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Ennismore, operator of the Hoxton hotel chain, is betting on growth in the Middle East and the Americas after warning that developing hotels in Europe is becoming “challenging”.
The company, which is backed by hotel group Accor, operates more than 37,000 rooms in over 170 hotels worldwide and plans to add another 27,000 rooms over the next few years, and owns 17 hotel and restaurant brands, including Mondrian.
The Middle East, which currently accounts for 43% of room numbers, will account for the majority of this growth (70%), while the Americas, which currently accounts for less than a fifth of the total, is expected to see a 61% increase in room numbers.
In Europe, 13,000 new rooms are expected to be added, roughly one-third of the current total, representing an increase of roughly 35%.
“Europe in general is much more challenging than other regions,” Sharan Pasricha, founder and co-chief executive of Ennismore, told the Financial Times.
The group, which already has offices in New York and Dubai, has further expanded in the region, setting up new teams in Cancun and Riyadh earlier this year.
Pasricha, the son-in-law of Indian billionaire businessman Sunil Bharti Mittal, added that Ennismore has “smaller assets in Europe which can take longer to develop than other regions and other jurisdictions, whereas assets in the Middle East and the Americas are much larger, are developing much faster and also have strong feeder markets.”
Ennismore, which also operates the Gleneagles resort in Scotland, does not own any hotels, instead partnering with “sovereign wealth funds, family offices and high net worth individuals”. [and] “Property developers can use their own brand to manage the properties,” Pasricha said.
In June, the company announced it would take over management of Our Habitas, a wellness and experience-focused hotel company that operates 10 resorts in locations including Tulum, Mexico, and the AlUla Oasis in Saudi Arabia.
Co-chief executive Gaurav Bhushan said the Ennismore operation should enable Our Habitas to “add 20 to 30 new properties over the next few years, primarily in these areas”.
Ennismore merged with Accor Brands in 2021 to form a joint venture in which Accor took a majority stake. Ennismore is now also backed by a Qatari consortium, which acquired a nearly 11% stake from Accor the following year, valuing the company at more than €2 billion.
Accor does not disclose Ennismore’s financial performance. Asked whether Ennismore needed more capital to expand, Pasricha said: “Our business is asset light so it is very cash generative. The business is profitable so we don’t need capital to run the business.”
Hotel chains around the world are looking for ways to expand to capture surging tourist demand, but growth in the number of room numbers has been slow.
Zach Demuth, global head of hotel research at property group JLL, said the number of rooms under construction was down about 8.5% from its 2019 peak due to rising costs, continued supply chain disruptions and a lack of land. He added that Europe was also being affected by labour shortages and long times to planning permission.
According to JLL, global hotel supply is expected to grow by just 2.4% on average over the next five years, down significantly from the long-term average of 4.2%.
The Middle East is one of the few regions where hotel development is accelerating, thanks to an abundance of capital and labor. The Saudi Arabian government has raised its goal of attracting 150 million tourists by the end of the decade, using the kingdom’s more than $900 billion Public Investment Fund to develop new destinations such as AlUla and the futuristic city of Neom.
“The amount of money being spent to create tourism demand is staggering,” Demuth said.
In the Americas, Bhushan said the company will focus particularly on Mexico and the Caribbean to “capture the U.S. customer” with all-inclusive luxury hotels. In November, the company plans to open SLS Playa Mujeres Cancun, the region’s first all-inclusive resort.
The region is seeing tourism growth, fueled by American visitors: Juan Pedro Saenz Diez, CBRE’s head of hotels for Mexico and the Caribbean, said U.S. tourism to Mexico and the Caribbean has exceeded pre-pandemic levels and the company expects “strong consumer interest in the region.”
Tulum’s new airport and the newly opened Mayan train are “poised to support incremental growth for years to come,” he added.
