Delays plague industry

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The “bubble” looks set to continue.

The predicted flood of hotel room inventory entering the market this year has not eventuated, with large hotel chains revealing that one in five rooms slated to open this year have been pushed back until 2009.

And looking further ahead the situation continues in a similar vein, with one in four hotel rooms slated to open in 2009 being pushed back as well.

After that, the numbers drop down to 5% beyond 2010, although with such lead times there is speculation that developers are reluctant to announce their delays until the exact timeframe can be confirmed.

The changing face of the Middle East hotel industry's landscape was revealed when Hotelier Middle East contacted major hotel companies to update the list of upcoming properties published monthly.

In reality the situation is potentially exacerbated even further, because the study only takes into account those properties for which management contracts have been negotiated and publicly announced.

Hotel industry expert and Viability general manager Guy Wilkinson said the market place for new hotel openings and planned hotel openings was changing as developer and investor confidence started to weaken in the face of new economic conditions.

"What we have seen is that they are being pushed back at least a year, in some cases two," he said.

"There are several reasons for that. The difficulty in obtaining materials, people getting a bit frightened about construction costs - some of [the developers] will have to abandon [the projects]."

Wilkinson added that some of the delay issues were caused by over-optimistic public relations campaigns stating hotels would open well before they were actually ready.

"Some have been much too optimistic about what it actually takes to build, fit out and open a hotel," he explained. "Also, with occupancy not as healthy over summer as it has been in the past, people are waiting a few moments [before deciding to continue with hotel projects]. As feasibility experts, we are now looking at other kinds of projects - such as condo hotels - which can make money.

"Loans are getting harder to achieve," he added. "Banks are definitely thinking twice before financing a hotel property."

While the majority of delayed projects are in the United Arab Emirates - with 27 branded properties contributing more than 6300 rooms to local inventory set back by at least a year - Qatar and Bahrain each showed large numbers being held up.

Indeed, with five branded projects - totalling 1264 rooms - running late in Qatar, it appears hoteliers in the Gulf state will be able to capitalise on the undersupply for some time to come through higher rates and inflated occupancy results.

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