Hospitality markets across the Middle East and North Africa (MENA) witnessed a drop in performance in 2016 compared to the previous year, as macroeconomic challenges negatively impacted room rates and occupancy, new research reveals.
A report by ‘Big Four’ professional services firm EY noted that the majority of markets saw their RevPAR (revenue per available room) decline due to the slower economy, with Riyadh cited as the worst performing market.
The Saudi Arabian city experienced one of the largest drops in RevPAR in the region at 20 percent from $135 in 2015 to $108 in 2016. The decline was attributed to the 8 percent decline in occupancy rates from 64 percent in 2015 to 56 percent last year, coupled with a 9.5 percent decline in average daily rate (ADR) from $210 in 2015 to $190 last year.
Riyadh had an oversupply of hotel rooms last year, EY said, and was also impacted by reduced government expenditure and the drop in oil prices.
At the other end of the spectrum, Dubai was the best performing market in the region last year, according to EY’s latest MENA Hotel Benchmark report. Dubai registered the highest RevPAR ($200) in 2016 and the highest occupancy rate (80 percent) of all markets studied – in contrast to much of the rest of the region it experienced no year-on-year change to its occupancy rates.
However, the average room rate in Dubai decreased by 7.7 percent from $268 in 2015 to $247 in 2016, and room yield fell from $216 in 2015 to $200 in 2016.
Jeddah registered the second highest RevPAR of $196 in 2016, the report found, while Ras Al Khaimah achieved the second highest occupancy at 72.1 percent – a 7.2 percent increase from 64.8 percent in 2015.
The emirate has invested heavily in tourism promotion in the past year to boost its competitiveness against the rest of the UAE. Room rates in RAK saw a slight (2.4 percent) dip from $166 in 2015 to $162 in 2016, said EY, but overall its hospitality sector improved last year an average rooms yield of $117 – an 8.8 percent increase from $108 in 2015.
Elsewhere in the UAE, Abu Dhabi’s hospitality sector saw a decline in performance across all indicators. Occupancy rates were down 1 percentage point to 77 percent, while the average room rate dropped by 15.1 percent from $147 to $125, and average rooms yield decreased by 16.3 percent, from $116 in 2015 to $97 in 2016.
Still, across the whole of the UAE, occupancy rates did not drop below 70 percent in 2016. EY attributed the declines in RevPAR to supply outpacing demand in the market, and a drop in tourists visiting Dubai due to the strengthening of the US dollar and the Euro and Russian ruble decreasing in value.
On the flipside, increased travel from Chinese tourists due to a change in the UAE visa policy helped to boost Dubai’s hospitality market in the last three months of the year, the report said.
The region’s highest room rates of 2016 were recorded in Saudi Arabia, with an average daily rate of $287 in Makkah and $277 in Jeddah.
Meanwhile, Cairo’s hospitality market experienced growth across all indicators in 2016, resulting in the highest increase in room yield compared to 2015 and a RevPAR increase of 62.7 percent, due to political stability at present in the country.
Yousef Wahbah, MENA head of transaction real estate at EY, said: “The hospitality market was greatly affected by the drop in oil prices over 2015 and 2016, forcing many hotels to lower their room rates while also suffering from lower occupancy.
“However, some cities, such as Cairo and Ras Al Khaimah, managed to increase both occupancy and room rates for overall higher revenues per room.”
The report forecasts softer global and regional market sentiments to continue posing challenges for the MENA hospitality industry in 2017.
“The MENA hospitality market is expected to have a slow performance in 2017 as the economy slowly adjusts to new trade agreements and currency fluctuations,” said Wahbah.
“It can be predicted that some markets may benefit from key annual events such as the Hajj pilgrimage, shopping festivals and global forums, but the overall sentiment is that it will be another challenging year for the hotel industry.”For all the latest travel news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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