Jumeirah to focus on China and Asia in Dh8 billion expansion drive

The Dubai-based hotel and resort operator Jumeirah will focus on the Gulf, China and other developed markets in Asia as part of its Dh8 billion expansion drive over the next three years.

Over the weekend, the group received the green light for its expansion plans across 11 countries from Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai. The new projects are expected to add 4,300 rooms to the company’s portfolio.

It was not immediately clear where the money would be invested as Jumeirah has said previously that it will grow through management agreements, similar to other international hotel operators.

“The [expansion] plan reflects international confidence in the power of the Jumeirah brand to attract luxury travellers from around the world to properties that bear its name,” said a spokesman for Jumeirah Group. “And that confidence has inspired an increasing number of investors and developers to entrust their properties to Jumeirah to operate as five-star luxury hotels and residences.”

There are plans to open 19 hotels in the next five years in the Middle East, Asia and Europe, the company said.

“Direct investments will be limited to the most strategic locations or properties,” said Chiheb Ben Mahmoud, the executive vice president and head of hotels and hospitality for Middle East and Africa at property consultancy JLL. “Management agreements require investments on the part of operators in setting up operation platforms, sales and marketing networks. But the invested amounts are, however, much smaller than those incurred when developing, acquiring or leasing hotels.”

For Dubai Holding, which owns the hotels group, revenues from hospitality segment rose to Dh3.37 billion last year, up by 8 per cent. Jumeirah expects to operate 40 hotels, up from 21 in 11 countries, and increase its inventory to about 10,000 rooms from the current 6,000.

“A 60 per cent increase in room count is quite an aggressive expansion drive, but it is not the first time Jumeirah is doing so,” said John Podaras, a partner at Hotel Development Resources. “Whereas traditionally they did so in tier one European cities, they are now trying to turn towards the East.”

In doing so, Jumeirah is mirroring the growth path of several other UAE businesses including the carriers Emirates Airline and Etihad Airways, the strategic investor Mubadala, energy group Taqa and Emaar Properties.

Jumeirah opened its first and only hotel in China, the 401-room Jumeirah Himalayas Hotel, in Shanghai, in 2011. It has plans for five more there in Guangzhou, Hangzhou, Sanya, Macau and Qindaohu as well as a resort in Bali, Indonesia, and a presence in Mumbai, India. These are expected to be ready between 2015 and 2017.

“I expect developed Asian markets for expansion would include India, possibly Japan, Malaysia and Indonesia and not so much South Korea as it is pretty saturated,” Mr Podaras said.

Among the Gulf countries, Saudi Arabia’s Jeddah and Riyadh could be the obvious choices.

However, Jumeirah is not targeting Africa, a region which is often regarded as an untapped hospitality market.

Qatar’s Katara Hospitality expects to open its luxury property in Tangiers, Morocco, and another in Comoros Island, off Mozambique, next year.

“But Africa is not an easy market to penetrate, you need an existing presence on the ground, and it’s not politically stable,” Mr Podaras said. “Apart from the pioneers in [the] hotels sector, there hasn’t been a wholesale roll-out [of properties] even in South Africa.”

The company, which is less than 20 years old, owns several trophy assets in London, Rome and Istanbul.

However, its international footprint is far smaller than some of its older peers. The French operator Accor, founded in 1967, has 460,000 rooms in 3,600 hotels; Hilton of the US, 95 years old, has 640,000 rooms from 3,897 properties; and the UK-based InterContinental Hotels, created after the Second World War, has 687,000 rooms across 4,602 hotels.

“Jumeirah has not penetrated the way others have, but it’s a boutique, specialised luxury brand and that’s the space they want to occupy,” Mr Podaras said.

“They, however, need a long way to go to raise market awareness, especially when it comes up against existing competition in Far East.”

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