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Gulf Times
Thursday, May 7, 2015

COMMENT
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GULF TIMES
Europe braces for
British election
amid Brexit fears
When voters head to the polls in Britain today, the
countrys politicians will not be the only ones waiting
for the nal tally with bated breath.
Anxiety is sure to be high across the Channel in
Europe, too, amid fears that a so-called Brexit is in the
making.
The term - coined to describe a possible British
exit from the European Union - has made the rounds
in Brussels ever since British Prime Minister David
Cameron promised to hold a referendum on EU
membership if his party wins this months election.
Opinion polls show Britons are reluctant Europeans,
despite being members of the political and economic
bloc for more than 40 years.
Weve shown that when you come here ready to
engage, to confront the difficult issues and to stand
up rmly for our position, then we advance Britains
national interests, Cameron said in March at an EU
summit in Brussels.
If you send me back here as prime minister on May
8, I have a very clear plan, he added. I want to sit at
that negotiating table with a mandate from the British
people to reform the EU and fundamentally change
Britains relationship
with it.
When he made his
referendum promise in
2013, Cameron vowed
to rst negotiate
a new settlement
with the EU on further exibility and democratic
accountability, as well as more national powers.
When we have negotiated that new settlement, we
will give the British people a referendum with a very
simple in or out choice, he said at the time.
But Cameron faces a rocky path ahead in getting his
27 EU counterparts to go along with the renegotiation
plan.
German Chancellor Angela Merkel, often portrayed
as the blocs most powerful national leader, had
dashed hopes for far-reaching reforms as early as last
year.
Some expect my speech to pave the way for a
fundamental reform of the European architecture
which will satisfy all kinds of alleged or actual British
wishes. I am afraid they are in for a disappointment,
she told both houses of Parliament during a visit to
London.
But she also declined to say that the rest of Europe
is not prepared to pay almost any price to keep Britain
in the EU.
The bloc, battered by years of economic crisis and
contending with major geopolitical challenges to its
east and south, is keen to keep a united and convincing
front.
Advocates for British membership in the EU argue
that one country alone cant be inuential on the
international scene, up against monoliths such as
Russia and China or transnational crimes such as
terrorism.
One of the strongest incentives for Britain to remain
in the EU is the access it offers to a border-free market
of 500mn consumers.

Qatar Airways hotel

acquisitions gather pace
With an increasing focus on
operating multi-frequencies
to many destinations as
more aircraft join its
150-plus eet, Qatar Airways
believes hotels will easily
complement its business
By Updesh Kapur
Doha

atar
Airways
love
affair
with the hotel
business is gathering pace.
Just weeks after acquiring one of
London Heathrows iconic airport
hotels, the home-grown airline is
venturing further into the hospitality
business once again in the UK.
It has conrmed a second overseas
acquisition, the Hotel Novotel
Edinburgh Park close to the Scottish
capitals international airport.
The 170-room property is a fourstar hotel targeting business travellers
and those seeking city breaks to
Scotlands most visited destination.
Two months ago, the national
carrier announced it had bought the
350-room four-star Sheraton Skyline
Hotel, one of Heathrow Airports
most renowned properties catering
to a mixed business base of transit
passengers, leisure travellers, and
indeed the corporate market.
The two properties join Qatar
Airways two domestic hotels in the
capital Doha. Oryx Rotana, the 325room ve-star property next to the
old airport, and the 100-room Airport

Hotel at Hamad International.

The doubling of its small portfolio
in a short space of time represents
a signicant strategic move for the
airline, looking to now aggressively
build its hospitality business.
The full-service global airline is its
core business, which is supplemented
by a fully-owned airline leasing
company, executive charter operation
and an international airport it
manages. The hospitality business was
seen as a natural extension.
Though embarking on a strategy
to expand into the hotel business was
chalked out a few years ago after the
opening of its rst property Oryx
Rotana the hospitality track seems
to only now be gathering pace.
This is largely due to one reason:
critical mass.

To build a brand is
a tall order
The airline has spread its global
footprint to almost 150 destinations,
carrying over 25mn passengers a year.
The volume in passenger numbers
and markets served seem to justify the
decision to forge ahead with the hotel
expansion at a much faster rate.
With an increasing focus on
operating multi-frequencies to many
destinations as more aircraft join its
150-plus eet, the airline believes
hotels will easily complement its
business.
Through a newly-created hotel
operating business, Qatar Airways
will expand the portfolio by acquiring
four- and ve-star properties in the
UK, North America and other parts
of the world. Future acquisitions will
inevitably be in key destinations on
the airlines burgeoning route network.

But rather than operating the

hotels, Qatar Airways will continue
to use international hotel companies
to manage them. In the case of
its existing portfolio, its Rotana,
Sheraton and Novotel.
Brand Oryx, an already familiar
iconic emblem on Qatar Airways
aircraft tails, will be part of the
branding strategy of each property.
The Oryx name, which features on
the Rotana property in Doha, will be
integrated into all acquired hotels.
Qatar Airways strategy has raised
eyebrows in the airline fraternity.
A daring attempt into the hotel
business, say some. Others question
the need when aviation ought to be its
fundamental business.
But Qatar Airways philosophy is
simple: to push the boundaries and
venture into markets and business
opportunities that others dare not.
Opportunities are challenges and if the
numbers stack up, the company moves
in. It will not target properties below the
four-star category to ensure they remain
in sync with the airlines strategy of
offering service at the highest level.
Its an interesting approach for an
airline to push into hotels, a non-core
business, where others in the past
withdrew for nancial or strategic
reasons PanAm, Swissair and Air
France to name a few. They owned the
Intercontinental, Swissotel and Le
Meridien chains respectively.
These hotel chains became
synonymous with quality thanks to
the high service levels that their airline
parents of yesteryear enthused.
It was a simple business philosophy;
airlines ying passengers around
the world on their jets and offering
them accommodation at their hotels.
However, entering a business not core
to their day to day operations was a

costly exercise that eventually saw

most airlines off load their chains to
concentrate on what they did best
ying aircraft.
Air travel has grown to become
such a vital economic tool for doing
business that there has been a surge
in the number of airlines connecting
cities within countries, within
continents and between points around
the world. Hotels are a necessity and
the number of properties being built
worldwide is just unprecedented.
Though yet to reveal its longterm strategy on numbers, Qatar
Airways is unlikely to be a big player
in the hotel business. It will go for
niche acquisitions that suit business
needs and set aside funds to invest in
refurbishments.
As the Sheraton Skyline is penciled
in for an upgrade in the coming
months, the same will follow suit
with other acquired properties where
necessary.
This mirrors Qatar Airways own
strategy of building a eet of newer
planes and investing in interiors that
push the boundaries.
To build a brand is a tall order. It
takes time, effort, energy, tremendous
marketing support and, more
importantly, customer buy-in to make
a difference.
Theres plenty of work ahead to
build the Oryx hotel brand name.
But Qatar Airways will be hoping
recognition will come sooner rather
than later off the back of the airlines
highly visible brand that has grown
over the past 18 years.
zUpdesh Kapur is a PR &
communications professional,
columnist, aviation, hospitality and
travel analyst. He can be followed on
twitter @updeshkapur

Opinion polls
show Britons
are reluctant
Europeans

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Qatar Airways Group CEO Akbar al-Baker in buoyant mood announcing the airlines hotel expansion yesterday.

Europes roadblocks to long-term investment

By Angelien Kemna
Amsterdam

ne of the major challenges

facing the European
economy is the lack of
liquidity in its capital
markets. Since the 2008 global
nancial crisis, an enormous number
of new rules have been put in place.
In order to facilitate the long-term
investment that Europe desperately
needs, it would be wise to reassess the
broader regulatory environment that
has emerged over the past six years.
With banks reluctant to make new
loans, institutions such as pension
funds are well placed to meet the
desperate demand for capital. Indeed,
the savings of workers who may not
be retiring for several decades are
particularly well suited for long-term
investments. The trouble is that in
many cases, rules and regulations
intended to ensure nancial markets
stability impede the ability of pension
funds and others to allocate savings
smoothly and efficiently.
The importance of proper
regulations cannot be understated.
When properly drafted and applied,
they ensure nancial stability,
maintain (and, if necessary, restore)
condence in the markets, and
facilitate long-term investment,
helping citizens meet their future
nancial needs. But if regulations

are not well tailored to the various

types of market participants and to
how markets actually work, they can
choke off opportunities that would
otherwise benet investors and the
economy.
The new margin requirements for
derivatives, introduced in order to
reduce systemic risk, are one example
of such a chokepoint. It might make
sense to apply them to banks or hedge
funds, but pension funds are highly
creditworthy institutions that pose
little or no systemic risk to nancial
markets. Forcing them to set aside
assets for collateral purposes only
drains capital that could be used for
long-term-investment.

The importance of
proper regulations
cannot be
understated
Such investment involves a variety
of products, market players, and
jurisdictions, and, as a result, the
effect of regulations can be difficult to
see, much less quantify. For starters,
the impact of rules and regulations
can be direct or indirect. Rules that
apply specically to long-terminvestment products or strategies can
be classied as having a direct impact.
Rules that apply to investors or their

counterparts, competitive products,

or complementary parts of the market
can be described as having an indirect
effect.
A well-crafted regulatory
framework minimises the adverse
consequences for long-term
investment, while maximising the
positive effects. New regulations are
constantly being introduced. It is
important to analyse carefully whether
the new regulations are actually
needed and, if yes, to foresee and ll
regulatory gaps with rules that ensure
the smooth ow of savings to new and
existing projects.
For example, standardising
regulations relating to covered
bonds, green bonds and cross-border
investment through real-estate trusts
could encourage more long-term
investment. In a more indirect way, a
general regulatory push that increased
the availability of projects suitable for
long-term-investment and harmonised
local insolvency regimes could also
have a positive effect. Prominent
examples of regulations with a direct
negative impact include existing rules
on securitisation and proposed rules on
asset-based capital charges.
The indirect negative effects
of such regulations on long-term
investment are, by nature, more
difficult to discern, but they can be
just as harmful as the direct effects
especially if they leave investors with
fewer funds available for long-term

investment. Margin requirements

for derivatives transactions have this
effect, as do regulations that increase
banking costs.
These types of indirect negative
effects have not been central to policy
discussions concerning how to boost
long-term investment. But they
deserve careful consideration.
As legislators and regulators
continue to shape the investment
environment, it is important not
only to monitor and evaluate the
impact of each piece of additional
regulation; the way rules interact
with one another and with new
rules as they are introduced must
also be understood. Unnecessarily
broad regulations should be avoided
in favour of rules that are specically
tailored to the various participants in
the market.
Allowing long-term investors
such as pension funds to provide
the European economy with muchneeded capital has the potential
to provide huge benets to future
retirees, as well as to the broader
economy. But that will not be possible
unless, and until, the right regulatory
environment is created.- Project
Syndicate
zAngelien Kemna is a board member
and chief nancial and risk officer
of APG, a subsidiary of Stichting
Pensioenfonds ABP, the worlds
second-largest pension fund.