Diversify Middle East investment to maximise success, say tourism leaders

Diversification of investment was named as the key factor to success in the Middle East, but it will be some time before the region attracts a “significant amount” of international capital, according to speakers on the second day of the Arabian Hotel Investment Conference in Dubai.

Muneef Tarmoom, CEO of Istithmar, said, “Rather than invest in one property, the best way to enter the regional market is to invest small in a diversified regional investment fund. This way, you will see direct feedback quickly and can decide whether to increase your commitment.”

Tarmoom was joined at a round table by: Donald J Trump Jr, The Trump Organisation’s executive vice president of development and acquisitions; Sarmad Zok, CEO of Kingdom Hotel Investments; and Arthur de Haast, global CEO of Jones Lang LaSalle Hotels. The session was moderated by Richard Stockton, head of Middle East real estate and lodging investment banking for Morgan Stanley.

Trump Jr said, “Taking the regional market as a whole, not our corporate investments, a $10 million investment in a diversified fund is an excellent way to approach the Middle East market – and is what I would do if it was a personal investment.”

He referred to the decision to invest in Dubai as a “home run”, but would not be drawn on comparisons to the Trump Organisation’s projected returns in other markets.

“We are selling real estate so we see early returns followed by the continued benefit of managing the project. But you can’t measure developments against each other: look at real estate prospects on a block-by-block analysis, not even by city or country.”

Zok referred to the diversified investment strategy as one that had driven Kingdom Hotel’s growth for the last 10 years. “KHI covers a portfolio that reaches from the Four Seasons on the Dead Sea to Movenpick in Dubai, but it has taken us 10 years to get to this stage.”

De Haast focused on the growth of the mid-sector accommodation bracket as one that can guarantee good returns for investors in the region. “This is a solid long-term investment, bearing in mind the growing business profile of the Middle East and its need for more accommodation solutions outside the luxury hotel offering.”

He said that it would be some time before the region sees a significant amount of international capital. “There is no shortage of capital in the region and high levels of liquidity, whereas international investors have to build some risk return into their premium.”

In an earlier session, the effect of development on the environment and the challenge of human resources were named as two of the biggest potential barriers to growth in the region.

Gerald Lawless, CEO of the Jumeirah Group, said, “We need to be aware of the effects on the environment of everything we are doing, and ensure projects are constructed with sympathy.”

As well as the environment, Jean-Gabriel Peres, CEO of Movenpick Hotels & Resorts, also named human resources as a major challenge facing the industry, “The industry is growing so fast that we can’t keep up with the pace; indeed, this pace may be the one thing that halts growth.”

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