The Middle East Hospitality Market

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Monday 12th April 2010

The Middle East Hospitality Market

Resilience and optimism in turbulent times

Notwithstanding the region’s natural tourist attractions, several mega, man-made attractions such as the Palm trilogy are set to wow visitors in years to come, and while the worldwide hospitality market is struggling due to tough economic conditions, an air of cautious optimism continues to reign in the Middle East.

Here, the industry is carried forward by the momentum of these massive ongoing construction programmes. The market in recent times has proven to be extremely attractive with recent figures released by Deloitte Middle East showing hotel RevPAR growth of 21.8% in the region, and the world's highest occupancy and average room rates at 75.3% and $180 respectively. So while the recent past has been brilliant, given the current “pinch”, authorities are looking at tempering investments, erring on the side of caution.

While some major cultural projects are being frozen for the time being, plans to open the Louvre and Guggenheim Museums are on target, and the Emirate’s first Formula One Grand Prix is still scheduled for 2009 on the new Yas Island Circuit. Abu Dhabi’s tourism forecast for 2009 is for 2-million visitors – an increase of around 15% over 2008.

According to figures published by Reed, by 2010, 174 new five-star hotels will bring 48,940 new rooms to the region. In the UAE alone, 97 new hotels are likely to be added by 2010, according to Reed’s market survey. The new hotels will have a combined capacity of more than 30,600 rooms. In the same period, Qatar is expected to add 39 new hotels and 9,835 rooms; Kuwait, 19 hotels and 4,115 new rooms; Bahrain, 15 hotels and 3,615 rooms and Oman, 4 hotels and 766 rooms. Currently the total hotel room capacity in the above countries stands at 33,925.

Abu Dhabi – The Jewel in the Emirates’ Crown

Situated on the North East coast of the Arabian Peninsula, Abu Dhabi, the UAE capital, concentrates by far the biggest share of the region’s wealth. The generated income has been purposely invested to create a first class infrastructure and flourishing modern metropolis.

Abu Dhabi is reportedly planning to increase hotel room capacity to 25,000 by 2015 and develop over 100 hotels in the next ten years with brands including Fairmont, Mövenpick, Accor, Grand Hyatt, Ritz Carlton, Al Habtoor, Radisson SAS, JW Marriott, One & Only, and many others. The emirate will be investing over US$100-billion in the next 5 years in a combination of projects that include construction of a new airport, building a new seaport, establishing new townships and tourism development.

But while international, regional and local operators see huge potential in the market, the billions being poured into the sector also make it a very competitive

space to be in. Operators are aware that with such strong competition they need to be up-to-date with the latest developments in the industry, including IT infrastructure, in-room automation, “triple play” and high performance PMS and reservation systems. It is becoming increasingly important for owners

and operators to agree on technological investments upstream in the construction process, in order to avoid costly rebuilds and re-cabling once projects are completed. To this end, savvy operators are realising the importance in terms of value-add of having truly “tech friendly” hotels.