'Need more transparency in enforcing regulations' GM Operations, Hashoo Group

Jan Verduyn is the General Manager, Operations, at the Hashoo Group. In this role, Jan oversees the Marriott International and Pearl Continental (PC) hotel chains across Pakistan. He has previously served at top management positions for renowned global hotel groups in countries such as Belgium (his homeland), Cyprus, Egypt, Kenya, Kuwait, Sri Lanka, South Korea, Thailand, UAE, and Vietnam. BR Research recently sat down with Jan in Islamabad and had an extensive discussion on forces affecting the high-end hospitality segment and expansion opportunities. Selected excerpts are produced below:

BR Research: You have worked in a number of countries before serving in Pakistan. How has your experience been here so far? And how does this hospitality market differ from other markets where you have worked?

Jan Verduyn: Pakistan is the fifteenth country where I am working now. I developed a taste for the hospitality industry when I was young, working at a friends restaurant first, and then doing courses in hotel management, and so on. I have always been intrigued by different countries and different cultures, to learn new things. It made me go to different countries. My last position was working in Dubai, which is a different market compared to Pakistan and has no shortage of hotels.

There is much less competition and much less number of players in the high-end hospitality segment in Pakistan. And there is also much less demand. Demand and expansion go together. The hospitality industry has faced many challenges over the past few decades when it was left behind and did not encourage investors. The industry requires high investment and has a long-term investment horizon. You dont build a hotel for five years; you build it for twenty five years. The time is gone where hotels could pay back within five years. Now its a very competitive environment.

Tourism has really not taken off in Pakistan. The buying power of the domestic tourist is much less. Then the conference market also does not have a positive climate. The political climate and the visa regimes create a hurdle for the conference segment to take place in Pakistan. At this stage, the Chinese are coming in and there are opportunities there, but we have to keep up the momentum. There have been new hotels coming up, in cities like Karachi and Lahore.

BRR: Please take us through Hashoo Groups share in the market you are operating in.

JV: The Hashoo Group has been here for a long time. It sets the trends. The two Marriotts and the Pearl Continentals are the heritage of the forties and the fifties of the United States start of modern hotel industry. Most hotels then were family businesses but they became real businesses and turned around with the American way of business.

The largest of our groups hotels is PC Lahore with 600 rooms. This is followed by Marriott Islamabad with 288 rooms; PC Karachi, 286 rooms; Marriott Karachi, 217 rooms; PC Bhurban, 199 rooms; PC Peshawar, 145 rooms; PC Gwadar, 114 rooms; and PC Muzaffarabad, 100 rooms. The majority of our hotels are mid-sized hotels.

In the corporate sector, the Hashoo Group is the leader, without a doubt. But I can mention, there is no similar competition compared to some other cosmopolitan cities in the region, as there are currently only two or three major hotels in large cities like Karachi, Lahore, and Islamabad.

BRR: What are the Hashoo Groups expansion plans for new hospitality establishments?

JV: Our group is currently building three new hotels. There will be one in Hayatabad, Peshawar; one in Multan; and another in Mirpur. We are also looking at opportunities in the tourist resorts, such as the ski resort.

BRR: How about the medium-end guest houses and hotels, whose market seems to be growing?

JV: The middle class is growing, so there is going to be more demand for guest houses. But we cannot compare guest house with the real hotel industry. There will always be need for guest houses and smaller hotels, but they are not able to run on the same level as we do. Though they have smaller investment needs, they also provide smaller returns because they cannot provide the non-accommodation services such as conferences, restaurants, spa services, etc. to the level that the real hotels provide.

Then, smaller hotels and guest houses are a different kind of operation. Yes, boutique hotels of 30 and 40 rooms are there and they target a certain group of individuals who prefer this kind of accommodation. But having said so, they cannot provide, due to their small size, services like conferences and banquets.

BRR: How is your group preparing for CPEC?

JV: With regards to CPEC, we have two Chinese restaurants in our two properties in Karachi. We refurbished both of them last year. At Marriott Karachi, we have translated the guest directory in Chinese as well. Even the caf shop menu has Chinese menu. The Chinese prefer their green tea so now we are fitting our all executive floor rooms with special-safety kettles for offering Chinese tea. We are also bringing in Chinese-speaking staff. We also have Chinese chefs in some of our restaurants.

These are all small measures, but together, they are being taken to make the Chinese guests feel at home.

BRR: How different are the needs and demands of Chinese guests from, say, European or American visitors?

JV: The Chinese prefer to eat early. So we have ordered our GMs to open Chinese restaurants early in the evening, by 7pm. But it seems that the Chinese visitors are also getting westernized. So, the services that we have at our hotels, such as the gym, spa and the pool, are also availed by them.

BRR: What are the industrys occupancy rates these days?

JV: There have been no tremendous jumps in recent years. The growth is one percent to two percent, every year. Currently we are sitting at seventy percent occupancy rates. That creates acceptable returns, provided you have no more bank loans to pay off. Those who are building new hotels with bank loans; it is still very difficult for them. You have to be a hotelier to invest within the industry; the opportunist cannot survive because it is a long-term business which requires constant re-investment.

We have seen more Chinese visitors coming in to the country. But that has not resulted in a great jump in occupancies. The average stay for foreign visitors still remains two to three days. Its not that folks are coming in large numbers for holidays in Pakistan. If the infrastructure in cities and security climate create a visitor-friendly environment, then Pakistan has a lot to offer. Right now, business travelers are not taking an extra day off to stay for leisure.

BRR: Could that also be because hotels in Pakistan generally lack a tourism extension?

JV: How it works is this. The first tourist is the rucksack tourist. After the rucksack tourist arrives the adventure tourist. That is followed by the corporate conference and business tourist. And then you have the leisure travel. This is for international travel. To bring in the rucksack travelers, you need a climate of easy access and safety for them. This is still a problem at this stage.

Pakistan Travel Mart will take place in Karachi in November, and thats a great initiative. But it is a beginning. The government has to provide safety and efficient visas for tourists. Tourists generally look for a two-hour access circle of surrounding countries. That is also a problem. So lets not get over-enthusiastic that next year a big number of Chinese tourists will visit Pakistan.

BRR: What are the regulations at federal and provincial levels affecting hospitality industry? And what are some of the lacunas that need to be addressed?

JV: The governing bodies for regulating the hospitality industry in Pakistan are fragmented. Right now, much of it is ad hoc. There is one big shout one day, followed by some action; but two months later, there is some other priority.

Compliance and inspections have to be a regular process. It is difficult to close a hotel when it is already operating. Before a hotel opens, a thorough compliance of standards and criteria must be undertaken by the relevant authorities. This should be followed by regular inspections.

We would love to have more regulations applied to us, because it will separate us from the amateurs. But regulations have to be properly enforced. Five-star properties are always the first to be focused on, and it stops at that. The regulations must be applied uniformly, to everyone who is part of the hospitality value chain, such as suppliers of raw materials, transporters, etc.

We are enforcing our Marriott brand standards, which are away above existing regulations. We love the ISO standards and other standards because they assist us. If you ask me, we need more controls, more regulations, but also more openness and more transparency in enforcing those regulations. The regulations have to be on a federal level and they have to be well studied.

BRR: What are your KPIs? And what do you benchmark them against?

JV: Our KPIs have four blocks. One is the financial side, such as occupancy levels, average daily rate, gross profit per available room, revenue per available room, number of staff per occupied room, etc. Then there is guest satisfaction block, which looks at metrics like loyalty levels, guest satisfaction index, and net promoter scale. Another block is interior processes, with regard to how fast you achieve your capex, how fast the GMs are implementing new ideas, etc. Then we have the learning and growth block, which is mainly related to staff, training hours, staff satisfaction, staff turnover, etc.

We follow the brand standards of Marriott International for our Marriott Hotels. We follow similar standards for our PC Hotels. We monitor all those on a regular basis to achieve our objectives.

BRR: How do you view the skills availability for the hospitality industry in the market?

JV: Unfortunately, the hospitality industry is not deemed as glamorous in Pakistan, even though this industry is a big business that requires a lot of skills and understanding of marketing, product development, finance, law, supply-chain, etc. We provide about 100 dedicated training hours to each employee, and those sessions are conducted by outside trainers. The problem is that the skills shortage in the Gulf attracts a lot of our trained people with double and triple salaries.

BRR: How much exposed is the hospitality industry in Pakistan to seasonality?

JV: We are very dependent on events within the country. The moment something bad happens, bookings go down. A major blast happens and people either postpone or cancel their bookings. During the last week, after a series of terrorist attacks, we have had up to five million rupees of cancellations or postponements. On the same note, if the PSL Final takes place in Lahore, it will be good for business.

BRR: Are the three-hotel, five-star, and seven-star hotel ratings for real? We are curious as to who rates the hotels.

JV: Well, the six-star and seven-star hotels dont really exist. I can go and build an out-of-this-world and call it an eight-star hotel, because its nice to say. But every country has a certain classification. And not all criteria are updated by countries. They also differ across physical infrastructure and guest service feedback. Our guests are requested to fill questionnaires, because criticism is the food for champions. Based on their feedback, we look to improve ourselves.

BRR: What has been the most consistent complaint of your customers?

JV: People coming from the Gulf are not used to power cuts, so thats one issue. Then, Internet is a very talked-about issue, as customers require fully seamless broadband connectivity.

Then, expectations of guests in Pakistan, we feel, are still on a static price range. They do not really accept the fact that hotel business is like airline business: when there is big demand, rates go up, and vice versa. You could stay at a high-end hotel this week and pay more but stay again the following week and pay significantly less. We have to follow the market dynamics. We tell our customers to come after a week or two to avail better deals.

Concluded