Middle East set for budget hotel revolution

Region will see surge of low-cost hotels in smaller cities, industrial centres, says Jones Lang LaSalle
Middle East set for budget hotel revolution
Premier Inn has a string of low-cost hotels in the UAE and is Britains fastest growing hotel brand
By Claire Ferris-Lay
Mon 02 May 2011 11:02 AM

A boom in high-quality low-cost hotels is set to
revolutionise the Middle East’s hotel industry in the same way budget airlines
have shaken up aviation, consultancy Jones Lang LaSalle said.

The
rapid growth of mid-range hotels in the region is set to mirror Europe’s budget
hotel growth two decades years ago, with Saudi holy cities Makkah and Medina
leading the way.

“I
see huge potential [for budget hotels] especially in places like the holy
cities in Saudi Arabia; phenomenal potential,” Thierry Loué, CEO, MENA, Jones
Lang La Salle said.

The cities play host to millions of religious tourists each year, who flock to the kingdom to undertake the pilgrimages hajj and umrah.

“It’s
a market which has been evolving quite fast, especially in the last three
years, with definitely more to come.”

Nor
is the trend confined to major cities. The Middle East will see a surge of
low-cost hotels opening in industrial centres and smaller towns in a bid to tap
into money-conscious business travellers, Loué said.

“We’ll see also a lot of new budget hotels coming to many
secondary cities. You’ve seen the first easyHotel opening in Jebel Ali; this is
the kind of environment you are going to see two and three-star properties
popping up in,” he added.

Hotel
deal volume in Europe, the Middle East and Africa more than doubled to $9.3bn
in 2010, according to Jones Lang La Salle’s Hotel Investment Outlook released
on Sunday.

Deal
pace is set to grow at a steady pace across the region in 2011, reaching $13bn
by year end, the real estate advisory firm said.

Market
performance for hotels in Dubai, Morocco and Saudi Arabia is forecast to
increase in 2011; however Abu Dhabi will continue to struggle as oversupply
takes a toll on occupancy.

The
UAE capital’s hospitality industry will only pick up once cultural attractions
such as the Louvre and Guggenheim on Saadiyat Island are completed, said Loué.

“I
think Abu Dhabi is going to be more challenging position for the next two three
years. Until Saadiyat Island really comes out with all of the cultural
attractions there will be a shorter period where it really needs to build its
identity, I think to find its own recognition it could take time,” he said.

Dubai,
which has emerged as something of a safe haven amid the political turmoil in
the region, is expected to remain stable but is unlikely to attract additional
investment for further projects.

“Dubai
is doing extremely well right now,” Loué said. “I don’t think we are going to
see any new money coming into new projects in the short term… [but] I think
Dubai has still got quite a fair positive future. “

More broadly, the UAE hospitality market has retained its
appeal, as demonstrated by
the $115m of financing secured for the Fairmont
Palm Jumeirah by IFA Hotel Investments in late 2010.

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