EasyHotels expansion plans for the Region

The budget hotel concept is a hot topic for the region; most of the hotels under construction today in Dubai, Morocco, and even India are primarily focused on the luxury end which created a big gap in the market. Having said that however, many branded budget hotels are entering the market in the next five years such as: Cento, Ibis, Holiday Inn Express, etc…. So what makes easyHotel differentiated and is it going to survive?

According to Porter, the essence of formulating a competitive strategy is relating a company to its environment, also the nature of competition in an industry is linked back to the roots of economics. In order to get a better understand of easyHotels position; let us look closely to relating them to the Threat of Entry, one of Porter’s five forces:

Threat of entry: this threat is very much dependent on the current barriers of entry as well as the reaction yet to be received from competition. The most relevant sources of the barriers to the expansion of easyHotel are:

1. Economies of scale: easyHotel roll out for the next 5 years will include 38 hotels within the Middle East, North Africa, Levant and Indian subcontinent. EasyHotel will save on cost given the close geography and will only need to hire one project manager to lead design, construction and delivery.
2. Product Differentiation: the easyHotel product is very unique as it follows a “no frill” concept. The hotel will also ensure a clean, strategically located room at a 15% discount to all comparables at all time of the year.
3. Capital requirements: Istithmar PJSC has collaborated with easyHotel to take responsibility of the construction of operation of the easyHotels under an exclusive Mater Franchise Agreement. Istithmar is a leading private equity firm that is committed in delivering this project as success and has set the required funding structure.
4. Access to distribution channels: easyHotel brand is part of a larger group known as EasyGroup which also holds eayJet, a budget airline mostly known in Europe. EayJet is planning to expand to the region and having easyHotels around the same territory will give a granted exposure and a higher number of distribution channels.

EasyHotel and Istithmar have closely studied the current gaps and were very much proactive in applying a concentrated competitive set challenge that has eliminated many barriers of entry. Now let us sit tight and watch this roll out mature, nourish, and succeed.

Article Link:
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Did Marriott sell its contracts or is it just a conspiracy of press?

According to Baron’s Framework, institutions must target success in both their market and non market activities: social, political and environmental since they are both interlinked. Marriott is a representation of this case especially in the United Kingdom where they have almost 76 properties under management and have now joint hands with Royal Bank of Scotland (RBS) which is one of the leading banks in hotel financing and leverage.

To illustrate this perspective further using the Baron approach, aspects of the non market environment of Marriott will be analyzed according to the 4 I’s:

Issues

· The main issue that that came up after Marriott and Whitbread sold 46 of their hotels to RBS was the long term management contracts. Landlords were worried that after this sale transfer Marriott will not managing the hotels in stake, and in the sense their steady cash flows will be in flame.
· The second issue the public concern through negative press issued by different hotel acquisition unions, even though such investment deals affect the stock price positively, in this case the reverse happened. Shareholders were worried that RBS will act in the best interest of itself as a bank before a management company and so the price of the Marriott stock was affected negatively.

Interest they include all parties with an economic stake with the issue and can be divided in this case as:

· Organized Interest: Marriott, Whitbread, RBS, Landlords, Shareholders
· Unorganized Interest: Arne M. Sorenson, chief financial officer and president of Continental European Lodging, competitors

Institutions the market and non market environments include activities that take place both within and outside public institutions:

· Media, hotel acquisition Unions

Information refers to what the interest and institutions know about the issues, the consequences of alternative courses of action, and the preferences of those concerned with the issues.

· The management contract issue arose after two main negative press; however both Marriott and RBS were firm in their Press Release title and included that management contracts are long term. The public were waiting anxiously to understand the truth.
· Information is important to deal with issues and can have consequences if not dealt with properly, in the case of Marriott, its stock turned around soon after RBS issued their statement to include this acquisition as a start in growing the Marriott brand continue success and help them through financial leverage to pursue worldwide exposure.

Link:http://www6.lexisnexis.com/publisher/EndUser?Action=UserDisplayFullDocument&orgId=616&topicId=12552&docId=l:378029607&start=1

Is Starwood Capital on the right track?

Starwood Capital Group is a privately held investment management firm that specializes in real estate related investments on behalf of select private and institutional investment partners. There is no doubt their model has been successful, but have they accumulated the right resources over the years?

According to Barney’s framework, it is essential to analyze an organizations strengths and weaknesses by building most directly on resource-based view of the firm. Will those resources however continue to hold and improve efficiency and effectiveness?

Yes, there resources include a wide range of firm’s brand assets that they operate and own such as Sheraton, Westin, St. Regis, Luxury Collection, Four Points and W Hotels. Overall resources can be divided into four distinguishes groups:

1. Financial Capital – Starwood Capital has strong relationships with banks globally and their diversified distribution channels have given them a competitive advantage of strong networking skills that make leveraging an easy task backed by strong generated cash flows.

2. Physical Capital – the geographical locations that the hotels and businesses operate in are very much global which gives them the advantage of economies of scale amongst their resources and large distribution channels.

3. Human Capital – Starwood Capital relies heavily on management and empowerment, they realize the need to hire the right leaders for the right position. They just recently hired James D. Motta, whose career in community development spans more than 25 years, for the President of the new real estate development company launched.

4. Organizational Capital – the overall collection of talented individuals reporting to an organized structure is key for Starwood Capital success over the years.

Over the past fifteen years the company accumulated $14 billion worth of assets and advised/closed on 380 deals. In the UAE alone they operate and own over 15 hotels between all their brands and with their distinctive concepts and operations they cover a wide range of distribution channels from US, Europe, and Asia. They do not only operate hotels, they own some of them and with the development of the new company – they will be able to develop real estate as well. Bravo!!!

Article
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Hard Rock Brand– expanding the horizon!!!

Is Hard Rock successful in both their market and as much as their non-market environment. According to Barons framework these two concepts must be related in a way to work together. Hard Rock Café is an interesting concept but according to any analysts in the field of hospitality F&B is a death penalty for this century, it is the hotel and casino business that will make it to the top.

Hard Rock hotels have proven success in all 11 destinations and have plans to grow around the glob. The long run of their sustainability of competitive advantage has required them to proactively and effectively manage their social, legal, and political environment.

Hard Rock as a group have captured this social issue, where clients are drifting from the concept of cafés and the business in many destinations is suffering, however with the diversification into hotels – it has proven to be very successful and lucrative.

“Our goal in 2006 is to continue to expand the Hard Rock brand with unique, new properties - including urban hotel and destination resorts." said Trevor Horwell, vice president, Hard Rock Hotels.

Just 75 miles from Denvor, Copper Mountain has been created for travelers that are interested in skiing, entertainment and having a good time!!! This way the clientele is satisfied given the track record of other Hard Rock hotel destinations….

Whether Media or PR, the group has been very successful in attracting attention and positively informing the public about their plans of continuous expansion in the field of 4 star luxury hotels.

Article
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And the Winner is!

And the winner is……Dubai Ports World! DPW’s acquisition of P&O is a major coup for Dubai, not only because P&O it is one of the oldest symbols of the British Empire but also because it will rank DPW as the 3rd largest ports operator in the world.

The beauty of this deal is that there was very limited overlap between DPW and P&O. With the CSX acquisition last year and this current acquisition, this will create much value to DPW as well as customers. DPW can now service customers with an end-to-end solution from Asia to the Middle East to Europe to the US. There is a strategic fit between the two and DPW is now truly global. It will be difficult to overtake DPW as No 3 as another major acquisition would have to take place and this would be difficult without triggering regulatory hurdles as well as port overlaps.

DPW was unique as initially its presence was only in the UAE and a few other regional spots. Then it bought CSX’s ports which added the international dimension, followed by P&O which made it a leader in its field within 18 months. As the former chairman of P&O commented, at the peak of the British Empire, Dubai was a place where P&O ships used to anchor to reload coal. Today, that “gas station” is the owner of the ship and the company that owned the ship. Bravo!


Article: http://search.gulfnews.com/articles/06/02/14/10018701.html

A New Kind of Big

Is it surprising that the Hashemite Kingdom of Jordan is attracting such capital. True, Jordan Dubai Capital is the second largest company in Jordan with $300 million of capital. However, it is important to note regional dynamics today.

With oil prices at an all time high, GCC states are flush with cash yet are facing a challenge in finding opportunities to invest in. Jordan offers an attractive environment for investors. There are limited barriers to entry due to the government’s liberalization programme. The country also offers a competitive strategy for Jordan Dubai Capital - there are very few direct competitors! This means that Jordan is a buyer’s market. The basis of differentiation for Jordan is that asset prices are relatively cheap in comparison to that of its neighbours.

The only issue that investors may face is the lack of sizable opportunities, as deal sizes will tend to be smaller in nature. this will make it difficult to go on a $300 million shopping spree!!!!!!

Atricle link:http://www.zawya.com/story.cfm/sidZAWYA20060207064851

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