Rotana Hotels investing $500m on 3-star brands

The first property is due to open within two years, with a five-year plan to operate 25 complexes across the Middle East. Three agreements have been already secured, in Abu Dhabi and Dubai. All the hotels will be managed by the group itself.

Called Centro, the new chain will target at the budget-conscious business traveller, said Rotana's president and CEO, Selim El Zyr. He said: "Business travel and accommodation for the budget conscious executive is an increasingly important market in the Middle East but remains grossly under-serviced. The Centro concept is specifically designed to cater to this rapidly expanding market."

The Centro hotel is an "Essential Service" hotel brand, said El Zyr, designed to appeal to large corporate entities, small and medium business owners as well as individual travellers.

"We are redefining the conventional concept of economical comfort and offering affordable superior class accommodation and hospitality."

The location of choice for a Centro property is at the heart of a business or commercial district, primarily in the major cities across the region.

The announcement comes only days after Khaleej Times published the findings of a report by HVS International that concluded: "We consider that significant opportunities exist in the emirate for the development of branded limited service (or three-star) hotels."

By 2007, however the hotel market may be looking somewhat different with competitors, such as Ibis from Novotel, Holiday Inn Express and Park Inn from Radisson also entering, or extending their reach in this hitherto untapped market. "The difference is that these are cookie-cutter products and we are not," said Rotana chairman Nasser Al Nowais. "We will be a budget hotel with elements of five star."

In the UAE the daily room rate will be priced between Dh250 and Dh300. Bookings must be made online and there will be no seasonal pricing, he said. "We want to sell the product at one rate across the board."

Centro's unique selling point, Nowais said, is that each room will provide guests with contemporary design, leading-edge technology and excellent value. Investors will gain from the Centro formula, which includes a lower build cost than is traditionally the case with hotels, lower levels of staffing because of the emphasis on hiring young, dynamic and multi-skilled staff and a niche product, by receiving a superior return on investment, said Nowais.

Nowais estimated the build cost of a typical five-star hotel room to be between $250,000 to $300,000 while he estimated the build cost of a Centro hotel room, fitted out, to be between $50,000 to $70,000. The company is promising investors a return on investment (ROI) of between 15 per cent to 20 per cent although he said ROI could be as high as 25 per cent in Kuwait and the UAE. "A 10 per cent ROI [for hotels] in the Gulf is common," he said.

Commenting on the Centro concept, consultant Monica Mascaros, at TRI Hospitality Consulting said: "I liked the concept. I think it is a nice product. But meeting the construction budget will be a challenge," she said, especially because the average construction cost for a mid-market hotel room in the region is between $80,000 and $90,000. "But if they pull it off, I would certainly stay at a Centro hotel," she said.