The big picture

The first half of 2009 has provided the regional hotel sector with a bumpy ride; year-on-year revPAR has been down in most destinations, and in some cases quite dramatically.

We all know the world has been turned on its head over the last year, so with the benefit of STR Global’s half-year data, this is probably a good time to take a snapshot of some of the key hotel markets in the region and see how their performance compares with other destinations round the world. The analysis below compares the first six months of 2009 with the same period in 2008.

The regional outlook

Let’s start with a real exception and a good news story: Lebanon — and in particular Beirut — is benefiting from the peace dividend, with both business and leisure travel booming. RevPAR has increased by 117% (from a relatively low base) to US $110.89 nationally and by 125% to $116.91 in the capital.

In neighbouring Syria, where Damascus is also enjoying greater stability and a tourism boom, revPAR increased marginally. Although at $76.52 it is among the lowest — in absolute terms — in the region.

Saudi Arabia is the only other Middle Eastern country to show a positive revPAR performance based on the prior year; up 4% to $102.17. Within these figures Riyadh is down 14% ($172.30), however, Jeddah — perhaps benefiting from greater diversity of demand — is up by 20% at $120.23.

A broadly similar picture is displayed by Bahrain (-8.3%) at $160.48, Kuwait (-12%) at $122.54 and Qatar (-13%) at $181.39. These are all destinations that, like Riyadh, rely predominantly on corporate demand. Limited supply growth may have protected them from the heavier falls.

Strong rate growth has enabled Amman to increase its revPAR by just more than 3% to $91.93; however, overall Jordan’s revPAR has dropped marginally to $86.01.

Of all the countries in the region, Egypt is the one with the highest proportion of international leisure business, with Europe its primary source market. As a result it is highly vulnerable to recession and has suffered a revPAR fall of more than 16% to $49.41, the lowest achieved in the Middle East by more than a $27 margin. At $80.66, Cairo’s revPAR was higher, but this has fallen by more than 19% from the prior year.

As a result of major event business, Muscat got off to a strong start in 2009, however, poor occupancy (InterContinental’s Al Bustan Palace Muscat re-opened early in the year following refurbishment, which increased supply) has seen it fall behind by 10% to a revPAR of $165.92. Overall Oman has fared a little better with revPAR down just under 8% at $147.31.

And so to the UAE, and what a contrast Abu Dhabi and Dubai provide; the capital has achieved a revPAR of $252.50 in 2009, a massive $67 more than any other city in the region and a 7% increase on 2008. Meanwhile Dubai has suffered both the greatest percentage (-36%) and absolute (-$98.90) revPAR fall regionally.

We know that Dubai has suffered, like Cairo, from a drop in leisure demand and that this has been coupled with a number of high-profile new openings in the city that have increased room supply by an estimated 17% year on year; two factors that have not significantly impacted Abu Dhabi. Furthermore, Abu Dhabi appears undersupplied with rental accommodation, and this factor assists the city’s hotels in driving up yield. Nonetheless, this difference is quite startling.

The global picture

So how does Dubai and the region’s performance rate globally? A year ago Beijing was in the midst of the Olympics Games. You would expect that the games’ legacy would result in a raised profile that would drive leisure visitation, much in the way that Barcelona benefitted post 1992.

Unfortunately the economic crisis, coupled with the new hotel supply growth associated with the games, has led to a revPAR fall of more than 44% to $43.28; a particularly low figure for a city of Beijing’s status.

In Madrid, a decrease in revPAR by more than 41% to $73.74 reflects the Spanish economy, which is deep in recession and similar to Dubai, Spain has also experienced a severe correction in real estate values.

New York has suffered a 32.5% drop in revPAR; down to $144.18. As a global financial centre the city is particularly vulnerable to the repercussions of the banking crisis and ironically, a stronger dollar recently has discouraged international visitors.

Both Madrid and New York must be considered mature hotel markets and as such might be expected to show less volatility than a relatively new city like Dubai. They have, however, suffered to a similar or greater extent and it appears that overall the Middle East has suffered no greater pain as a result of the global recession than any other region of the world.

Nigel Teasdale is regional director for Vision Hospitality Asset Management. Contact: This email address is being protected from spam bots, you need Javascript enabled to view it

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