No man is an island
The Island Hotels Group is celebrating its 20th anniversary this year. Group managing director Winston Zahra Sr told Vanessa Macdonald he thinks the group will grow faster in the next 20 years but that he is looking forward to handing it over to the...
The Island Hotels Group is celebrating its 20th anniversary this year. Group managing director Winston Zahra Sr told Vanessa Macdonald he thinks the group will grow faster in the next 20 years but that he is looking forward to handing it over to the next generation.
The path of true business does not always run smooth. Winston Zahra Sr and Zaren Vassallo were not particularly upbeat in 1992. They were sipping a drink on a trans-Atlantic flight, on their way to a Radisson convention in Georgia but the point of their trip had been pretty much lost. They had approached Radisson after the government had given them a letter of intent for a site in St George's Bay which they thought would be ideal for a five-star hotel - which would need a brand. But at the last minute, the government gave it to a French company.
As they talked, the near-derelict Salina Bay Hotel cropped up in the conversation. Many people had been interested in it but the money was never put on the table.
"We decided to go for it," he said. "Just like that. And we did. We bought it from John Saliba in January 1993 and it was ready by March 1994 - two months ahead of schedule."
Looking at what is now the Island Hotels Group, it is hard to imagine that there were ever any setbacks - and that things did not just fall into their lap.
As he talks, you appreciate that what set him and his partner, Zaren Vassallo, apart was their refusal to get discouraged. They got the St George's site in the end, buying it from the French company - "paying for it through the nose", he said with a shrug. And he got the Radisson franchise too, a relationship that has since been extended to the Golden Sands Hotel.
Mr Zahra, now 67, started out in the tourism sector through Alpine, which he ran at the time with his brother Tony. In 1979, they became joint owners of the Riza Hotel with the Rizzo family but things did not work out and, in 1986, they were faced with the choice of buying out their partners - or selling out. They chose the latter. He was so bitter about having had to let go of his "baby" that he actually toyed with the idea of retiring.
He was approached by Mr Vassallo, whom he had befriended while the Vassallo Group was building the Riza. Mr Vassallo wanted him to be a consultant for the Bugibba Holiday Complex he had just built. Once Mr Zahra was back in the industry, his blood soon began to race and within years, they formed the Island Hotels Group - and extended the complex to 1,000 beds, still the largest on the island.
"I always get excited at the prospect of developing," he said.
The next step was decided when the two were standing together at a party one of them was throwing at home.
"We did a lot of entertaining at home and in those days we used Arrigo for our catering. But one time, Zaren and I were talking and wondering why we did not use our own staff and equipment from the BHC. And that was the start of Island Caterers," he chuckled.
It did not get off to a very auspicious start but his son Winston took it over when he completed his studies and, backed by a solid team, it had a "satisfactory" turnover of Lm100,000 in its first year. It has since grown to 20 times that.
The company went were no one had gone before - literally. Rather than focusing on local weddings at set venues, it went for conference travel, setting up tables under marquees at the most unexpected places.
"I guess we were instrumental in getting conference and incentive travel going as this was a very important service to offer groups. We always believed in CIT; in fact, I used to have a dedicated company in the UK, Conference Tours," he said.
His pride in the company is tangible - down to the details.
"We just did the August Moon Ball, which was very successful. It was one heck of a job feeding 850 people outdoors. Our pasta came out warm and al dente, which was excellent," he said.
The Coastline then came along, which fed naturally off the good relationship Mr Zahra had with tour operators through the BHC.
"We had a very good deal with Thompson, which guaranteed accommodation for about five years. These things don't happen by themselves. They happen because we had a good product, we ran it well and we maintained it in good condition," he said.
The St George's site was next - and being a five-star hotel, he preferred to franchise as a brand gives a crucial competitive edge, especially with CIT.
"The importance of branding is really felt if you are looking at a mix of business that includes conference and incentives. At that time, there was only the Hilton here - the Sheraton had closed. So we were among the first to appreciate the importance of franchising," he recalled.
"In fact, we are the only five-star properties to operate an international brand under franchise as opposed to having given the properties out to the brands to manage themselves."
The next challenge was the Casino. When the government put the Dragonara site up for grabs, he persuaded the main contenders to join forces rather than fight each other. The winning consortium brought together Island Hotels, the Westin, the Corinthia, Air Malta and Accor (which was entrusted with running it).
"We have 40 per cent market share, not bad when you consider that there are four casinos," he said.
However, he said there were no other sites of interest at present.
"There are none on offer. We wanted one at the Radisson Baypoint but the government would not allow it. The Casinò di Venezia? We don't believe in that site and what they were asking for it didn't make any sense," he added.
With that up and running, he was already looking around for the next challenge: the Golden Sands, which had to be up and running in time for CHOGM in November 2005. It was - even if the tarmac had barely cooled down.
It too was branded as a Radisson.
"There were two options: Either stick with the brand that we knew, or look for another one.
"The obvious option was to retain Radisson SAS as our brand for both hotels and it worked very well. You get a good deal because you have two properties rather than one.
"In branding there are two systems: franchising or management, where basically the developer passes the property on to an international name which runs the property. We felt we had sufficient resources to run the place ourselves, so we opted for the franchise system."
Mr Zahra is already letting go the reins. On his 60th birthday he gave sons Trevor and Winston Jr 20 per cent each of the holding company, TMC. He is convinced that it is in good hands.
"Like me, they have grown up with a sense that you should be friends with the people you do business with. They have the same yearning to develop that I did and I am convinced that the company will expand as much in the next 20 years as it did in the past 20 years - if not more."
As he begins to contemplate how he would spend his free time - his yacht and sports car beckon not far away - he does have some regrets. One is that he never managed to expand overseas.
Perhaps with this in mind, he admitted that there was one piece of unfinished business that he would like to complete before he retires: listing the company's equity on the Stock Exchange.
"I have been thinking about this for a long time and I would like to see it happen before I let go the reins completely. In the past 20 years, it has always been a struggle to find financing to expand.
"Obviously it requires a board decision but I think the company is now large enough to go on the Stock Exchange. It would be so much easier to raise fresh capital if you are a public company.
"I am not worried about the public scrutiny this would require. We are two partners so we have always had to be completely transparent, with good corporate governance. It does not worry me at all."
As he talks about the prospect of money on the table to spend, his eyes light up again - briefly.
"I am itching for another project but I don't think that there will be another one for me. I've done quite enough: I've developed five hotels in the past 25 years, which is a lot, and I think my time has come to an end. The urge to keep on developing is lower than the urge to start winding down."
Thoughts from above
On Bugibba...
"Over 40 per cent of bed nights are spent in Bugibba but it has unfortunately been neglected. It used to be a real mess and I led the Bugibba project to upgrade it, as well as helping George Micallef when he led another project. We actually went out ourselves to plant the trees on the road leading into Bugibba!
The Labour government updated the promenade but they stopped short of making the area a tourist zone.
The solution would be to take Bugibba away from the local council, which does not have the budget for what is needed, and to create a specific council, with enough money to do what is needed. It is not enough to have a promenade and public areas. You have to keep them clean and you have to enforce things like overflowing litter bins and kiosks that obstruct the area.
The first thing to be done is the roads. Once the roads are done properly, it immediately looks better. It is all about basics. You do not need to go mad."
On conference and incentive travel...
"In 1974, I had a company in the UK, Conference Tours. At that time there were only two hotels you could use: the Corinthia in Attard and the Verdala. The record for the largest conference was the Europa Forum, held in 1976 at the Verdala, which brought 1,700 delegates.
I think CIT is very important as it is very lucrative: Many other places are more expensive than Malta so we can afford to charge a realistic rate and still compete, while getting much more revenue. And the delegates have a full programme so there is a lot spent on catering, tours and so on.
From the very skimpy statistics that are kept it seems we are getting around 70,000 CIT delegates but I believe this figure could easily be doubled if there were more emphasis on marketing.
And it cannot all come from the government; hotels have also got to do their part. When I was chairman of the marketing directorate at the MTA, I got all the five-star properties together for collective advertising in various magazines and so on, and the results were excellent."
On low-cost airlines...
"I was recently in Pisa and there were at least six different low-cost airlines at the airport. Malta would do well to introduce more to the island.
Travel patterns are changing completely. Tour operator bookings are going down and direct internet bookings are going up.
I think we should still pursue EasyJet - and any other low-cost airlines interested. We should have as many as possible. I am sure that the Malta Tourism Authority is targeting low-cost airlines the way that we used to target tour operators in my time.
For hotels in Malta to be sustainable, we need to have 1.6 million tourists or more importantly, 16 million bed nights, which would give the hotels an average occupancy rate of 70-72 per cent.
There is, indeed, a big different between relying on internet bookings and having a five-year guaranteed agreement as I did at the Coastline with Thomson. But you just have to approach your marketing in a different way.
You have to bear in mind that tour operators were constantly putting pressure on hoteliers to reduce prices, especially in the past few years when demand was less than supply.
The reason we need 16 million bed nights is to get demand higher than supply. Then you can start charging decent rates and the hotels can retain profitability, ensuring that they can maintain the property's standards and make new investment."
On timeshare...
"Vacation ownership - as we prefer to call it - is a way to guarantee repeat business.
It is part of the future but you cannot base your whole tourism industry on it. At the moment, there are about 35,000 owners in Malta, which translates to well over 100,000 annual visitors and the numbers are increasing all the time.
At Golden Sands, we already have 5,000, representing 35 per cent of the property. This is equivalent to 20,000 permanent tourists per year. I estimate that we will add another 1,500 owners this year.
On the other hand, there is a downside to it. This is the timeshare touts that irritate visitors but there are other ways to sell and we try to use these methods, although we do have a few people on the road."
The path of true business does not always run smooth. Winston Zahra Sr and Zaren Vassallo were not particularly upbeat in 1992. They were sipping a drink on a trans-Atlantic flight, on their way to a Radisson convention in Georgia but the point of their trip had been pretty much lost. They had approached Radisson after the government had given them a letter of intent for a site in St George's Bay which they thought would be ideal for a five-star hotel - which would need a brand. But at the last minute, the government gave it to a French company.
As they talked, the near-derelict Salina Bay Hotel cropped up in the conversation. Many people had been interested in it but the money was never put on the table.
"We decided to go for it," he said. "Just like that. And we did. We bought it from John Saliba in January 1993 and it was ready by March 1994 - two months ahead of schedule."
Looking at what is now the Island Hotels Group, it is hard to imagine that there were ever any setbacks - and that things did not just fall into their lap.
As he talks, you appreciate that what set him and his partner, Zaren Vassallo, apart was their refusal to get discouraged. They got the St George's site in the end, buying it from the French company - "paying for it through the nose", he said with a shrug. And he got the Radisson franchise too, a relationship that has since been extended to the Golden Sands Hotel.
Mr Zahra, now 67, started out in the tourism sector through Alpine, which he ran at the time with his brother Tony. In 1979, they became joint owners of the Riza Hotel with the Rizzo family but things did not work out and, in 1986, they were faced with the choice of buying out their partners - or selling out. They chose the latter. He was so bitter about having had to let go of his "baby" that he actually toyed with the idea of retiring.
He was approached by Mr Vassallo, whom he had befriended while the Vassallo Group was building the Riza. Mr Vassallo wanted him to be a consultant for the Bugibba Holiday Complex he had just built. Once Mr Zahra was back in the industry, his blood soon began to race and within years, they formed the Island Hotels Group - and extended the complex to 1,000 beds, still the largest on the island.
"I always get excited at the prospect of developing," he said.
The next step was decided when the two were standing together at a party one of them was throwing at home.
"We did a lot of entertaining at home and in those days we used Arrigo for our catering. But one time, Zaren and I were talking and wondering why we did not use our own staff and equipment from the BHC. And that was the start of Island Caterers," he chuckled.
It did not get off to a very auspicious start but his son Winston took it over when he completed his studies and, backed by a solid team, it had a "satisfactory" turnover of Lm100,000 in its first year. It has since grown to 20 times that.
The company went were no one had gone before - literally. Rather than focusing on local weddings at set venues, it went for conference travel, setting up tables under marquees at the most unexpected places.
"I guess we were instrumental in getting conference and incentive travel going as this was a very important service to offer groups. We always believed in CIT; in fact, I used to have a dedicated company in the UK, Conference Tours," he said.
His pride in the company is tangible - down to the details.
"We just did the August Moon Ball, which was very successful. It was one heck of a job feeding 850 people outdoors. Our pasta came out warm and al dente, which was excellent," he said.
The Coastline then came along, which fed naturally off the good relationship Mr Zahra had with tour operators through the BHC.
"We had a very good deal with Thompson, which guaranteed accommodation for about five years. These things don't happen by themselves. They happen because we had a good product, we ran it well and we maintained it in good condition," he said.
The St George's site was next - and being a five-star hotel, he preferred to franchise as a brand gives a crucial competitive edge, especially with CIT.
"The importance of branding is really felt if you are looking at a mix of business that includes conference and incentives. At that time, there was only the Hilton here - the Sheraton had closed. So we were among the first to appreciate the importance of franchising," he recalled.
"In fact, we are the only five-star properties to operate an international brand under franchise as opposed to having given the properties out to the brands to manage themselves."
The next challenge was the Casino. When the government put the Dragonara site up for grabs, he persuaded the main contenders to join forces rather than fight each other. The winning consortium brought together Island Hotels, the Westin, the Corinthia, Air Malta and Accor (which was entrusted with running it).
"We have 40 per cent market share, not bad when you consider that there are four casinos," he said.
However, he said there were no other sites of interest at present.
"There are none on offer. We wanted one at the Radisson Baypoint but the government would not allow it. The Casinò di Venezia? We don't believe in that site and what they were asking for it didn't make any sense," he added.
With that up and running, he was already looking around for the next challenge: the Golden Sands, which had to be up and running in time for CHOGM in November 2005. It was - even if the tarmac had barely cooled down.
It too was branded as a Radisson.
"There were two options: Either stick with the brand that we knew, or look for another one.
"The obvious option was to retain Radisson SAS as our brand for both hotels and it worked very well. You get a good deal because you have two properties rather than one.
"In branding there are two systems: franchising or management, where basically the developer passes the property on to an international name which runs the property. We felt we had sufficient resources to run the place ourselves, so we opted for the franchise system."
Mr Zahra is already letting go the reins. On his 60th birthday he gave sons Trevor and Winston Jr 20 per cent each of the holding company, TMC. He is convinced that it is in good hands.
"Like me, they have grown up with a sense that you should be friends with the people you do business with. They have the same yearning to develop that I did and I am convinced that the company will expand as much in the next 20 years as it did in the past 20 years - if not more."
As he begins to contemplate how he would spend his free time - his yacht and sports car beckon not far away - he does have some regrets. One is that he never managed to expand overseas.
Perhaps with this in mind, he admitted that there was one piece of unfinished business that he would like to complete before he retires: listing the company's equity on the Stock Exchange.
"I have been thinking about this for a long time and I would like to see it happen before I let go the reins completely. In the past 20 years, it has always been a struggle to find financing to expand.
"Obviously it requires a board decision but I think the company is now large enough to go on the Stock Exchange. It would be so much easier to raise fresh capital if you are a public company.
"I am not worried about the public scrutiny this would require. We are two partners so we have always had to be completely transparent, with good corporate governance. It does not worry me at all."
As he talks about the prospect of money on the table to spend, his eyes light up again - briefly.
"I am itching for another project but I don't think that there will be another one for me. I've done quite enough: I've developed five hotels in the past 25 years, which is a lot, and I think my time has come to an end. The urge to keep on developing is lower than the urge to start winding down."
Thoughts from above
On Bugibba...
"Over 40 per cent of bed nights are spent in Bugibba but it has unfortunately been neglected. It used to be a real mess and I led the Bugibba project to upgrade it, as well as helping George Micallef when he led another project. We actually went out ourselves to plant the trees on the road leading into Bugibba!
The Labour government updated the promenade but they stopped short of making the area a tourist zone.
The solution would be to take Bugibba away from the local council, which does not have the budget for what is needed, and to create a specific council, with enough money to do what is needed. It is not enough to have a promenade and public areas. You have to keep them clean and you have to enforce things like overflowing litter bins and kiosks that obstruct the area.
The first thing to be done is the roads. Once the roads are done properly, it immediately looks better. It is all about basics. You do not need to go mad."
On conference and incentive travel...
"In 1974, I had a company in the UK, Conference Tours. At that time there were only two hotels you could use: the Corinthia in Attard and the Verdala. The record for the largest conference was the Europa Forum, held in 1976 at the Verdala, which brought 1,700 delegates.
I think CIT is very important as it is very lucrative: Many other places are more expensive than Malta so we can afford to charge a realistic rate and still compete, while getting much more revenue. And the delegates have a full programme so there is a lot spent on catering, tours and so on.
From the very skimpy statistics that are kept it seems we are getting around 70,000 CIT delegates but I believe this figure could easily be doubled if there were more emphasis on marketing.
And it cannot all come from the government; hotels have also got to do their part. When I was chairman of the marketing directorate at the MTA, I got all the five-star properties together for collective advertising in various magazines and so on, and the results were excellent."
On low-cost airlines...
"I was recently in Pisa and there were at least six different low-cost airlines at the airport. Malta would do well to introduce more to the island.
Travel patterns are changing completely. Tour operator bookings are going down and direct internet bookings are going up.
I think we should still pursue EasyJet - and any other low-cost airlines interested. We should have as many as possible. I am sure that the Malta Tourism Authority is targeting low-cost airlines the way that we used to target tour operators in my time.
For hotels in Malta to be sustainable, we need to have 1.6 million tourists or more importantly, 16 million bed nights, which would give the hotels an average occupancy rate of 70-72 per cent.
There is, indeed, a big different between relying on internet bookings and having a five-year guaranteed agreement as I did at the Coastline with Thomson. But you just have to approach your marketing in a different way.
You have to bear in mind that tour operators were constantly putting pressure on hoteliers to reduce prices, especially in the past few years when demand was less than supply.
The reason we need 16 million bed nights is to get demand higher than supply. Then you can start charging decent rates and the hotels can retain profitability, ensuring that they can maintain the property's standards and make new investment."
On timeshare...
"Vacation ownership - as we prefer to call it - is a way to guarantee repeat business.
It is part of the future but you cannot base your whole tourism industry on it. At the moment, there are about 35,000 owners in Malta, which translates to well over 100,000 annual visitors and the numbers are increasing all the time.
At Golden Sands, we already have 5,000, representing 35 per cent of the property. This is equivalent to 20,000 permanent tourists per year. I estimate that we will add another 1,500 owners this year.
On the other hand, there is a downside to it. This is the timeshare touts that irritate visitors but there are other ways to sell and we try to use these methods, although we do have a few people on the road."