Tadawul-listed Al Tayyar Travel Group Holding Co. plans to focus on growing its online unit globally, while developing its hospitality business to align with Saudi Arabia’s tourism reforms under Vision 2030, CEO Abdullah Aldawood told Argaam in an exclusive interview.
In 2017, the company’s diversification plans helped maintained its topline at SAR 2.1 billion, despite widespread austerity measures that led to a decline in the size of government contracts awarded to the company, mainly from the education ministry, he added.
Below is the full interview with Aldawood.
Q: What were the key factors that impacted Al Tayyar’s financial results for 2017?
A: Despite the macroeconomic conditions and austerity measures by the government, and given that our historical business concentration has been on government business, we were able to maintain a similar topline for the group thanks to our initial strategy to diversify our revenue sources, especially in the hospitality sector where now we have five operational hotels. Also, there has been tremendous growth in our online business unit, where we have grown our topline, or our gross booking volume, by almost 180 percent.
In December 2016, we also closed the acquisition of the Portman Group in the UK.
All these initiatives helped us maintain similar topline like last year.
Q: Al Tayyar’s net profit for Q4 2017 fell 88 percent YoY. What was the reason for this decline?
A: In Q4 we had one-time charges related to impairment of some real estate assets.
Also, this is the first year of compliance with IFRS. Under IFRS specifications we had to value our real estate holding, and for three or four properties we had to write-down the value.
In addition, there was also our share of losses from investments in associates, which is a one-time occurrence. We don't think that it would continue over 2018 and 2019 -- it would reduce substantially.
Also, I would like to mention the decline in margin from the core government business, which we had anticipated over the past couple of years and was the reason for us to diversify our revenue sources.
Q: At present, how reliant is your business on government contracts?
A: The key point is that while profitability from the (government) sector is declining, we have been able to increase our market share. So it’s not like we are losing business. Over the past 18 months we were able to win significant new business from the government, such as the Ministry of Health. Also, we were able to renew our contract with the Ministry of Education. These are two major wins that help us protect and even increase our market share within that sector.
Q: Al Tayyar Group has announced that there was no impact on the company's functions following the earlier detention of founder Nasser Al Tayyar. Does he still own the 27.7 percent stake in the company?
A: Yes, he is still a shareholder.
Q: What are your plans for parallel businesses, such as online travel and your stake in Careem?
A: Careem is not consolidated in our financials. But Careem is a very successful investment. And based on the last round, which took place almost a year ago, the value of our stake is notable of our initial investment. Additionally, the growth in other lines of business such as hospitality and online have reduced significantly our reliance on the government business. For example, in 2015, the contribution from our online travel unit was almost zero. In 2016, it crossed nearly SAR 500 million of gross booking value (GBV), and in 2017 we almost reach SAR 1.4 billion of GBV.
We hope by 2020 we will reach SAR 3.75 billion of GBV only from the online business unit.
Q: Are you planning to further expand your online business?
A: We are investing further in our technology projects and expect to expand our market share within in our core markets, Saudi Arabia and the UAE.
Late last year we launched in UAE and Kuwait, and in Q1 this year we will launch in Egypt as well.
Q: Do you have plans to expand your hospitality business in 2018?
A: The rationale behind our hospitality investment is that we want to be closely aligned with Saudi Arabia's Vision 2030 of promoting Haj and Umrah, as well as the domestic tourism.
We have invested more than SAR 4 billion in hospitality assets in Makkah, where they became operational by the end of 2017.
We have also announced our partnership with Choice Hotels to operate their key brands: Comfort and Quality in the region.
Additionally, we have announced our intention to operate about 6,000 rooms by 2022. To that goal we have started working on our first "mid-market hospitality fund" to start the development of mid-market hotels, that will be operated by the Choice brand. We should announce soon a major development with respect to this fund.
Write to Nadeshda Zareen at nadeshda.zareen@argaamplus.com
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