Although metrics seem to be heading south in the face of rising supply, hotel owners remain interested in the Gulf and Indian Ocean region as long as the gap narrows between expectations and economic values.
ABU DHABI, United Arab Emirates—Despite a combination of rising supply and occupancy declines, largely a result of the oil slump, the hotel industry in the Middle East has seen some success.
For instance, take Dubai, which in 2016 was the fourth-most visited destination in the world with 15.2 million visitors, according to Philip Wooller, area director, Middle East and Africa, at STR, parent company of Hotel News Now. As a result, Wooller said, revenue per available room in the region fell noticeably during 2016—in Dubai by 9%, in Abu Dhabi by 13%, in Riyadh by 17% and in Doha, hit by high supply, by 23%.
Wooller was among the speakers on the first day of the second Gulf & Indian Ocean Hotel Investors’ Summit, where the mood was optimistic as attendees, predominantly owners, attested that growth remains possible in the region.
The consensus of the conference was that the requirements for growth are sound partnerships, a sincere understanding of what hotel owners and brands do best, and design and concepts that are uniquely suited for today’s travelers.
The bottom line to help the bottom line, attendees agreed, was that owners have to evaluate what they want from any investment.
Marko Vucinic, SVP, Dubai, at hotel consultancy JLL, said the principal concerns in the Middle East are high land costs, the high cost of debt, over-specified development costs and the existence of gaps between expectations and economic values.
But, he said, the Europe, Middle East and Africa region remains the most attractive market globally as the Euro continues to fall in value against the U.S. dollar.
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“Yes, we all need to think of how we evolve our loyalty plans, but we also need to realize what the cost of that acquisition is. Often you are automatically enrolled into a hotel loyalty program, and sometimes you have no choice, even though undoubtedly (loyalty) is a very powerful tool.”
—Guy Hutchinson, COO, Rotana Hotels, during a panel addressing how medium-sized brands can provide a competitive alternative for owners in the age of megabrands
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Although the continent is not included in the conference title, much of the first day was given over to the 54 countries of Africa. Of course, some of those countries are regarded as belonging to the Indian Ocean—Mauritius, Seychelles, Zanzibar and, unarguably its star in terms of RevPAR, Maldives.
Africa was mentioned because owners and operators in the Middle East—despite not being warned off from expanding or developing in the Gulf countries—are seeing Africa as the logical next step, and not just the Arabic countries of North Africa.
That is not to say every owner is going into every African country. There are concerns here, too. Raoul Gufflet, deputy CEO, head of corporate and institutional banking at The Mauritius Commercial Bank, which has been present in Africa for almost a decade, said the requirement of travelers remains white sand beaches, and there is a sense that Africa has few.
Bani Haddad, managing director at Dream Hotel Group, added much of the problem is that most African countries lack strategic marketing campaigns.
The Middle East and Africa both have mountains to climb, but with growing populations, increased global travel demand and capital looking to find healthy yield, the hotel industry is open for business.
—Terence Baker, Reporter, Europe