International travel to Pakistan has plummeted, and domestic tourism has not been able to make up the slack, but the country’s largest hospitality company is pushing ahead with its expansion plans, focusing on opening up its budget hotel franchise in more locations.
Hotel One, a medium-priced hotel chain, is owned by the Hashoo Group, a diversified conglomerate that owns, among many other businesses, the Pearl Continental Hotel chain and the franchise for Marriott Hotels in Pakistan. The Hashoo Group’s hospitality holdings are the largest in the country and the conglomerate owned by Sadruddin Hashwani appears to have no plans of slowing down its growth.
“We have been in this business for decades. We have to keep expanding,” said Haseeb Gardezi, CEO of Hotel One, in an exclusive interview with The Express Tribune.
Hotel One offers a slightly stripped-down version of the quality of services offered by Hashoo Group’s better known chains, but at a drastically reduced price. “Not every city is ready for a Pearl Continental or a Marriott, so we are trying to capture those markets with Hotel One,” said Gardezi. “Our prices are up to 50% lower than the bigger brands.”
The budget hotel chain started in 2008, just as the global economic crisis began to pick up steam. Since then, it has expanded to nine hotels in five cities: three in Lahore, two in Islamabad, and one each in Faisalabad, Sailkot, Multan and Bahawalpur. Not all of the hotels are owned and operated by the Hashoo Group: Hotel One operates on a franchising model, partnering with business groups in most of its locations.
By the end of 2013, Hotel One wants to open up hotels in six more locations, including Murree, Gujranwala, Abbottabad, Karachi and Rahimyar Khan. By 2015, it hopes to have at least 50 franchises in cities all across the country.
The challenge of running a hotel chain in Pakistan is compounded by the fact that international tourism – never a particularly large number – has virtually dried up. Domestic tourism has not been able to keep pace with that decline. “Our industry has been particularly hurt by the ban on Basant (spring kite-flying festival) and the lack of international cricket in Pakistan,” said Gardezi.
Fortunately for the hotel industry, demand from the corporate sector is picking up pace as Corporate Pakistan rapidly expands its footprint across the country. Hotel One and other Hashoo Group hotels are capitalising on that opportunity.
“We are establishing our [Hotel One] units in more cities now since multinationals and large domestic companies need to provide accommodation to employees and executives travelling across the country,” said Gardezi. “In the larger cities, people often travel for conferences, seminars, training sessions, etc.”
This shift in consumer profile is slowly helping the hotel industry build back its revenues and profitability. Of the Hashoo Group’s several holdings in the hospitality industry, only the Pearl Continental Hotel is publicly listed on the Karachi Stock Exchange, listed as Pakistan Services Ltd. In the three quarters that ended on March 31, 2012, the company saw its revenues 9.3% to Rs4.1 billion. Profits were up 12% to Rs600 million during that period.
The company appears to be on track to come close to its all-time high profits of Rs751 million, which it achieved in financial year 2006. Pakistan Services’ financial year ends on June 30.
The one consequence of relying more on corporate clients, however, is reduced margins. Most corporate clients never pay the rack rate and have negotiated contracts that offer them steep discounts. This helps the hotels keep their revenues stable, but hits their profit margins. In 2011, Pakistan Services earned a profit margin of 13.3%, far below the 18.1% it earned when it had its peak profits in 2006.
Published in The Express Tribune, August 5th, 2012.