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Golden opportunities still available
Investment in the Middle East hotel industry should continue its strong growth, with many investors remaining bullish about the opportunities in the market, according to industry experts.
Jones Lang LaSalle Hotels (JLL) global chief executive Arthur de Haast said his company was tracking more than US $11.7 billion worth of developments in the region from 2007 through to 2012.
"Investors are as confident as last year, and sometimes even more bullish," he said.
"The potential for both intra-regional and international tourism and business travel to and within the region remains strong and will continue to grow. This will be driven partly by low cost and national airlines and a new ‘short-break' market segment.
"Investors are looking to less popular locations, which remain high risk, however may present strong opportunities."
Within the industry, some fears remained for investments based in the Levant and North Africa, however Qatar and Saudi Arabia were considered medium risk with high potential returns, de Haast added.
"The other unexploited opportunity in the region is the development of branded mid-scale and budget hotels as opposed to high-end luxury hotels," he said.
"Finally, religious and culturally sensitive tourism has great potential within the region, with purchasing power growing throughout the Muslim world."
Looking at specific developments, de Haast noted that some mega projects were slowing to re-assess early assumptions.
"Many developers are, for example, undertaking renewed feasibility studies in order to ensure that their investment objectives can be met. This is mainly true of developments in Dubai where over-supply has long been a consideration. In addition the cost of land and the price of construction mean that developments could be less profitable in Dubai," he said.
But in Abu Dhabi development was continuing and investors' appetites remained strong, de Haast continued.
"Investors are behaving with more sophistication and the days of ill-planned and poorly calculated projects are behind us," he explained. "Developers have followed our advice to ‘balance their risk' by developing mixed-use projects as we emphasis ethe value one asset can bring to another."
The strong outlook for the Middle East is echoed in the global industry, with JLL estimating that $110 billion worth of global hotel transactions could be completed by the end of the year. Last year's - record breaking - result was $72.5 billion.
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