. It's a very important industry. And we need it to grow, not only in the F&B but in delivery service in general, but this will enable the growth of the e-commerce in total. Let's just, I think the industry and the aggregator they need to come closer. They need to look at each other as two parties that complement each other, instead of what's happening today, as you know, that they need them but they hate them at the same time. But I think they have the right to grow as any other sector. And of course, the government needs to make sure that there is no monopoly or bad practices.

Muhammad Ali Syed: That's correct. Okay, one of the other questions we asked was, what are the biggest barriers that CEOs are facing currently? And the three biggest barriers actually all came -- like, you know, if they are removed by the government, then businesses feel like they can grow and they can actually ignite themselves. So the top three were all related to government actions. One was VAT, the other one was labor availability and the third one was helpful regulations -- or I mean, I shouldn't say helpful regulations but regulations barrier. So if we were to talk about first VAT, any other talk, any discussion in the government forums on increasing it, or keeping it, or reducing it your viewpoint on that?

Prince Alwaleed Bin Nassir: Let me start with the health regulation or the regulation related to COVID. That will change in the first of August. The new regulation will come out that will ease the current regulation example, the limitation of five people on the table to 10. The distance between the table first three meters to come to down to one and a half and so on. VAT, yes, there is a discussion. There's a lot of changes that are coming. We're looking at when the VAT will be collected, when it's going to be paid to the government, the different VAT brackets by product. So there's a lot of industries or a lot of products that VAT will go down to the previous rates, and some will remain as. Until now it's not clear which is which and when. But all based on the consumer need actually because consumer spending is impacted by the VAT. So basic products, then all the way through luxury, there will be a difference in rates.

Muhammad Ali Syed: So do you think that, like, the effective or the average rate would be 15%, but in some cases, if you do a tiered one, some people will pay 5% and some will pay 20%? Is that how you're looking at.

Prince Alwaleed Bin Nassir: By product, not by people. So, I'll be for example, buying grocery, paying 5%. Buying jewelry, I'll be paying 15%. But this is initial for now. All in all, it will go down to -- this is my judgment between 10% and 5%, we will not continue 50.

Muhammad Ali Syed: And what about restaurant businesses? Do you feel they are considered a need or a luxury? And is it dependent on the type of restaurant or which way will it go?

Prince Alwaleed Bin Nassir: Most likely it will be considered looked at on the lower brackets.

Muhammad Ali Syed: What about you said health regulations? They're going down expected 1st of August? Not in July, not at this time?

Prince Alwaleed Bin Nassir: Because there's a cycle to review the current regulations in all different industry. We worked with the government on the F&B. And they agreed on the recommendation of the industry. So it's just the announcement will happen 1st of August.

Muhammad Ali Syed: Understood. What about labor Prince Waleed? Any big things going on in labor?

Prince Alwaleed Bin Nassir: Nothing besides what was announced about a month or two ago, which was developed by an alignment with the industry. So the industry agreed to the new regulation, which is in favor actually of the growth of the industry. So we know the coming 24 months, what's the requirement? It's much easier by the way than before.

Muhammad Ali Syed: Okay, so in terms of availability of labor, you feel that things will become better? Great. Okay, so I'm going to move on to the next question. This was about how people are working in team? You know, how a pandemic has brought about a very different way of working between people. So the question was, well, what we find is that CEOs are happy with team efficiencies and communication. 60% field teams are more efficient and there's better communication, despite the way work has moved. But they also feel that it's at the cost of their own mental health, they're getting stressed. So any things that are going on in terms of sending people back to offices?

Prince Alwaleed Bin Nassir: It's only the vaccination requirement. Anyone can to back to office, except that they have to be vaccinated. And the government is working to meet the targets that before September, all are vaccinated. They want to reach the 70% bracket of vaccination of the population by that. Yesterday, they started the 12 - 16 years old. Had they went to all Mecca and Medina to become vaccinated, even retail and so on. So we're getting there.

Muhammad Ali Syed: Wonderful, final thing Prince Waleed, you're coming to AHIC and GRIF forums. So we want to talk a little bit about that, what you're going to talk about?

Prince Alwaleed Bin Nassir: I think GRIF is a good event for people to come not only to hear what's the update and what's happening in the market but to network with the leaders that are attending the event, and I really encourage everyone to attend.

Muhammad Ali Syed: Thank you Prince Waleed for your time and valuable work you're doing, you and your teams are doing Saudi Arabia. Thank you for collaborating with Mingora as well. A big shout out to your team particularly Razan and Jaylee, who did the survey.

Prince Alwaleed Bin Nassir: Thank you. Thank you very much.

[Outro]

Thank you for listening to AHIC Talks, a podcast for the Arabian & African Hospitality Investment Conference. For a full transcript of this conversation, along with other reports and insights visit AHIC.com. We look forward to welcoming you and your colleagues live and in-person at AHIC in Dubai from the 20-22 of September 2021. Register and purchase your pass today at AHIC-dot-com and save on the early bird rate. For any questions email us at Hello@AHIC.com. Until next week, stay safe and keep well.

Published 19 July 2021

Next article

The Future of Lifestyle Hotels

Read