Dh13trn boost for the Middle East - Emirates24|7

Dh13trn boost for the Middle East

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A massive $3.63 trillion (Dh13.3trn) is being invested in the Middle East travel and tourism industry in the form of 600 new hotels with 650,000 additional rooms creating 1.5 million new jobs.

 

Research by Fast Future and Global Futures and Foresight has revealed a sizeable amount of this will also be invested in leisure projects, cruise lines, tourism promotion and aviation developments across the region.

 

The World Travel and Tourism Council (WTTC) has estimated an additional 1.5 million jobs will be created in the region’s hospitality sector over the next 10 years.

 

While the UAE is estimated to add 97 new hotels over a period of three years, Qatar is expected to add 39 new hotels and 9,835 rooms; Kuwait is to add 19 hotels and 4,115 new rooms; Bahrain 15 hotels and 3,615 rooms; and Oman is likely to add four hotels and 766 rooms.

 

Half-year results from the HotelBenchmark Survey by Deloitte showed the Middle East hotel market continued to enjoy double-digit growth for the fourth consecutive year in 2007 – with revenue per available room, or revPAR, increasing 13.7 per cent.

 

During the first six months of 2007, revPAR increased about Dh62, fuelled by improvements in average room rates. At about Dh397, the Middle East continues to boast the highest revPAR of any region – above Asia Pacific and Europe at the equivalent of Dh356 and Dh367, respectively.

 

According to consultancy HVS International, on the other hand, the average room rate in the Middle East increased by 11 per cent to Dh510.

 

“Increases in liquidity and disposable income from regional travellers and the continuing appreciation of the euro against the US dollar have had a beneficial impact, resulting in a revPAR increase of nine per cent in  Goppar [gross operating profit per available room] to Dh338, reflecting an impressive 10 per cent increase,” said Hadrien Pujol, an associate director of HVS International.

 

Last year was again profitable for Dubai hotels, with revenues in the first nine months jumping 20 per cent, to rest at Dh 8.7 billion, according to the Dubai Department of Tourism and Commerce Marketing (DTCM).

 

The department puts down the revenue increase last year to a seven per cent hike in guest arrivals and 17.6 per cent rise in guest nights in Dubai hotels compared to the corresponding period last year. More than 5.1 million guests stayed in Dubai hotels between January and September last year, with the number of guest nights crossing the 15 million mark, DTCM said.

 

The number of hotels in Dubai also went up by seven per cent to 441 (about 46,775 rooms) from the same period a year earlier, DTCM said. And the number is set to rise to 554 by 2016, with the existing room capacity of hotels and hotel apartments expected to nearly triple with the new additions.

 

Dubai added about 5,900 new hotel rooms in 2007 (as per the DTCM data compiled until November 2007) and it expects to grow the current number of guest accommodation units by 172 per cent, to accommodate the targeted number of 15 million visitors a year in 2015, according to DTCM.

 

Around 18 hotels with around 6,500 rooms and apartments are scheduled to open this year. Of this, approximately 51 hotels will be in the four-star category and about 50 in the three-star category, which will be complete by 2010, as per the estimates of TRI Hospitality Consulting. The UAE will add 97 hotels in the next three years, according to DTCM.

 

Commenting on the supply, TRI’s Managing Consultant Emma Davey, said she agrees the supply would affect pricing in 2008. “Average annual room rates showed little change in 2007 against 2006, but moving into 2008 it is likely more than 20 per cent growth in room supply will begin to put pressure on room rates,” she said.

 

“Hoteliers are likely to accept a drop in occupancy before correcting rates, and it is possible this may be sustained until new supply  competes effectively, by this year-end and into the beginning of 2009,” said Davey.

 

DTCM’s Director-General Khalid bin Sulayem, said: “A shortage of hotel rooms has slowed Dubai’s tourism growth, with many openings delayed in 2007. Dubai is expected to see more hotel launches in 2008.”

 

This would include the 1,539-room Atlantis resort on the Palm Jumeirah. And early next year, Dubai will be adding the world’s first Armani Hotel to its portfolio of luxury properties. Located in Burj Dubai, the world’s tallest tower, the Armani Hotel will comprise 175 guest rooms and suites.

 

Meanwhile, Dubai’s biggest hotel development project – Bawadi, in Dubailand – aims to have 51 hotels and 60,000 rooms when completed in 2016.

 

The number of available hotel rooms in Dubai also increased by 5.4 per cent to 32,244 in the first nine months of 2007, whereas the average hotel rooms occupied went up by 9.7 per cent. And the average room occupancy rested at 86.9 per cent, an increase of 4.1 per cent, according to DTCM statistics.

 

But while the DTCM is still crunching numbers to arrive at a full-year estimate for Dubai hotel revenues for 2007, market experts have projected an overall positive incline.

 

“Given the historical growth in hotel demand, the forecast public spending on tourism in Dubai, and the current and future projects that are currently being developed in Dubai, we expect demand to experience an average annual growth of seven to 10 per cent over the next five to 10 years,” said Russell Kett, Managing Director of HVS International, a United Kingdom-based hospitality consultancy firm. With 2007 displaying a strong performance, a correction in the market is envisaged to take place between now and the year 2009, once more new supply comes on stream, he said.

 

“From 2010 onwards, we expect the market to recover, and occupancy to stabilise at around 70-75 per cent, when compared to the current occupancy levels of approximately 90 per cent,” said Kett.

 

He added: “We expect the additional supply, which will enter the market to put pressure on average room rate. In 2008 and 2009, we envisage the market will experience a slight decline in average room rate, of approximately five to 10 per cent (for five-star hotels).”

 

Furthermore, Dubai-based hoteliers are confident that approximately 22,000 hotel rooms are set to flood the market by end-2008, and that it will not cause a drastic downturn in revPAR.

 

Most who believe there will be sufficient demand to meet the supply, have also accepted that the sudden boost in hotel room numbers is likely to have significant effect on room rates, as well.

 

According to a Movenpick Hotels executive, the number of hotel rooms that are expected to be added in Dubai will create a much-needed surge in supply.

 

“This in turn will regulate the current imbalance of supply and demand and we can expect to see a downward adjustment in room rates. The realignment of rates will not cause a crash, but merely a market adjustment to the exorbitantly high rates that we have witnessed in recent years,” he said.

 

Meanwhile, with major developments under way, the Dubai Strategic Plan 2015 aims to maintain double-digit gross domestic product growth to deliver $108bn and per capita GDP of $44,000 by 2015.

 

By 2010, the emirate expects 15 million business and leisure visitors to contribute 20 per cent of the GDP.

 

Developments in the pipeline stretch out to 2020 and should deliver 80,000 hotel rooms by 2010 with 100,000 people employed in the sector.

 

Meanwhile, Dubai turned out to be the third-most expensive city in the world last year, as the average daily hotel room rate reached Dh1,234 in the first half of 2007 from Dh1,151 in 2006, according to an industry survey by Hogg Robinson Group (HRG).

 

The survey also said the Middle East and West Africa region recorded a 14 per cent increase, spurred by the strong performance of Dubai as well as further investment in Abu Dhabi and Qatar.

 

The UAE is now a major focus for the inbound leisure market, which impacts the number of rooms available for the corporate market, and with demand outstripping supply the growth in average rates looks set to continue for the foreseeable future, the survey revealed.

 

 

Budget boost

 

Dubai hotels sector enjoyed a healthy 2007. This can be largely attributed to the surge of branded budget (also referred to as economy or mid-scale or limited-service) hotels in the emirate, quoting an average per day room rate of between Dh250 and Dh350.

 

Since easyHotel made its foray into Dubai early last year, there has been no looking back for mid-scale hotels sector. The first easyHotel is due to be complete in early 2008.

 

Emirates Hotels & Resorts, a part of the Emirates Group, already runs the economy hotel chain, Premier Travel Inn, which operates more than 470 budget hotels in the UK with more than 31,000 rooms.

 

Ishraq Gulf Real Estate Holding in November last year launched a 244-room Express by Holiday Inn at DIC. The $30m limited service hotel is aimed at business and leisure travellers. About $600m would be invested by Ishraq in the next few years to develop the Express by Holiday Inn brand across the GCC.

 

And there are more budget hotels waiting to open doors to Dubai travellers in the next few years.

 
 
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