In this week's episode of AHIC Talks, Jonathan Worsley had a chat with Carlos Khneisser, who is Hilton's Vice President of Development for the Middle East and Africa region. They discussed how the hotel chain has been adapting to enormous changes by focusing on their people and the strength of their relationships with owners. Despite these challenges, they've made significant strides over the past year with the new deals done across the MEA region, with more opportunities brewing in the pipeline. Listen to the full episode to find out more about Hilton's plans and which countries have taken priority.
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.
Jonathan Worsley: So for our next episode of AHIC Talks, I'm delighted to have Hilton's Vice President of Development for Middle East and Africa, Carlos Khneisser. Carlos, lovely to see you.
Carlos Khneisser: Thank you Jonathan.
Jonathan Worsley: How has it been for you though, Carlos, personally, how challenging has it been in terms of family, in terms of your work environment, in terms of your travel?
Carlos Khneisser: Yeah, look, definitely it was challenging and there's no doubt about it. I think being vaccinated, fully vaccinated is a good thing that makes our life easier, especially being on the road and moving from one place to the other, it's a really positive thing. But if I were to touch base on the overall development for Hilton in the Middle East and Africa, I think we are still on track to double our portfolio in the next three to five years. We continuously, I mean, great activities. We're lucky in that region. I have to say, in the Middle East and part of Africa, we are still lucky as compared to other parts of Europe, or maybe other parts of Asia, excluding China. Business is still in a good shape, we see a lot of conversions, we see a lot of new deals that are coming through. Like for example in 2020, we did open our Conrad Etihad Tower in Abu Dhabi, it's a conversion deal.
Jonathan Worsley: With these deals Carlos, have you managed to do them all remotely during this period of time?
Carlos Khneisser: Yes, we did. We managed to do them remotely. But the good thing is that Jonathan, if you look at the percentage of new deals that we did in 2020 and year to date 2021, more than 80% of those new deals are with existing owners. This is the network effect that we always talk about. Those owners have been working with us since quite some time. We have trust and confidence layered between Hilton and those owners, we have a superb relationship. And then those owners, they have an investor's mentality. In crisis, they see a lot of opportunities. Prices of consultancies, like architecture, interior design are far lower, like if you compared it to 2017-2018. Contractors are as well competitive, they get a competitive rate. So those investors who are sitting on a good amount of money, who have accessibility to finance, they go for it. They go for new projects and that's what is happening with us. But mostly, all the new deals that we're doing are from existing partnerships or existing owners.
Jonathan Worsley: Because it's difficult to find new owners, I suppose in this environment as well. So a lot of your pipeline is with either existing owners, or they are already in the pipeline anyway, aren't they? So they're partially constructed, and they're moving forward.
Carlos Khneisser: You're right, you're right. I mean, because when you want to establish a new ownership or a new relationship, people want to meet you face-to-face. I mean, nothing replace face-to-face meetings, especially if you're going to go and do a new hotel with those owners. And those hotels cost a lot of money. So they're not going to take the initiative or a step forward to just lock a deal with you without seeing you face-to-face. People do business with people they like. So if they don't know, if there is no chemistry between you and them, it's very difficult to really get the deal through.
Jonathan Worsley: How are you dealing with that? Are you beginning to travel again?
Carlos Khneisser: Yes, absolutely. Three weeks back I was in Egypt. Egypt is really booming. I mean, I have to say, I went to the administrative capital, the new administrative capital, I saw more cranes than I saw people there. They are really going full fledge in terms of construction, which is good to see. If you look at the northern part of Egypt as well, they're really doing a fantastic job in the northern part. On the Red Sea, Hurghada & Sharm El-Sheikh, you see a lot of new development. So I have to say, Egypt is still doing well. Saudi Arabia is our focus. I mean, with all the mega projects that you know about. As Hilton, in Saudi Arabia, we have the largest pipeline. We have more than 40 hotels that are under construction, which is fantastic news for us and for Saudi Arabia itself. And this creates approximately 8000 - 9000 new jobs for Saudis, which is fantastic opportunities. If we look at the UAE, UAE is still doing well. Dubai, Ras Al Khaimah, Abu Dhabi, Fujairah, Ajman, so there is still a lot of opportunities, and some opportunities, or if I want to say 50% - 60% of the opportunities in UAE are conversions, which is good for us.
Jonathan Worsley: I was going to ask you about conversions and your brands? Is there a specific brand, or a selection of brands that clients are and are now looking at? And also on the conversion side, what are you converting from and to?
Carlos Khneisser: Well, we don't have a specific brand. I mean, like it's sort of a conversion brand. I mean, we say plug and play. Each project we have, I mean to specifically analyze it, and we visit each and every hotel that is opened up for conversion, and we make sure that we agree with the owner on an improvement plan, something called an improvement plan to align this project or this hotel, to align it with the standards of the brand fit that we propose to the owners. So for example, if we want to convert an hotel from X brand into a Conrad brand, like we did in Abu Dhabi, we converted the one of the Etihad Towers into a Conrad Brand. So we had agreed with the owner to change some standards that are existing in the hotel, into to different standards that match the Conrad Standards. So this is basically how we deal with owners. So there is a property improvement plan that goes into place. And this property improvement plan basically, it changes the hotel into a hotel that fits into the proposed brand that we agree with the owner on.
Jonathan Worsley: How are you accommodating the new traveler, you know, working from remote places, not going into the office like they did before? How do you bring that into your hotel concepts?
Carlos Khneisser: I mean, as we see nowadays it's completely different. The customer base is completely different than in the past. If we compare it to 2018 - 2019 it's completely different. So now the focus is more on leisure; we see our leisure properties are doing extremely well. Our properties that are focused mostly on corporate business and meeting business are doing good but not as good as the resort properties. For example, the resort properties that we have on the Palm or in Ras Al Khaimah which is still doing fantastic results. I mean, I was talking to one of our owners in Ras Al Khaimah about their hotels are running above 80% occupancy with a good rate. I mean and that is a superb indication that this part of the world is still doing well, if we compare it to the rest of Europe or parts of Europe, or parts of Asia.
Jonathan Worsley: On the business traveler, the leisure traveler, are you providing that whole workspace environment as well? Are you looking at that whole co-working space within the hotel brands to facilitate their ability to work away from that typical conventional office that they normally would have in the past?
Carlos Khneisser: We are, especially in the pandemic and during these COVID times, we are extremely flexible. And that is what is helping us to maintain a good occupancy, not only in UAE, in the rest of the region. In Saudi Arabia we're trading, at a good occupancy and a good rate. I mean, yes, mostly the business is domestic, but we are doing extremely well. In UAE and in Egypt, business has came back rapidly. So we're seeing a comeback in our region, definitely.
Jonathan Worsley: Okay, great. I mean, one of the biggest challenges, of course, during COVID, must be with the owners who own the real estate. So how have you managed that whole relationship with the owners? And what have you done to help them during this past 18 months?
Carlos Khneisser: Any company during crisis, you need to have a plan. So our plan, it's in three tiers, if you want to put it into three tiers. The first tier is to protect our employees, because protecting our employees and taking care of our employees, basically, this means that those employees that you had really focused on and you took care of they will take care of our clients at the end of the day. The second tier, we focused on protecting our business. Protecting our business means working side by side, with our owners working as well, side by side with the customers that are visiting and staying in our hotels, and making sure that they are fully supported. Owners that need support, we are there for them. And that is a good translation of business. When I say 80% of our business are coming from repeated owners, and those repeated owners they're not obliged to give you a new hotel if you are not supporting them during crisis. If you're not supporting them and giving them the right guidance and direction to make sure that they're hotels, even when they are running at low occupancy they are managed properly and efficiently. So we can reduce their working capital injections and what have you. So yes, again, this part of the world, we're lucky to be in this part of the world, especially in UAE because the actions that they had taken at early stage, it really paid off. It really paid off and it gave a good protection for all those owners and investors that owns those hotels.
Jonathan Worsley: I would suggest that you probably have a closer relationship with your owners now than you ever did before.
Carlos Khneisser: Absolutely. If you tell me, we are actually gaining, we're taking over a lot of hotels, in terms of conversions. And this is our reputation in the market. Because we work very close to our ownership. And the fact is that you don't just manage the hotel for the sake of managing it. The good part is to manage the hotel during hard times, not during good times. During good times, everybody really feels great about it, but the muscles are shown when we are in a crisis, when we're in pandemic. What is the strength of a management company? This is what created us, not in this region only but I'm talking as a company, and globally. We had really worked very close to our owners, we supported them and definitely this has really paid off. And third tier I mean, we had worked on and we have projected and worked very close with our executive team to make sure that we are preparing for recovery. Because in every crisis if you don't have a plan -- Yes, our plan at the beginning is to protect our employees. The second tier is to make sure that our owners, investors and clients are well supported. And the third tier is to make sure that that we are prepared for the comeback. We are prepared for the recovery. Because if you're not prepared for the recovery, it's actually a bad thing. Because when the business comes back, you have to be ready to really reap the effort that you have put in place.
Jonathan Worsley: No, of course. And yeah, congratulations on your attitude and philosophy around COVID, and how you've dealt with your owners. Moving on to the advisory board for AHIC, I'm delighted that you were participating. Really appreciate your support with AHIC on the advisory board, can't wait to see you in September. And thank you very much for joining us.
Carlos Khneisser: No, likewise Jonathan. AHIC is going to be a really phenomenon forum, especially during this year. After a very challenging year in 2020, we're really looking forward to meet with our colleagues, with our owners, investors, with our consultants, and actually it is a great place to reconnect and plan and listen to each and everyone who was on those panels on how we're going to tackle the future. And I think everybody is really looking forward to hear from the other side, from all the experts on the panels on how we need to tackle, or how we need to welcome the future after this pandemic.
Jonathan Worsley: Yeah, I know, you're right. Lots to talk about and also the ability for the industry to network, get together again, discuss how they're going forward, the future, and so many topics actually, Carlos.
Carlos Khneisser: I'm really, really looking forward. I mean, our teams are really looking forward. Simon as well is really excited to join you during AHIC in that forum. It's going to be exceptional. I'm very positive about it and hopefully we can really put all the pandemic behind us and start from that point onwards, looking positively to the future.
Jonathan Worsley: Exactly! I agree with you. Carlos, thank you so much for joining us, and I shall see you in September.
Carlos Khneisser: Thank you. Thank you Jonathan, you too. Bye bye.
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.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 08 August 2021