By Staff writer
New report says fundamentals in the Gulf's hospitality sector remain strong despite recent falls in hotel room rates
Fundamentals in the Gulf's hospitality sector remain strong despite recent falls in hotel room rates amid muted demand caused by economic slowdown, according to a new report.
Alpen Capital's GCC Hospitality Industry report said that despite the drop in oil prices and currency depreciation is currently affecting demand, the sector’s long-term outlook remains stable.
According to Alpen Capital, the GCC hospitality market is expected to grow by 7.6 percent annually from an estimated $25.4 billion in 2015 to $36.7 billion in 2020, despite a slowdown in 2016.
It said the market is anticipated to recover in the long-term with upcoming events, robust fundamentals and government efforts, driving the continual rise in tourist arrivals and a robust pipeline of hotels and serviced apartments.
The key operating metrics of the sector is expected to remain under pressure in the short-term, mainly in the UAE and Qatar, but is likely to rebound in the long-term supported by growing demand, the report said.
During the forecast period, occupancy rates at hotels and serviced apartments are anticipated to grow by 3 percent to 70 percent while average daily rates (ADR) are likely to rise by 1.4 percent annually.
As a result, the aggregate revenue per available room (RevPAR) in the GCC is projected to grow by 2.3 percent annually to $133 by 2020.
Alpen said from 2015 to 2020, the hospitality markets of Qatar and the UAE are expected to demonstrate the fastest annualised growth of over 10 percent.
It added that Bahrain is likely to deliver growth in line with the regional average backed by tourism promotion activities and recovery in oil prices while the rest of the GCC nations is likely to register growth in the range of 5-6 percent, below the regional average.
During the forecast period, the total room supply in the GCC is expected to grow at a 4 percent per year, slower than 5.7 percent expansion in international tourist arrivals, the report added.
Sameena Ahmad, managing director, Alpen Capital (ME) Limited, said: “Backed by an active tourism market, the GCC hospitality industry remains firm on its growth trajectory. Though a drop in oil prices and currency depreciation is currently affecting demand, the sector’s long-term outlook remains strong.
"Government measures to bolster tourism activities in the region like encouraging private sector investments, building new attractions, expanding airport capacity, and increasing international promotion campaigns are providing impetus to the growth of the hospitality sector in the region."
Alpen said the GCC region holds one of the largest hotel development pipelines in the world. Dubai is likely to witness an addition of nearly 57,000 rooms in hotel and serviced apartments in the five years to 2020, while Saudi Arabia has a pipeline of over 47,000 rooms.