Finding the middle ground

HI-TRAC:

The author's shorthand for Happiness Index, Infrastructure, Talent, Regulations, Access and Capital. The six pillars that make UAE a great place for a startup. This week, the focus is again on Infrastructure. This story is about a company that is leveraging the value in real-estate that is being built up in the UAE.

The power of a disruptive business lies in its ability to generate value in situations when existing models seem to be stuck in a rut or even declining. Indications are that the traditional hotel industry in developed markets is fairly advanced in the maturity stage of the product life cycle. And in some markets, it may even be in the decline phase.

Like all traditional industries, the hotel room as a paradigm is being disrupted. It is under attack from all ends of the competitor landscape. Portals like Airbnb represent one end of the spectrum of change. Although this is an attractive option for vacationers and budget business travellers, it may not meet the requirements of corporate executives. Especially professionals who are working on assignments or projects that are a month or more in duration. They prefer a home away from home, not just another hotel room.

They would like to live in a community or facility that connects them with the outside world rather than one which isolates them from it. Especially in safe lively global cities like Dubai, Istanbul and Athens. They appreciate the ability to connect with other local residents rather than a host of nameless and faceless travellers transiting through. They appreciate the flexibility to be able to cook or order food of their choice, to entertain guests in a home-like environment. Plus, staying within a community offers a much higher level of privacy compared with fairly public facilities like hotels.

At the same time corporations are looking to reduce their own as well as their clients' expenses by cutting out expensive hotel room-based accommodation. Hotel rates usually incorporate high overheads usually driven by star-rating considerations and franchise fees.

Alexandros Chatzieleftheriou, co-founder and CEO of Blueground (www.theblueground.com), has first-hand experience of long-stays at hotels as a McKinsey Consultant. He also worked in a strategy role with Samsung. The Blueground leadership team consisting of Kurtulus Korkmaz- - head of Turkey, Thanos Geramanis - head of Greece and Aneesa Arshad - head of UAE, have set out to penetrate the massive corporate long-stay opportunity. Based on the Finnacord report "Global Expatriates: Size, Segmentation and Forecast for the Worldwide Market," interviews with expats and bespoke research, they estimate the market size of one-month-plus stays to be in the region of ?125 billion. This volume is generated by an estimated five million long-term expatriates and two million business travellers.

The Blueground team has diverse experience from organisations such as Rocket Internet and MasterCard, in addition to shared experience at Samsung and McKinsey. Three of the four are Insead alumni.

Blueground has positioned itself perfectly between the more expensive and less private hotel room market by lowering costs and offering a more suitable private home experience with 30-to-50 per cent savings.

At the same time, while it commands a premium over private renting, it takes away all the challenges of writing out rent contracts, furnishing the accommodation, taking care of utilities and a host of other chores that come with the territory.

Blueground's value proposition for property owners is, in their words, "a crucial part of our success". They provide value to owners by renting their properties for the long term, have only corporate executives as guests, provide full property maintenance and offer interior design services free of charge. This proposition enables Blueground to position itself well with owners as a tenant of choice.