Poor returns likely resulted in Marriott-Habtoor break-up: analysts

Poor returns likely resulted in Marriott-Habtoor break-up: analysts

Poor occupancies, low returns and the potential for cannibalisation of other nearby Marriott hotels were likely factors in the operator parting ways with property owner Al Habtoor Group this week, a number of analysts have said.

On Tuesday, Marriott International and Al Habtoor Group announced that they had “amicably” agreed to end a contract (originally signed in 2012) to manage three ultra-luxury hotels in the heart of Dubai.

Months after rumours about unrest between the pair first emerged, Marriott International, the largest hotel group in the world, said it would “no longer manage or otherwise be associated with” The St Regis Dubai, W Dubai Habtoor City, and The Westin Dubai Al Habtoor City, effective July 31, 2018.

While the two players have not stated reasons for them parting ways, industry experts put it down to poor performance of the three properties.

“Their occupancies were abysmal,” said Vineet Shrivastava, an industry analyst, explaining why the relationship soured.

Echoing this, fellow hospitality expert Martin Kubler said that the Al Habtoor City complex was simply too big, and opened at a time when revenues simply weren’t sufficient to make operating three upmarket hotels in the same location worthwhile.

“I think that either the owners did not see the right returns or the operator struggled to fill the properties with business paying enough to cover their costs. “The thing is that Marriott has another very big hotel, the JW Marriott Marquis, literally next door, which has different owners, but also needs filling,” Kubler said.

Al Habtoor Group did not return multiple requests by Gulf News for comments, while Marriott declined to answer a number of questions sent to it.

The JW Marriott Marquis is owned by Emirates Group, the parent company of Emirates airlines, while the three hotels at Al Habtoor City are owned by Al Habtoor Group.

“In the end, I assume, one Marriott-operated property price-dumped other Marriott-operated properties,” Kubler added.

The worst kind of competition is not between a Hilton and a Sheraton, but instead among different brands within the same company, Shrivastava explains.

“For example, competition between a Sheraton and Marriott, or between two Sheratons, is always terrible, since now you’re aiming for the exact same guests and loyalty programme faithfuls.”

New operator

Offering over 1,600 rooms between the three hotels, owner Al Habtoor Group will now be tasked with finding a new hotel operator to manage the properties and provide them with new brands.

Some in the market have speculated that Hilton is likely to be the preferred operator due to its broad portfolio of brands, although there exists a number of permutations that could potentially still play out, analysts say.

“Hilton is most likely the front-runner, but Hyatt and IHG are also involved,” Shrivastava said.

Kubler agreed that Hilton would be considered by Al Habtoor Group to replace the three Marriott hotels.

“Hilton would be another option, as Habtoor already has good ties with Hilton in other locations,” he said.

Hilton declined to comment when contacted by Gulf News. The company is the only hotel brand with a comparable breadth of hotel brands to Marriott International, which has 30.

Kubler, however, says he doubts that one operator will take all three properties.

“There are only very few operators in the market that would have the required number of brands and the muscle to do this. Perhaps Al Habtoor will own and operate the hotels themselves, for example with the Habtoor Grand in Dubai Marina,” he said.

“Perhaps the incoming operator will combine two of the properties so that the complex has only two hotels, instead of three,” Kubler added.


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