Muscat, Dubai hotels to see strongest revenue growth in 2015

New PwC report says tourism receipts in major Gulf cities are closing in on peaks seen back in 2008
By Andy Sambidge
Fri 16 May 2014 01:19 AM

Muscat and Dubai are forecast to be the best revenue performing tourism markets in the Middle East next year, according to a new report by PwC.

PwC's first Middle East hotel forecast report said hotels in the Omani capital are set to see a 6.6 percent rise in revenue per available room (RevPAR) in 2015, on the back of similar growth this year.

The report said Dubai's RevPAR growth would hit 6.5 percent next year, followed by Doha with 5.4 percent.

According to the report, the improving economic and travel backdrop has helped reinvigorate trading in the featured cities of Dubai, Abu Dhabi, Doha, Jeddah, Muscat and Riyadh.

While growth is forecast in all six cities, the pace of growth varies from city to city and the challenge for hotels will be to capitalise on this improving climate while responding to the megatrends impacting their business.

PwC said Dubai and Jeddah top forecasts in the region for occupancy rises while the only negative is expected to see average daily rates dip marginally in Riyadh.

While hotels are not yet back to 2008 levels, a number of cities are edging ever closer to those highs in terms of forecast occupancy rates, the report added.

Viren Lodhia, hospitality and leisure lead partner at PwC Middle East, said: "Travel to the Middle East is expected to grow strongly over the next 10 years, with the region's strategic location and investment in airports and infrastructure, establishing it as an important global hub.

"Combining this with future mega events being held in the region and an emergence as a magnet for both MICE and shopping travellers, provides for a wealth of opportunities for both hotel operators and owners".

Alison Cashmore, hospitality and leisure director at PwC Middle East, added: "It's a mix of ADR and occupancy, with the cities really falling into two camps. In the strongest RevPAR growth cities of Doha, Dubai and Muscat we are anticipating ADR being the strongest metric.

"However for Riyadh, Jeddah and Abu Dhabi, occupancy is the principal driver with low growth forecast in ADRs. Each city has its own supply and demand characteristics and may be on different stages on the hotel life cycle. While supply could cast a shadow in some cities, the strong demand should continue to drive growth."

The six cities represent over 124,000 hotel rooms and have seen high levels of new supply added in recent years with more scheduled to open.

In Qatar, 45,000 further hotel rooms are reported to be required to meet FIFA World Cup capacity requirements, with 21 hotels planned for construction by 2017.

In Dubai, The Department of Tourism and Commerce Marketing estimate a need for between 140,000 to 160,000 new rooms by 2020, with a further 10,000 plus rooms being reported as needing refurbishment prior to the Expo 2020.

Lodhia said: All in all, it is a growth story across the featured cities, but some issues are likely to impact hoteliers' profitability. While we are not yet back at 2008 levels (particularly in relation to ADR), a number of cities are edging ever closer to those highs when we look at forecast occupancy rates."

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