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- 7 Jun 2010
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Middle Eastern Hospitality: Two-Way Investment


As international hotels continue to mushroom across the region, will one local powerhouse investor be looking to Europe for a golden opportunity?

Elisabetta Gucci, daughter of one of the Italian fashion brand’s famous family figures, Paolo Gucci, has unveiled ambitious plans to open 40 luxury hotels over the next 15 years. Target locations stretch from the Middle East to South America to Africa; but it is Dubai that has been chosen as the initial launch pad.

Known for its opulent, record-breaking hotels in boom time, the desert city is still witnessing several post-crisis hotel investment projects, despite widespread concern over the health of the market. Luxury Society recently reported on the opening of Armani’s $1200 a night brand showcase, as a bevy of famous fashion names race to grab a piece of the action. Donatella Versace, Elie Saab and even, it is rumoured, Karl Lagerfeld, are all set to open luxury hotels in the region.
So, what is it that makes Dubai so irresistible? And what is the key to ensuring a successful investment?

Lorens Ziller, partner at Elisabetta Gucci Hotels and Resorts believes that the answer lies in creating small but perfectly-formed hotels: “If we had a 300-room hotel I would be seriously concerned. But even in the downturn there’s great potential for boutique hotels in Dubai.”

The Elisabetta Gucci hotel will also cater to a range of budgets with rack rates ranging from a relatively modest 1,500 UAE dirhams ($408.5) a night to as much as 25,000 dirhams ($6,808).

Brands like Tiffany are known for the enduring success they have had combining what Milton Pedraza referred to, at the Reuter’s Global Luxury Summit last week, as “the halo of luxury” with the opportunity to purchase entry-level products. Perhaps creating a luxury hotel in a location known for its extravagant hospitality, while also offering rooms at accessible rates, will allow companies like Elisabetta Gucci to mimic this success in the luxury hotels sector.

As international investment continues to pour into the Middle East, some market observers are speculating over whether a Middle Eastern investor might swoop in and acquire a British hotel empire that is hanging in the balance.

Derek Quinlan outbid Goliath Saudi investor Prince Alwaleed bin Talal in 2004 to purchase a group of London’s smartest hotels- the Savoy, Claridges, Connaught and Berkely, for £750m ($1.08 billion).

Eight months later, Alwaleed bought the Savoy for about $230m and the three remaining hotels were successfully re-launched under a new holding company,.

However, the debt (reportedly originally around $722m) needs to be restructured ahead of a December deadline,while some of Quinlan’s personal loans, often used to fund his property investments, are in the process of being transferred to the Irish government vehicle that handles bad bank loans.

Despite the company’s serene public assurances , inevitably there are many investors “waiting in the wings”. Derek Gammage, a hotel specialist at CB Richard Ellis says that it’s little surprise: “These hotels are as good as it gets.”

Could one of these mystery investors be one of the Middle East’s most powerful investors? Alwaleed is already a player in the luxury hospitality sector, with major investments in the Savoy in London and the Monte Carlo Grand Hotel in Monaco. Might he soon add to his collection by taking advantage of Quinlan’s teetering property empire?



The Times