Issue link: https://maltatoday.uberflip.com/i/475084
maltatoday, SUNDAY, 8 MARCH 2015 News 13 MATTHEW AGIUS PUT two leading hotel groups to- gether in a €50 million acquisition and what do you get? Deal of the century, no doubt, for the Island Ho- tels Group, which was acquired by Corinthia's investment arm, Inter- national Hotels Investment, in a €36 million cash acquisition and €9 mil- lion in new shares, bringing together the Zahra family's expertise with the Radisson franchise in Malta into the Corinthia's unique brand. But is Winston J. Zahra, who to- gether with his father Winston took on a very ambitious expansion of the Island Hotels Group with the Radis- son franchise, now selling off the family silver? "Not at all," he replied. "The group was built up over the last 27 years and in those years there have been differ- ent stages of development. To me this is the next stage for the group, an evolution into something bigger." Zahra believes that the end result is greater than the sum of its parts. "This was an opportunity that came about by a joint vision shared by IHI and ourselves and the logical solu- tion of bringing the assets, the man- agement expertise, and the teams of those groups together. "We are not your traditional family company. We started off as a family company but evolved into a publicly listed company and operated on a corporate level for many years, espe- cially after we went public." Today, both Corinthia and the Is- land Hotels Group are not just bring- ing together their asset base, but also bringing together expertise in the hospitality and catering trades that have made them household names in Malta. The Zahras, who own 73% of the Group, discussed the momentous decision at length inside the fam- ily. "We saw it was the right time to make this move. The conditions were right," Zahra said. As a result of the deal with Corin- thia, Island Hotels Group (IHG) will be a fully owned subsidiary of IHI, and Zahra expects it to be a seamless transition. "For all intents and purposes it's go- ing to be business as usual at an op- erational level. We're remaining in- volved in the company, as part of the transaction is in IHI stock. Secondly, I will be remaining fully involved in the company going forward as CEO of IHG. From a career perspective this is also a step forward, we're be- coming involved in a company that is bigger and accelerating the growth plan of the group by 10 to 15 years." Zahra says the chemistry was right between the two sides, sharing a vi- sion to have both their groups stand ide by side, especially in St Julian's. "The best way to make use of these assets is to consolidate and rather than consolidate one hotel, and it made much more sense to consoli- date everything that we had." Both hotels, the Raddison and the Corinthia San Gorg were built on public land granted to the two hotel groups at low prices by the govern- ment of the time, a sore point for critics who believe private industry got more than it bargained for in the 1990s. "The government leases land to a lot of hotels in Malta on very similar conditions. When the Radis- son and the San Gorg were built, the government of the day wanted to en- courage local entrepreneurs to invest in five-star hotels. Some people say that the land leases were favourable, but they tend to forget that these leases include obligations. These in- clude some very heavy investment." The result is a net gain for Malta, he says. "What one has to look at is not just the lease of the land but also the investment put into it, but the jobs created, how the property has cre- ated tourism numbers, and how we have created a five-star hotel product, which at the time were few and far between on the island. I don't think that the way the lease agreements are put together are anything to be ashamed of because they came with a number of onerous conditions and have given a return to the island." Zahra's belief in having public sup- port for private tourism enterprises ties in with his view of the national airline, Air Malta. "Its survival is extremely important for the tourism industry," he said. "Should we have it at all costs? No. Should we run it at the cost of mak- ing a loss every year? No. I think that some of the difficult decisions which had to be taken at Air Malta have al- ready been taken with the restructur- ing plan. There are others that still need to be taken and it is important that we bring Air Malta back to prof- itability." He noted for example Air Malta's losses of €16 million last year. "Hope- fully the drop in the price of oil will help with profitability and as stake- holders in the industry we need to be working together to ensure the solution to the airline's profitability is found and found as soon as pos- sible." The conversation moved to the re- cent terrorist attack on the Tripoli Corinthia. "Any attack like that should worry anyone who has an ounce of human- ity. The loss of life is tragic," said Zahra when asked whether the at- tacks were a cause of concern. But the commercial aspect was not, he said. "IHI has come from a situation where it was far more dependent on Libya in the past than it is today." An important factor in the business is the geographical spread of prof- its, he explained. "You could have a problem in one area, such as Libya, but this is compensated for by gains in other markets, such as Malta, London and Portugal, so the two are balancing each other out. This sup- ports the logic of what we're doing as a group. Today IHG is mainly Malta based, while Corinthia is spread in- ternationally." This also helps spread the risk posed by incidents in particular parts of the globe. "The world is what it is and there are always going to be these types of challenges. The im- portant thing is to have the correct geographical mix to counterbalance the effects." No discussion with a major tour- ism industry player would be com- plete without a question about the "quantity vs quality" debate. He was asked to weigh in with his take on the issue. "I don't think the two are intrinsi- cally separate," he replied, pointing to the number of visitors to the is- land last year – 1.7 million. "That is not in conflict with driving a quality tourism destination." He is particular in his choice of words. "Very often we hear the phrase 'quality tourists'. To me every tourist who comes to Malta is a qual- ity person. Let's not start talking about people in terms of quality. The difference is the price point that peo- ple are prepared to pay to experience our destination. There is nothing to stop us from driving quality in our destination – that comes from the environment to the quality of service and attractions, to the hotels that we have. "I believe that we can collectively drive a much higher level of quality than we do today and improve the experience of our visitors… the situ- ation improved in leaps and bounds from where it was 20 years ago. "Does that mean that the numbers will drop off? I don't believe so. If you have the right quality product and the right marketing behind it you can still achieve those numbers. We cannot put the chicken before the egg though. We have to get the product right and then the rest will follow." Zahra still has development per- mits on the Hal Ferh site to develop the area according to original plans for a low-lying expansion of his hotel site. The group is currently evaluat- ing when best to start the project, adding that he expects "to give some clarity to the market on this issue by the end of this year." With Island Hotels also comes the presence of Manchester United stal- warts Gary Neville and Ryan Giggs, with whom the group has "an excel- lent relationship" Zahra says, espe- cially Gary, who sits on the board of directors. "They had invested in IHG in 2009 when the company became a PLC, buying 3% each, and both re- main very active and involved going forward. They will effectively own a small number of IHI shares, in the same manner as the Zahra family will." So what does the future hold for Winston J. Zahra? He won't be rest- ing on his laurels, he says. "I'm 45 and I'm definitely not retiring at this age," he laughs. His immediate focus is to "drive results for IHG today in the years ahead". Indeed the man seems indefatiga- ble. "The scope of what I do is going to become bigger and I am going to remain immersed in the business, just like I've always been." magius@mediatoday.com.mt 'An evolution into something bigger' MOSTA – situated in a quaint location, a large house of character with lots of natural light, set on two floors with high ceilings, central courtyard, spacious garage, entrance hall, kitchen, living room, laundry room and spare toilet at ground floor level. At first floor level one finds three large double-bedrooms (circa 5.6m x 4m per bedroom), en-suite bathroom, separate main bathroom and study. This property is complemented by a second courtyard with four additional large rooms which can be converted into an extension to this already spacious property or a separate flatlet. - €435,000 freehold. Call on 99434606, no agents please. Island Hotels Group's CEO Winston J. Zahra says the conditions were just right for his family business to enter its next stage of evolution Winston J. Zahra - not selling the family silver