Divided outlook for Middle East hotels

The future performance of the Middle East hotel industry has been labelled "a tale of two regions" by the authors of HVS International's Middle East Hotel Survey - Outlook, Market Trends and Opportunities report.
Divided outlook for Middle East hotels
By Administrator
Tue 05 Jun 2007 11:24 AM

The future performance of the Middle East hotel industry has been labelled "a tale of two regions" by the authors of HVS International's Middle East Hotel Survey - Outlook, Market Trends and Opportunities report.

HVS director and report co-author Bernard Foster said that growth in 2006 slowed compared to "huge" growth in the previous two years, indicating that the market was becoming more mature.

"Riyadh, Abu Dhabi, Muscat and Dubai are the clear winners in terms of RevPAR growth, with all markets experiencing minimum RevPAR growth of approximately 20%," he said.

"On the other hand, Beirut, Damascus, Amman and Kuwait City witnessed declines in RevPAR for different reasons.

"While some markets were affected by the war in Lebanon this summer, the modest decline in occupancy in the other markets surveyed is attributable to continuing increases in average rates, whereby price sensitive customers are displaced to alternative accommodation."

Concentrating on the financial results, HVS associate director and report co-author Hadrien Pujol said the average room rate in the region increased by 11% to US $139.

"Increases in liquidity and disposable income from regional travellers and the continuing appreciation of the Euro against the US dollar have had a beneficial impact, resulting in a RevPAR increase of 9% to $98 and in Gross Operating Profit-PAR to $92, which reflects a very impressive 10% increase," he said.

Other findings from the report included:

• General outlook for 2007 and 2008 is positive, although with a large number of rooms to enter the market "a correction is likely to happen with lower occupancy levels and declines in average rate, especially in the UAE and Qatar".

• Rising construction costs are becoming a threat to investor returns, with significant increases during the last three years.

• Assuming employee to room ratios range between 1.5 to 2.0, between 123,000 and 166,000 extra hotel staff will be needed in the next four years.

• The most active operators in terms of brand expansion are Accor, InterContinental Hotels Group, Rotana Hotels and Mövenpick Hotels and Resorts.

• The large number of hotels being developed means "the bargaining power of the hotel companies increased, and the options in branding a property with a ‘new' internationally recognised brand has reduced significantly".

• There are still investment opportunities in mixed-use developments, branded service apartments, timeshare units and limited service hotels.

Hotel performances would experience another good year in 2007, Forster concluded, assuming there was "no significant political upheaval in the region".

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