UAE leads Mideast hotel pipeline with 59,543 rooms

Almost half of the 126,464 hotel rooms to be developed in the Middle East and Africa are in the UAE, according to the August 2009 STR Global Construction Pipeline Report.

"The UAE has 59,543 rooms in the total active pipeline, the largest number compared to any country in the region," said the report. It added that Saudi Arabia also accounted for a large proportion, with 11,110 rooms.

Duane Vinson, Vice-President at STR, said: "With 54 projects currently being built in Dubai alone, they are poised to be a major player in the development pipeline for years to come. In the Middle East, the UAE is exploding on the scene with four times the projects in the 'in construction' phase compared with its closest competitor, Saudi Arabia."

According to the new STR Global data, the Middle East and Africa hotel development pipeline includes 468 properties comprising 126,464 rooms.

Four of the seven chain-scale segments account for more than 80 per cent of the rooms in the total active pipeline. The luxury segment had the largest share, accounting for 25.1 per cent (31,706 rooms). The unaffiliated segment made up 24.3 per cent (30,739 rooms), while the upscale segment formed 21.2 per cent (26,829 rooms) and the upper upscale segment made up 17.2 per cent (21,791 rooms). The midscale, without-food-and-beverage segment accounted for 1.2 per cent (1,503 rooms), the smallest portion of the total active pipeline.

According to Lodging Econometrics, a global firm tracking hotel real estate, the Middle East will see 99 new hotels and 25,829 hotel rooms open in 2009, including the development pipeline and the sale and transfer of lodging real estate, followed by 110 hotels and 31,725 rooms in 2010. A majority of these will be in Dubai and Abu Dhabi.

In its lodging forecast and construction pipeline report on Europe, Middle East and Africa (Emea), Lodging Econometrics said in the first quarter of 2009, a total of 68 new hotels with 11,924 guest rooms opened in the Emea region, about 60 per cent of which were in Europe and 28 per cent in the Middle East.

"The global economic crisis, which has affected credit availability and caused a decline in consumer and business travel resulting in occupancy and room rates declining throughout Emea, is having a serious impact on lodging development," said Lodging Econometrics in its report. "New openings in the Middle East and Africa are poised to accelerate each year into 2011," the report said, adding that total new openings in Europe for 2009, at 277 hotels and 38,879 rooms, will be down 10 per cent compared to 2008. In 2010, however, guest rooms are expected to bounce back and set a new high, with 278 new hotels and 47,464 rooms scheduled to open.

Further, at 477 hotel projects and 142,702 guest rooms, the Middle East's total projects have fallen 14 and 13 per cent respectively from a peak in the second quarter of 2008, according to the findings.

Also, with more than 53 per cent of the region's total projects currently under construction, new hotel openings in the Middle East are expected to accelerate in 2009, 2010 and 2011 "as large, iconic projects come online", said the report.

The pipeline in Dubai alone stood at 124 hotel projects and 48,558 guest rooms, representing 34 per cent of all guest room developments in the region, according to the report. It said Dubai's average hotel project size is 392 rooms, "one of the highest for any country or market worldwide, second only to Las Vegas".

Dubai-based market research firm Proleads said recently the economic slowdown has resulted in the cancellation of about 6,500 rooms in the UAE in 2009, with about five per cent of the 893 planned hotel projects put on hold or scrapped.

According to Proleads, while 14 per cent of hotel projects in the UAE are put on hold, 15 per cent are in the design stages, eight per cent planned and nine per cent completed.

The Proleads data further revealed that currently Gulf countries are constructing 306 new hotels with 108,600 rooms budgeted at $140 billion (Dh514bn).

"With an average completion period of two to three years, 108,600 rooms should come online by 2011," Emil Rademeyer, Director of Proleads, told Emirates Business.

He said the UAE hotel sector would see about $20bn of cash flow into hotel projects under execution in 2009.

"The economic slowdown has resulted in much more cash flowing out of the hotel construction sector than into it. The industry is projected to restore its cash flow by late 2010 with more of cash flowing into the industry than out of it by 2011," said Rademeyer.

Africa will see 42 new hotels and 8,864 rooms come online in 2009, with a further 54 hotels and 10,072 rooms in 2010, according to the report.

It said Africa is working on 174 hotel projects and 35,253 rooms, a three per cent decline in projects and four per cent in rooms.

With 47 projects and 9,175 rooms, Morocco makes up 27 per cent of the continent's total hospitality projects, followed by South Africa with 25 projects and 4,250 rooms, and Nigeria with 16 projects and 3,939 guest rooms.

Europe's construction pipeline, on the other hand, stood at 912 hotel projects and 153,189 rooms at the end of the first quarter of 2009, down 11 per cent from 2008's second-quarter cyclical peak.

"Of the total, 457 projects and 78,155 rooms are under construction, which is the lowest level seen since the third quarter of 2007. Project and room counts in the stages of 'start construction' in the period up to March 2010 and 'early planning' remain high, as project migration towards 'under construction' is significantly slowed by the lack of attractive financing," the report said.

At 19 projects and 5,056 rooms, 'construction starts' in the Middle East witnessed a decline of 50 per cent from their peak "as lending and operating concerns are now belatedly impacting real estate development here, as they did much earlier in other parts of the world", said the report.

It said: "Construction starts in all three regions are continuing their downward trend that began a year ago, as the lack of available capital keeps a brake on project migration up the pipeline towards 'under construction', causing a backlog of 'stalled' projects. In Europe, construction starts are at a low with 68 hotel projects and 10,839 rooms and are expected to go yet lower."

Meanwhile, cancellations and postponements in the Middle East moderated in the first quarter of 2009 to 32 hotel projects and 8,178 guest rooms.

Dubai saw nine projects cancelled, six of which were "under construction".

Overall, project cancellations and postponements remain at high levels, said the report.

"The availability of financing is so restrictive and lodging operation declines are impacting so significantly that, of the 116 cancellations and postponements reported, 51 or 44 per cent were already under construction and abruptly halted," it said.

Of the 78 projects and 12,120 rooms cancelled or postponed in Europe, 22 projects were in the United Kingdom and 14 in Spain. Out of Europe's total of 78 cancellations, 36 projects were already under construction, according to Lodging Econometrics' findings.

The report further stated that in the first quarter of this year, all three regions reached trend line lows for new project announcements (NPAs) into the pipeline, as the lending and operating environment continued to impact developers' sentiment.

"About 79 new projects and 12,514 rooms were announced in Europe, 36 of which are in the UK. In the Middle East, 22 new projects and 6,801 rooms were announced, with five each in Egypt, Saudi Arabia and Abu Dhabi. And 18 projects and 2,642 rooms were announced in Africa, four in Morocco," it said.

The Emea Construction Pipeline Reports include development for the three stages of construction, three-year forecasts for new hotel openings, two years of prior new openings and current supply.


Asia Pacific remains strong

The Asia Pacific hotel development pipeline has 997 hotels with 239,313 rooms, according to STR Global.

"Hotel construction continues to be strong in the region," said Duane Vinson, Vice-President at STR. "The amount of development seen in China and India is truly astounding, with about 170,000 rooms in the active pipeline. Thailand, specifically Bangkok, is experiencing heavy development with more than 6,000 rooms in the 'In construction' phase and approximately 11,000 in the active pipeline."

Among the key markets, Shanghai reported the most rooms in the total active pipeline with 14,944, followed by Bangkok with 9,687 rooms. Beijing has 6,536 rooms in the total active pipeline. Five markets reported less than 500 rooms: Melbourne (398 rooms), Seoul (344 rooms), Osaka (274 rooms) Tokyo (160 rooms) and Brisbane (156 rooms).

Within the chain-scale segments, the upper-upscale segment accounted for the largest portion of the total active pipeline with 23.9 per cent of rooms (57,180), followed by the upscale segment with 23.6 per cent (56,531 rooms).

The economy segment and the midscale without-food-and-beverage segment accounted for the smallest percentage of the total active pipeline. The former reported 4.5 per cent of total rooms, while the latter had 2.6 per cent.


Europe stays on growth track

The STR Global Construction pipeline for August 2009 reveals that the European hotel development pipeline includes 585 hotels comprising 94,259 rooms.

"We continue to see growth in much of Europe," said Vinson. "By the end of this year, we expect another 123 properties to open. Upscale chains such as NH Hotels and Courtyard by Marriott are dominant in the major markets."

Three European countries account for more than 50 per cent of the rooms in the "in construction" phase, as well as the total active pipeline: Germany ended the month with 6,264 rooms under construction and 19,610 rooms in the total active pipeline; the United Kingdom reported 9,055 rooms in the construction phase and 18,005 in the total active pipeline; and Russia accounted for 6,806 rooms in the construction phase and 13,755 in the total active pipeline. The economy segment reported the largest portion of rooms in the total active pipeline, with 23.7 per cent (22,311 rooms), followed by the upscale segment with 23.1 per cent (21,741 rooms).

The luxury segment had a 9.1 per cent share (8,591 rooms) and the mid-scale without-food-and-beverage segment was at 6.9 per cent (6,509 rooms), accounting for the least amount of rooms in the total active pipeline.


Other strong Regions

The Central and South America hotel development pipeline includes 145 projects with 21,750 rooms, according to STR Global.

Among the key markets, Panama City ended the month with the largest amount of rooms in the "in construction" phase with 1,318 rooms. Three additional markets reported more than 500 rooms in the construction phase for the month: Buenos Aires (951), Sao Paulo (854 rooms) and Bogota (841 rooms).

According to STR Global, the Caribbean and Mexico hotel development pipeline includes 141 hotels with 18,535 rooms.

Among the countries in the region, Mexico reported the largest amount of rooms in construction phase at 5,289, as well as in the total active pipeline (10,810).

Puerto Rico followed with 1,163 rooms in the construction phase and 1,627 rooms in the total active pipeline, while the Bahamas ended the month with 1,439 rooms in the total active pipeline.

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