Episode 74: Paul Bridger, COO, Rove Hotels & Mark Dunford, CEO, Knight Frank Kenya

Published: 06 June 2023

Matthew Weihs (00:00:05) - So welcome everyone, to another Africa Hospitality Investment Forum podcast or the podcast, The podcast that actually looks to spread a little light and a little information on the investment market, especially into the hospitality space in Africa. I'm here today with Paul Bridger and Mark Dunford. Paul is the CEO of Rover Hotels based in the UAE. And Mark, who's probably no stranger to you from the days if you've been to one of our events, but or if you're in the Kenyan market. Mark is the CEO of Knight Frank. Welcome, both of you. So welcome. And before we get going into the discussion, which the meat of it will be around affordable lifestyle, please tell us a little bit more about the work that you're doing within Africa. Over to you.

*Paul Bridger * (00:01:07) - Hi. Thanks, Matthew. So Rove Hotels is an affordable lifestyle hotel brand developed in Dubai. We now have about 3500 keys open with a similar amount of keys under development. We are we don't take ourselves too seriously. We're a young brand and we're kind of.

*Paul Bridger * (00:01:29) - Targeting that kind of new segment of travelers that, you know, want to want a. Accessible price point but don't want to compromise on quality design lifestyle. You know, our team are super young, engaged guys and girls. We don't have anything in Africa yet. We've kind of been focusing our brand on the UAE and until this year and then as of this year, we've kind of said, well, you know, we're kind of ready to to get out into new markets commercially. We've been super successful and we're kind of ready to. Particularly interested in in kind of Middle East, North Africa for our future development and not.

Matthew Weihs (00:02:19) - Tell us a little bit about what you did.

*Paul Bridger * (00:02:22) - Yeah, like.

Mark Dunford (00:02:23) - Like you said, I'm a I'm a long standing heifer. I'm also a, um, a rover. I've been staying at the rover since they first opened, um, in Dubai and a big fan, so I'm regularly in s properties when I'm up for leisure or for or for work, actually. So I'm a big, big fan.

Mark Dunford (00:02:45) - And that's how Paul and I kind of connected a couple of years ago. Um, around that we as Knight Frank obviously where, you know, the largest private, um, privately owned real estate advisory firm in the world, we have been on the continent. For over four decades. We been in Kenya 25 years as our 25th anniversary this year and of deal with all all asset classes. And obviously I come from a hospitality background. So although now I'm kind of generic leadership, I'm still very passionate about and still very involved in the hotel space and the hospitality world. So, you know, I've got a good handle on what's going on, at least in eastern Central Africa vis a vis the kind of hospitality space.

Matthew Weihs (00:03:31) - All right. And we're going to talk a little bit about affordable lifestyle and what it actually means to Africa and the continent. I'll throw this open to both of you. Feel free to throw it between yourselves. But firstly, how do you actually define this? What makes affordable lifestyle as a brand? And are there any specific requirements that need to be met to fit that statement?

*Paul Bridger * (00:04:03) - I'm happy to kick off.

*Paul Bridger * (00:04:04) - Think for me. Hoteliers generally get very hung up on star ratings. And, you know, think we've all pretty well travelled. And you can often stay in a five star hotel in some parts of the world and have a very different experience to a alleged three star hotel in places like Middle East and whatnot. So I think the kind of lifestyle piece, which is a little bit overused and very much used in in the luxury end, is around giving you more connection. And then than a kind of bog standard hotel is often tailored to either a specific interests or a specific area and generally design kind of kind of led. And for us, we, you know, we target the kind of 100, $150 price point. It used to be 100 and now it's close to $150. Um, and I think but, but what our kind of motto on that is that that, that just because you're paying $100 maybe that you shouldn't need to compromise on on on service, on design and these kind of aspects in your hotel.

*Paul Bridger * (00:05:10) - You know, if you can deliver a hospitality, offer smartly and take out the things that maybe people don't need on particular occasions, you know, like often when you go and stay in a hotel, you know, particularly in this part of the world, you're paying for valet parking, five restaurants, a spa, a concierge, etcetera, etcetera. And if I'm travelling for a large part of my travel, not all my travel. I don't need any of those things. So kind of why am I paying for them? And then I think the lifestyle piece just comes in with being a bit different, particularly in design and that aspect. Not tell me I'm wrong.

Mark Dunford (00:05:52) - No, no, not at all. I agree with all of that. I think for me, it's also just about. Being easy and simple. You know, the. A lot of the reason why, you know, Airbnb, for example, doesn't really appeal to single business travelers is because you just want to be able to pick up the phone and order room service or whatever.

Mark Dunford (00:06:12) - And, you know, that kind of you don't have to sacrifice quality to have a simple product, you know, done affordably, you know, so fun, affordable, easy. Those are the big words for me when it comes to, you know, kind of affordable lifestyle properties and. I think they appeal to. You know, particularly the Rove portfolio really appeals to both the leisure and the corporate market because I used to stay there for work initially when I was flying up to Dubai for meetings and stuff, I'd check into the Rove. It was affordable and it was just super easy. There's a 24 hour shop downstairs and one downtown, and so that was really handy. So that was great. But at the same time, if I'm going there on holiday, you know, you can walk around in board shorts and flip flops. And that's part of the reason that I'm wearing a polo shirt today and sitting at home, you know, with a picture of a monkey behind me because, you know, I knew that Paul would be cool with that.

Mark Dunford (00:07:09) - And it's very on brand for Rove. And I think that's really important for, you know, that kind of affordable lifestyle market. Um, yeah, just just kind of fun, funky and affordable.

Matthew Weihs (00:07:23) - Yeah, That's why I wore my Africa shirt today and as well. And actually I'm going to pornos, I'm going to stay for the first time in a row of next week, so I'll be able to report back as well on that. So looking forward to it. Um, and to Mark again, I guess then, what are you seeing about the adoption of Affordable lifestyle in Africa? Has it already started? And if it has, where are some of the good examples?

Mark Dunford (00:07:57) - It has. It's it's really still quite nascent. And it started really in the fab space. So we saw a lot of. Younger expats coming into these markets, being seconded to, you know, markets in Africa for six months, three months, some of them for a year or two. And they wanted places that they could go and work.

Mark Dunford (00:08:19) - They didn't you know, they weren't going to rent an office. They didn't necessarily want to work from home the whole time. So they wanted to go to a cafe and sit there and, you know, have some have a chilled environment where they had good Internet and do some work. And that's where it kind of started. And then I think also the growth of a of a middle class in a lot of sub-Saharan Africa has led to this kind of demand from. Local domestic tourists to look for things to do in places to go and spend their money without having the additional cost of international flight and potentially the forex issue, right? So if you're earning and shit, you can go and spend in shillings or if you're earning a local currency, you can spend local currency. So that then started. We've seen that, you know, brands like Onomah across Africa, they've come in in that space, but they are still very much or, you know, most of their properties are more kind of corporate, I would say, rather than true leisure properties.

Mark Dunford (00:09:17) - You know, the same here in Nairobi. There's, you know, there's a lot of standalone examples in South Africa. There's Social House here in Nairobi that's been very successful. But again, more city hotels rather than leisure properties. And what's happening is a huge demand for leisure from these digital nomads, from, you know, these young expats and also from the domestic middle class, young middle class. And at the moment, that gap is being filled by very small standalone properties that are owned and operated by, you know, an individual or two or Airbnbs. To an extent this because here Airbnbs typically come with if you go and rent a big house on the coast, it'll come with staff usually because we're in Kenya. So it's it's actually a pretty fine line between luxury and and not luxury. You know, they're very simple, but they're very spacious and, you know, they're on the beach and you have a team of people who will cook for you and clean and stuff. And so for a pretty reasonable price, if you go down with a group of friends, there's there's there's a lot of houses out there that people rent and even smaller ones, some some one beds and two beds that are on Airbnb.

Mark Dunford (00:10:28) - But there is certainly a huge demand and product like, you know, what Rove did at La Mer, which I found really fascinating. And actually it was the first time I met Paul was mayor, is, is, you know, it's really targeted at the leisure traveler. You can still stay there if you're a corporate, but it is a leisure property. And that sort of property just doesn't exist in Kenya or along the East African coast anyway. There's very few small, you know, ten room, even less type funky properties on the coast. But there's nothing that's, you know, a decent size that's still affordable fun and kind of caters to that market of young, young travellers, young expats and domestics. So there's there's not a lot that's happened in that space. You have the legacies of this world and stuff. Again, more corporate, as in more city focused, even though they are more. Chilled out and fun on a mo, like I said but and you know Radisson red to an extent but they haven't really made a dent into the African market of any Africa, really.

Mark Dunford (00:11:34) - So, you know, there's this massive gap and think that's a sweet spot.

Matthew Weihs (00:11:41) - Thank you. And. Marks give you some of the drivers there, I think, Paul. But, you know, Rove has been hugely successful in the UAE. UAE. Why do you think now is the time for it to move into the African market? And why do you think it's such an attractive proposition for Africa? I mean, Marc talks about the sort of lack of but why, you know, you could concentrate on the UAE and do very, very well there. So what's driving this thinking?

*Paul Bridger * (00:12:16) - So I think there's two things. One is we have to be ready as an organization. So, you know, we've been focused on getting our product. We're owners and operators. So we've been focused on getting our product right, getting, you know, getting a substantial entity in the UAE to allow us to then, you know, go overseas. We, you know, particularly if we're going to be in partnerships with others, we want to make sure that we've really nailed the product service, culture, the brand, etcetera, etcetera.

*Paul Bridger * (00:12:43) - You don't want to have learnings on other people's dollar, as they say. And then I think all the things that Mark mentioned around the kind of demographics just in this region, you know, the whole region in general, the demographics of the growing middle class of, you know, that that time of everybody wants to own the best luxury hotel is still happening and has happened. But I think now also investors are very savvy to actually these kind of hotels can give you some amazing returns and they don't have to be a boring proposition, which I think in the past there was probably quite you know, it was it was a less exciting, let's say, proposition to have a midscale Upper Midscale hotel.

Mark Dunford (00:13:32) - Yeah, I think so.

*Paul Bridger * (00:13:33) - The supply demand. Both.

Mark Dunford (00:13:37) - We thought we were talking to each other. I was. I was just going to say, I think that investment piece is really important as well. You know, and the the difference, the demographic that's going to stay at a, you know, a funky, fun, affordable property is not as fickle as your five star luxury traveler who's flying in from overseas.

Mark Dunford (00:13:58) - Right. Because a lot of the time your your your audience is domestic or at least regional. Yes. You'll get international people staying with you as well. But if there is an issue or at least the perception of an issue internationally, your luxury travelers just don't come. We've seen that volatility in the five star market, particularly in some of the camps and resorts. As soon as there's a you know, the word Ebola is said, no matter where it's in relation to or any kind of attack or anything like that, even if it's not in the same country, you just see that that high end market just dry up. Whereas even during Covid, in fact, a lot of these hotels, you know, Tamarind tree and Social House here in Nairobi, they did extremely well during Covid. There was a lot of people.

Matthew Weihs (00:14:43) - Proof and being a lot of time.

Mark Dunford (00:14:46) - And also people wanting staycations. And I know that in the UAE, a lot of hotels did quite well and Russell Hayman did very well out of the Dubai market going down there during Covid.

Mark Dunford (00:14:56) - So just having that captive audience in times when when things get a bit tough is really important because it gives you a little bit more stability. So, you know, it really is the right demographic. And it it means that, you know, your returns are a little bit more consistent and your costs aren't as high, right? The cost of running a five star hotel are pretty expensive if you're importing lots of stuff. Um.

Matthew Weihs (00:15:19) - What are the ambitions then pull for? It's interesting.

*Paul Bridger * (00:15:22) - You. So it's interesting, too, that in the UAE, obviously our parent companies have a lot of luxury hotels and we're almost without fail. Every single one of them closed during during Covid. And I got the call saying, you guys are still open, What's going on? And I'm like, well, we're going to be profitable in all of our hotels, so why would I close? And there you go. It was to the point that people didn't believe me. They didn't believe it. Like, we don't believe you forecast almost.

*Paul Bridger * (00:15:52) - Um, and then month on month went by and we're still kind of okay, we're not making the same margins we were in 2019, but we're still having a black number at the end of the month. And I think, as you say, that shows some resilience and adaptability in both this kind of brand, but also this kind of upper midscale midscale market.

Mark Dunford (00:16:15) - Mm. Exactly.

Matthew Weihs (00:16:19) - What are the ambitions then for Rove within Africa? Do you have any specific markets? Are you looking for a number of hotels, rooms? What what's what would you say the success would look like in five years?

*Paul Bridger * (00:16:35) - So mean. We're very early on the journey. Uh, as I said, we only kind of decided to start this year that we kind of wanted to get into new markets. I think our focus is very much in North Africa, um, because they're, you know, both closer to home and arguably easier to do business. Um, and I think the key for us is that we have the right partners.

*Paul Bridger * (00:17:00) - Of course, location, location, location. But having the right partners to work with is very important for us. And so we're, we're in a hurry that say to to get into these markets think you know right location right partner right model would be the kind of way forward.

Matthew Weihs (00:17:21) - So onto a. As Mark says, he's a bit of a veteran with with the event but Paul welcome. For the first time you'll both be talking on the agenda with different subjects and actually Mark you'll be oh look at that. What a good promotion. Good man. I'm surprised you didn't when he.

*Paul Bridger * (00:17:44) - In the back for the run.

Matthew Weihs (00:17:48) - And that's good. That's. That's good to see. So one of the things that we've launched this year, actually well, my colleague John Howell Dev has launched is a real estate airport real estate discussion, which links both the hospitality, of course. Look, he's got his avion dev t shirt as well. Basically what Mark is proving is that he only comes to our events for the actual running shirts.

Matthew Weihs (00:18:17) - So, you know, but feel free if this is exactly what drives you to a conference to come, because we do do charity runs and those charity runs raise money for local local charities. And it's also a great way to network. So feel free to do that as a bit of a promotion. But yeah, look, you're taking on the sort of hybrid role there in in airport real estate. And it seems to me I'm no no expert on the real estate side and certainly airports. But it seems to me as if this is quite a new awareness of what to do within airport real estate. And airport authorities are trying to suss out what they can do with their infrastructure. You're talking on raising capital, but have you seen this as a sort of new trend from from airport authorities and such?

Mark Dunford (00:19:18) - So to me. Awesome. Yeah. Look, I think. In Africa, particularly a lot of airports. And we had that problem in Kenya for a long time. Are. Hard to get to.

Mark Dunford (00:19:32) - There's an uncertainty in a stress factor related to traveling because, you know, if you're not within striking distance of the airport, you might miss your flight. Traffic could happen. You know, the road could could flood or whatever it is. Right. And we saw as a result of that, a couple of hotels pop up in airport locations across the continent that were, you know, providing that comfort that I don't necessarily need to only stay in town and then leave five hours early for my flight. I can stay at the airport and then just fall out of bed and go go to the terminal, at least on the last night of my stay or the first night of my stay, or if I'm transiting and even if I'm just coming in for a day or two of meetings, I can go and stay at the airport with. That is the additional security of the airport cordon the convenience of the fact that you're right next to the plane so you're not going to miss anything so that there was a lot of drive for that.

Mark Dunford (00:20:24) - I mean, in terms of the broader real estate piece. You know, airport authorities in the rest of the world, or at least the developed markets of the world, have understood that there's a lot of money that can be made there from logistics. You know, there's a lot of cargo that goes through airports. There's a lot of distribution. There's also, you know, particularly from this part of the world, there's a lot of agri produce that goes out. So there's cold storage opportunities and things like that. And then as part of that ecosystem, you need hotels, right? So there's, you know, aside from air crew, there's all the people associated with those different businesses that are within the airport district as well as the transit tourists and all of that. So it's it's a good way for airports to reduce their costs to airlines because, you know, a lot of these airports rely heavily on taxing airlines for coming to them, which, you know, a big problem across Africa has been airlift.

Mark Dunford (00:21:18) - And if you are really expensive destination to fly to, then airlines. Oh, you can be prohibitive to airlines to fly in. And there's been a certain amount of protectionism as well from some of these governments to protect their domestic airlines. If they had a diversified income stream from, you know, better utilized real estate, that wouldn't be there wouldn't be as much pressure, particularly if you've got government owned airlines and government owned airports. So, you know, then the money's just going to come in from somewhere else. And you can then, you know, loosen up a little bit on some other foreign airlines coming in and just increase traffic into your airport. So we're very early in that journey, a bit like Paul and his journey of discovering Africa. We're very early as real estate people in Africa. You know, I'm excluding South Africa because they've already got pretty sophisticated airport real estate. But, you know, here in the rest of sub-Sahara, we're pretty early on that journey. But it is I think the eyes of the governments are starting to open and they're starting to appreciate that there's a lot of potential income that can come from developing plans and developing those ecosystems properly.

Matthew Weihs (00:22:23) - I'm really looking forward to that as part of the the agenda actually, because it's so new to to us to discuss. So thanks for taking part in that. Paul, finally, you know, final question over to you then, is that you're talking on cutting costs and strategies for reducing those operating costs, I suppose. Simple. You know, you talked about it earlier, it was $100. It's now 150. We've had this huge inflation pressure. But, you know, I don't know if it was sort of exacerbated by the Covid or is going to happen anyway. But even so, we're in this situation. It's got to be a top topic for owners. What can be done?

*Paul Bridger * (00:23:13) - Well, the only thing the only thing I'll say on this subject is cutting costs can be a bit emotive. I think controlling costs is probably the way of looking at it. Yeah. I mean, interestingly, if I look across that in the UAE, we aside from some team staff cos we've been quite smart, we actually are similar if not, if not below 2019 in terms of our operating costs.

*Paul Bridger * (00:23:43) - And so I'm looking forward to the to the discussion on this one. I think, you know, I think what you have to be careful of in in hotels is you don't want to cut something that the guest is going to notice. Right. You don't you don't want to you don't want to do something that has an impact on your brand or the guest experience, because eventually you'll be further down the line. Um, I think, you know, sustainability is a great opportunity to look at your, your costs and look at, you know, investing up front to, to kind of reduce long term costs. Um, back office and front of house and I think, yeah, being a bit smarter scale bigger hotels and scale gives you some advantage there as well. But overall think yeah, smart management over short term decision making is generally the way forward.

Matthew Weihs (00:24:39) - Well, thank you. And thank you both for joining today for this short podcast. I look forward to seeing obviously Rove next week from the first time and I will be reporting back.

Matthew Weihs (00:24:51) - And secondly, in a couple of weeks in Kenya. I cannot wait. It's been four years since I've been back, so looking forward to it. Thanks, guys, and best of luck and look forward to seeing you.

*Paul Bridger * (00:25:06) - Thanks, Matt.

Mark Dunford (00:25:07) - Thanks a lot for having you down here.