‘An evolution into something bigger’ - Winston J. Zahra

Put two leading hotel groups together in a €50 million acquisition and what do you get? Deal of the century, no doubt, for the Island Hotels Group, which was acquired by Corinthia’s investment arm, International Hotels Investment, in a €36 million cash acquisition and €9 million 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 together with his father Winston took on a very ambitious expansion of the Island Hotels Group with the Radisson 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 different 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 solution of bringing the assets, the management 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, especially after we went public.”

Today, both Corinthia and the Island Hotels Group are not just bringing 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 family. “We saw it was the right time to make this move. The conditions were right,” Zahra said.

As a result of the deal with Corinthia, Island Hotels Group (IHGH) will be a fully owned subsidiary of IHI, and Zahra expects it to be a seamless transition.

“For all intents and purposes it’s going to be business as usual at an operational level. We’re remaining involved 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 IHGH. From a career perspective this is also a step forward, we’re becoming 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 vision 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 consolidate 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 government 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 Radisson and the San Gorg were built, the government of the day wanted to encourage 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 include 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 created 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 support 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 making a loss every year? No. I think that some of the difficult decisions which had to be taken at Air Malta have already been taken with the restructuring plan. There are others that still need to be taken and it is important that we bring Air Malta back to profitability.”

He noted for example Air Malta’s losses of €16 million last year. “Hopefully the drop in the price of oil will help with profitability and as stakeholders 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 possible.”

The conversation moved to the recent terrorist attack on the Tripoli Corinthia.

“Any attack like that should worry anyone who has an ounce of humanity. The loss of life is tragic,” said Zahra when asked whether the attacks 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 profits, 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 supports the logic of what we’re doing as a group. Today IHGH is mainly Malta based, while Corinthia is spread internationally.”

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 important thing is to have the correct geographical mix to counterbalance the effects.”

No discussion with a major tourism industry player would be complete 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 intrinsically separate,” he replied, pointing to the number of visitors to the island 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 quality person. Let’s not start talking about people in terms of quality. The difference is the price point that people 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 situation 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 permits 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 evaluating 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 stalwarts Gary Neville and Ryan Giggs, with whom the group has “an excellent relationship” Zahra says, especially Gary, who sits on the board of directors. “They had invested in IHGH in 2009 when the company became a PLC, buying 3% each, and both remain 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 resting 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 IHGH today in the years ahead”.

Indeed the man seems indefatigable. “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.”