Rotana expects recovery to hit pre-Covid levels by end of next year

Abu Dhabi-based hotel management group Rotana expects its business to return to pre-coronavirus levels by the fourth quarter of 2021 as economies reopen and international travel restarts.

Rotana, which manages properties across the Middle East and Africa, is already seeing "green shoots" of recovery as governments lift lockdown measures, residents go on staycations and people are keen to return to their normal lifestyle, Guy Hutchinson, Rotana's president and chief executive, told The National.

"Today, we are seeing green shoots, we're seeing opportunities to generate income and we're seeing those opportunities accelerate," Mr Hutchinson said in an interview on Wednesday.

As Dubai plans to open up to international visitors from July 7 following months of travel restrictions, the executive is "cautiously optimistic" about the return of visitors to the country.

Pent-up demand for travel, both globally and among the UAE's source markets, will drive the return of business and leisure visitors faster than expected, he said.

"It's basic human nature: People have been away from their business partners, economic opportunities and access to leisure – I think they're going to reclaim that," he said, adding that while technology is helpful in connecting people it cannot replace face-to-face human interactions.

The company will forge ahead with its growth plans during the Covid-19 crisis and is proceeding with opening four new properties by the end of 2020, he said. Rotana will open one new hotel in Dubai, one in Amman, one in Dammam and another one in Riyadh, taking its total to 73 properties under management by year-end. In 2021, it will open a new property in Kurdistan.

Rotana – whose brands include Arjaan, Rayhaan, Centro and The Residences – manages 69 hotels in 14 countries across the Middle East, Africa, Turkey and Eastern Europe. Of those properties, 35 are in the UAE, making the Gulf nation its biggest country, and 62 in the Middle East.

The hospitality group, which has a total of 44 hotels under development, has revised its outlook for business in the second half of 2020 to a more positive view than the one it held in April amid early signs of recovery.

"While we have a pretty pessimistic financial forecast for the back end of the year, we've got some underlying optimism that if the pace of recovery continues on the same trajectory that we've seen over the last four-to-six weeks, then we may be pleasantly surprised by the second half of 2020 – we're due a break," he said.

The executive did not elaborate on the financial forecast, noting that each of Rotana's hotels is an individual business owned by a different developer that has navigated the crisis in its own way.

"We have five or six hotels in Abu Dhabi that will achieve budgets and perform better than last year," he said. "Other hotels will have significant shortfalls to the prior year."

The tentative signs of recovery come after its business was "hit hard like everybody else" due to the impact of the Covid-19 pandemic on the hospitality industry at the beginning of the year, with May and April being the toughest months, he said.

The hotels' performance during the crisis was mixed: Some properties in Abu Dhabi recorded occupancy levels of more than 80 per cent in Ramadan as they accommodated oil and gas industry executives unable to travel due to UAE flight suspensions. Its hotels in Dubai were more impacted, particularly beachfront locations, with revenue dropping as much as 70 per cent in some properties, he said.

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Data from consultancy STR found overall occupancy rates in Abu Dhabi increased 5.7 per cent year-on-year in May to 55.2 per cent, although revenue per available room dropped 22.3 per cent. That compared favourably with the broader Middle East and Africa region, where occupancy fell 31 per cent  to 36 per cent..

Rotana took some "austerity measures" to contain costs and preserve cash, he said. This included asking staff to take their annual vacation and, in some cases, take unpaid leave though no workers were laid off during the crisis.

"It's been a difficult time for everybody and we're no exception," he said.

The group does not see an immediate need to raise capital to boost its liquidity levels.

"One of the positives about our model is that funding needed to ramp up hotels that are quieter or have larger revenue shortfalls is relatively limited," he said. "What we really need is travel to start."

Mr Hutchinson said he expects the region's tourism sector to rebound from the coronavirus-related slump quickly, led by Dubai and the UAE, due to the nation's "well-managed" response to the pandemic.

However, he acknowledged the challenges posed by a global economic recession, cautious consumer spending amid job losses or furloughs, and uncertainty unleashed by the Covid-19 crisis.

"The road to recovery will take time, there will be hard yards, there will be hard work to be done, and it takes time to get a destination back to where it was before," he said. "I'm not underestimating that journey, but I have confidence that the trajectory of Dubai and the UAE will be quicker than others."

Asked about the landscape of the hospitality industry in a post-Covid world, he said in the short term it is "absolutely critical" is to build people's confidence in the sector. To that end, it has implemented its "Safe Space" programme that focuses on a contactless experience at its hotels and enhanced cleaning and disinfecting procedures certified by third-party auditor Ecolab.

"In the long term, I look forward to all this to have been gone," he said. "It's bizarre for a hotelier to be promoting contactless service ... hospitality is a tactile business."

Mr Hutchinson is bullish about the future of the hospitality industry and confident that Rotana's business model will recover.

The Middle East's hospitality sector – particularly in Abu Dhabi, Dubai, Saudi Arabia and Bahrain – will bounce back quickly, he said.

"While we’re optimistic that recovery might happen, if the opposite happens over an extended time frame, then there is a raft of measures and contingencies to consider," he said. "What keeps me awake at night is the sincere hope that this model stays in the drawer."

Between January and April 2020, international tourist arrivals declined by 44 per cent, translating into a loss of about $195 billion (Dh716bn) in international tourism receipts, the UN World Tourism Organisation said.

It identified three scenarios for global tourism in 2020, which point to potential declines in overall international tourist numbers of 58 per cent to 78 per cent, depending on whether travel restrictions lift in July, September or December.