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Tue 3 Mar 2009 01:28 PM

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Mideast hotels facing tough 2009 amid global crisis

New study shows region's hotels had positive 2008 but challenge lies ahead.

Hotels across the Middle East and North Africa (MENA) region are expected to cut their room rates to tackle declining numbers of tourists as the impact of the global crisis continues to bite in 2009.

In a new report published on Tuesday, industry experts say the next six to nine months will see a deterioration in visitor numbers.

The bleak picture follows a positive 2008 for the region's tourism industry in which Oman was by far the most improved destination, recording a 34 percent revenue per available room (RevPAR) increase, a report by MKG Hospitality’s market monitoring database revealed.

Oman’s performance was fuelled by a major growth of almost 40 percent in average daily rate (ADR).

Jordan was not so far behind, with a 26 percent growth in RevPAR, while Egypt, Qatar, Bahrain, Algeria and Tunisia also all recorded good results.

Overall, however, Qatar recorded the highest RevPAR at $223, followed by the UAE at $211 and then Oman and Bahrain, almost equal at $164. Only Saudi Arabia and Kuwait in the Gulf showed negative growth in RevPAR for the year.

“However much the tourism sector has held up in 2008, and indeed it has resisted the downturn far better than other industries, the economic downturn will start to take its toll in the coming months, as consumers and companies alike continue to cut back on travelling expenses,” said Vanguelis Panayotis, director of development, MKG Hospitality.

Forecasts suggest that the situation will deteriorate over the next 6-9 months and most countries in the region have already started to see a decrease in occupancy rates, signalling that demand has dropped.

The report said hoteliers are now expected to further reduce their prices in order to encourage more guests.

“The indicator that must be observed very carefully now is ADR. As demand is decreasing, competition will increase and then the market will start to drop its prices in order to maintain occupancy rates. When ADR decreases for several months versus year-to-date, it is a clear sign of recession,” added Panayotis.

“Unfortunately this sign might be stronger in some markets such as MENA, where the majority of the rooms are in the upscale and midscale segments, compared to mature markets in Western Europe and the US, where there is more of an equilibrium between hotel categories.

"The higher the category, the more volatile price is, so we can expect the MENA region to show stronger decreases than markets with more budget rooms.

"With this in mind, 2009 and 2010 should see the development of more budget-orientated products in the region, such as Express by Holiday Inn, Ibis and the new concept from Rotana, Centro."

According to Panayotis however, the fact that the region is dominated by international and regional hotel operators is a good sign, as it will help withstand the downturn, with their versatility to reduce the impact of recession and to maximise operational efficiency.

“During this difficult period, hotels should focus on two strategies: Cost and Revenue,” said Ahmed Rasmy, revenue manager, Millennium Hotel, Abu Dhabi.

“Initiate a brain storming session to reduce costs and develop revenue streams to capture new opportunities. Applying a total revenue management concept will also reduce the impact. The key for success is the coordination between all hotel departments and having a unified goal.”

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