The Saudi city of Madina is the best performing city in the Middle East for hotel investment, according to the results of a new study compiled by accountancy firm Ernst & Young.
Madina had the highest growth in average room rate in the first quarter of 2012, increasing 14.9 percent to US$170, while occupancy was also up 15 percent to an average of 72 percent in the same period.
Click here to see the region’s best performing hotel investments.
“Madina’s dynamics in terms of hotel ROI (return on investment) is entirely different to any other city in the world,” said Basel Abu Alrub, managing partner of Dubai-based travel agent Utravel.
“The reason of it having the highest ROI is due to the fact that there is a growing demand to visit Madina as the Muslim population grows. Nevertheless, unlike Mecca, fewer developments are being set up there and this creates a lack of supply of hotel beds, which drives up the price.
“Madina’s business model is very cyclical but in general the trend is on the rise due to increasing demand as well as growing accessibility into and within the city limits; thanks to the Saudi government’s heavy investments on improving the city’s infrastructure including roads and highways,” he added.
Following Madina were Amman and Beirut, the Jordanian capital having the highest growth in occupancy, rising 27 percent to 80 percent.
“Another important factor to point out is that Amman enjoys a strategic location being the only port of exit by air to the Palestinian territories,” said Abu Alrub.
“One more thing to point out about Amman and Beirut is that they have an unusually high level of revenue being generated from the wedding business. This is a major revenue stream and is driven by cultural and sociological habits of high spending on weddings in hotel venues,” he added.
At the bottom of the rankings was Cairo, where room yields dropped by nearly a quarter. “Cairo’s figures in my opinion are skewed due to the sheer number of registered hotels in this mega city. The poor performance of run down hotels dilutes the performance of higher quality hotels in Cairo. The ROI of quality 5 and 4 star hotels will look much stronger if you isolate them from the rest of the poor quality hotels,” said Abu Alrub.
“In a mega city such as Cairo, the number of successful hotels is very minimal compared to the sheer number of run down properties that are merely licensed as hotels. Again, the wedding revenue in Cairo is very high but is only shared amongst a small number of hotel properties across Cairo’s city centre.”
Click here to see the region’s best performing hotel investments.
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