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"Push yourself, take responsibility and do not be afraid to try"

Interview - September 26, 2013
Management at the group behind the hospitality sector's game-changing Yotel micro-hotel concept, IFA Hotels & Resorts, encourages Kuwaiti youth to act on their entrepreneurial instincts to further expand the nation's private sector. Speaking to World Report, Chairman & Group CEO of IFA Hotels & Resorts Talal Al-Bahar also urges international investors to take a broader look of Kuwait beyond its petroleum industry
In a recent interview with Americana, Mr Al-Kharafi stated that investment in the Arab world is the most secure and the best. However, the so-called Arab Spring in a way has damaged the image of the region. In your experience, would you still agree that now is the best time to invest?

It is. With every investment you have to weigh the security and the risk. I think there is a risk in everything you do. If you look at Dubai, Saudi, Kuwait, Qatar and the rest of the GCC, it is stable. If you look at the other countries, they have their ups and downs, but I think it is a good opportunity. I think our demographic and purchasing power is one of the best in the world.

Looking at the rating of the country’s financial stability as well, these are all pluses. But, of course, there are negatives, including barriers to entry and instability regarding political issues. This region will always be up and down – it comes with our history. But overall, I agree with that comment. 

It is no secret that Kuwait has been blessed with natural resources, handling over 10% of the world’s oil reserves. However, some people have referred to this blessing as a threat or even a curse, because it has made the country too dependent on oil. There have been long talks about a National Development Plan, but things have not moved as fast as they were expected to. In your view, what steps should be taken in order for Kuwait to realise its full potential and achieve true diversification away from oil?

I would say firstly, it is definitely a blessing for our country and its people, because they are living one of the best lifestyles compared to other countries around the world. I think we are in the top tier, if not the top 5% compared to the rest of the world, and we are thankful for that.

There is a huge challenge with our government. In my view, our government is not doing the job it should be doing regarding developing the private sector and expediting and building upon the non-oil related sectors. Right now, I think close to 90% is oil and oil-related and over 85% of the population is working in government. This is not a capitalist country and we are still dependent on oil.

What do you think should be done to expand the private sector and grow the other sectors away from oil?

There should be privatisation and an initiative for the country (a 20 or 50-year plan) in the sectors we want to grow and invest in. You might lose money the first 10 years, but still it is building job opportunities and a career path for young Kuwaitis. Today we do not have that – there is no vision or leadership to do that.

Kuwait was ranked by the World Economic Forum as the fourth most unfriendly country in terms of receiving tourists and expats. At the same time, the competitiveness of its hospitality industry lies at the bottom of the list of Middle Eastern and North African countries. What do you think should be done in order to improve this unfriendly perception and expand Kuwait’s tourism and leisure industry?
We should start by welcoming and inviting foreign investment. We should have a simple process of investing and establishing companies. This is improving with the youth ministers we see nowadays, but from a strategic point of view, it is still not there. They are putting in a few structures to help with the process, but we will see how it will work. We are trying, but we are still far away from having a proper structure. 
Regarding tourism, I think we will always be in the specialised tourism sector, so it is going to be a regional opportunity. Our facilities and hotels in Kuwait are specifically structured for business tourism more than anything else. I think we will never be a Dubai or even Qatar. Dubai has the perfect model for growing and building the hotel industry: they have all the complementary parts, such as the right airlines, the right distribution and infrastructure, and attractions. It is built for that. I think Kuwait’s vision is a little bit different, but we are not implementing that vision, whereas in Dubai they are.
Unfortunately here, when you are secure and you do not have someone pushing you, you become relaxed. This is what the environment in Kuwait is like.

Many people complain that Kuwait is not moving forward due to the country’s democratic model that is actually delaying the nation’s development. But I believe that democracy is a long-term benefit for Kuwait.

Democracy is always there, which is something good. We really cherish this as Kuwaitis. The country is evolving, hopefully for the better, but this has nothing to do with how Kuwait is progressing or not. What drives Kuwait towards progress and to achieving its goals is the Government; but leadership, implementation and accountability are not there.

Jassim Al-Kharafi, former speaker of the National Assembly, stated in our recent interview that Kuwait should establish a Disneyland for the region, to increase tourism in the country. At the moment, people are travelling elsewhere and spending their money abroad. Do you think that if the leisure industry was further developed, money would stay in the country? 

There are a lot of options and ideas. But we have a bigger problem. I think Kuwait needs to create jobs for Kuwaitis and young people within the private and government sector, and not give out jobs just for the sake of employing people. We have to create jobs for the future of the country and to develop people’s careers. I am not sure about the numbers, but on average for the next 10 to 15 years between 10 to 115,000 graduates will be flooding the market each year. If you look at this and compare it to the existing job opportunities we have, that is 50 to 60 per cent of employed Kuwaitis in the sector right now.

Of course, people will retire, but there is no way you can create that number of jobs. Today we have a lot of jobs that are not actual jobs – we are just employing people for the sake of it. That is a bigger problem. That is a problem with the vision of our country – not of the sector. It needs leadership and proper study and building blocks or it will never be resolved. 

You are an expert in both the Kuwaiti and British markets, thanks to many projects such as the Yotel brand. The bond between both countries has been strong for more than 230 years, and this year is the 60th anniversary of the Kuwait investment office in London. A Kuwait-UK Business Council was also recently established in London, so a lot of things are going on to strengthen these bilateral relations. What is the value that the UK can bring to Kuwait in terms of profitability and business opportunities?

The UK has been very close to Kuwait for many years now. We have been under UK rule in the past and became independent in the 1960s, but the relationship continued. We see a lot of history and close relationships between Kuwait and the UK and you can see that from the number of visitors per year. You can see it by just walking into the supermarket and seeing UK products and brands all over Kuwait. That relationship is developing and will continue to do so. It has been good and will continue to be. 
A lot of investments are going over to the UK. Our Group invested in four properties in the UK at the beginning of the year – we have two Yotel hotels in Heathrow and Gatwick Airport, and we are continuing to invest in the Yotel brand. We are going to have two announcements in the UK soon. It is still confidential, but it will be soon. We like the UK market. The UK is a big client and an important market for us.

You mentioned that a lot of Kuwaiti investment goes to the UK.  It is a fact that a lot of Kuwaitis call London their second home. What can Kuwait do to bring investment from the UK to Kuwait?

Unfortunately, Kuwait has not stimulated foreign investment properly. My late father created the offset program. In the beginning after the invasion of Iraq and the liberation of Kuwait, the KIIC, one of the Group’s companies, presented the late Emir with the offset program that was tailored to Kuwait. Unfortunately it was not implemented correctly in this country, although it was implemented the right way in a lot of other countries in the region.

I see the offset program as maybe one of the best tools for this region to allow foreign countries to benefit from purchasing in this area and reinvesting in the country. There are not a lot of opportunities for the private sector here, and the Kuwaiti private sector is dying for them. So it will not be as competitive or enticing for someone from the UK and Europe to invest in the region here, while the local markets and companies are grabbing any opportunities that come up.

IFA Hotels & Resorts has taken Kuwait global, across three continents already and currently further expanding. What are the company’s priorities for 2013-2014?
This year we are continuing to deliver our commitment to our clients. We have one project remaining that we have not delivered, which is expected next year, and we are launching two new projects in the Dubai market. We are waiting for the market to stabilise. We have another project in the pipeline in Lebanon as well. We are prioritising hotels – this is an area in which we want to expand. We signed our first management contract in Singapore for Yotel, and we signed another major airport in Europe that will hopefully be announced in the coming weeks. We are pushing very hard to expand our hotel brand globally.
We are also establishing a new dedicated company in the timeshare field, with a vacation ownership program, which could be expanded. We are continuing to develop our platforms. These are our priorities for the next couple of years. 
What would you say are IFA Hotels & Resorts’ competitive advantages? What makes it unique compared to other similar companies?

There are not a lot of similar companies, because we cover a lot of different aspects of the real estate sector. We are into vacation ownership, timeshare, freehold, and luxury and affordable hotels. We focus more on emerging markets. We have a great team of employees, and I think that stands us in good stead against the rest.
What would you say is IFA Hotels & Resorts’ role in stimulating and contributing to the socioeconomic development of Kuwait?
To tell you the truth, we are supporting new laws. We are helping draft new laws through which we are trying to create opportunities. Whenever we see opportunities, we like to work with the Government to enhance participation in the private sector. Whenever we have an opportunity to participate, we participate.
Steve Jobs once said that innovation is what differentiates a leader from a follower. You have certainly innovated, and what’s more, revolutionised the face of leisure and hotels with the Yotel brand. Some people call it the ‘iPod of hotels’. How did you come up with the concept?
The hotel came from a company in our group – an investment company called Univest Group. They met the CEO and the founder of the hotel, Gerard Green, who showed them the opportunity. He had an idea, which he presented to us, and we looked into the possibility of it. It is a game-changer; it is not like any other hotel, so we invested in it.

We kept investing and pushing its growth, and it worked. It is about changing the concept of a typical hotel, and having an affordable luxury concept and being flexible in terms of its location. That gives us an edge. The concept started with Gerard and his partner, the founder of the Yotel brand. They came up with a design model for the room, which was built around the concept of the Japanese capsule, and added a first-class

British Airways cabin concept to it to ensure everything fit into the right place. That’s how it all started. We have invested in the team and the company. I think our biggest game changer was two years ago when we opened up our Times Square hotel, which is a 669-room hotel. It was the largest hotel opening in New York over the past two years. It is a $350-million hotel that opened during the financial crisis, and has performed amazingly well. We are building on that. Like I said, it is a game-changer.
What would you say defines Kuwait and makes it authentic?

Its people and relationships between people. This is the only place where you will see the Dewaniya concept, where society is very close. I would say that this is what makes a difference. It is like a big family in a way.

How would you describe the Kuwaiti youth, and what resources should the private and public sectors give them so they can develop both personally and professionally to develop Kuwait?

We have got some great entrepreneurs. There is an exhibition that takes place every year, called ‘Proud to be Kuwaiti’. It shows you the young people’s aspirations and entrepreneurship and how they think. You see some nice stories in Kuwait. If you give them the opportunity to do so, they will shine. Some of them will take those opportunities themselves and will take the risk of establishing a business.

Others do not have the means to do it, or maybe they are afraid to move forward. We can do a lot in this regard. I hope we will have more opportunities to support young people and their development in the private and public sector.

What message would you like to send to motivate and even invite the young leaders to be more active in the development of Kuwait?

Push yourself, take responsibility and do not be afraid to try.  

What achievement are you most proud of, and what drives you today?

My late father started IFA Hotels & Resorts when we took over IFA. He set the vision of it and I was fortunate that he gave me responsibility from a very early age. Before IFA Hotels & Resorts, I was in charge of an investment company. I think I was in my 20s. Then I took charge of IFA Hotels & Resorts in 2006, if I am not mistaken.

We kept developing and delivering our promises to clients and we handed over projects and expanded the company. We went through a tough patch with the financial crisis, especially as we are in the emerging countries etc. But we are pushing back to growth now, and it is looking good.
I think I am proud of how we stuck together as a team, and passed the tough financial crisis that occurred in Kuwait and in the region. We have got a lot of work ahead of us – it is just the start. We are still not satisfied.