AHIC predicts a year of growth for the region

Pacek and Worsley

PAINTING a picture of a region set to consolidate its position as one of the world’s fastest growing centres of hospitality development, speakers at the annual Arabian Hotel Investment Conference (AHIC) 2012 at the Madinat Jumeirah in Dubai, UAE, underlined the strength of the Middle East with growth rates in excess of worldwide competitors.

The conference started with an introductory speech by Nenad Pacek, founder and president of Global Success Advisers, titled ‘Macro-Economic Overview: the Middle East After the Arab Spring’, set the tone for the rest of the conference, which was dominated by the state of the regional hotel investment climate.

“Most of the growth in the Middle East has been generated by high oil prices, while the Arab Spring contributed to an increase in government spending throughout the region,” he said.

“The fundamentals in the region, particularly the GCC, are among the best in the world given the combination of oil revenues, official reserves and the contribution of sovereign wealth funds,” he added, although warning that all sums could be jeopardised if oil prices were to fall substantially.

Turning to current performance in the hospitality and tourism sectors, more than in past years the region is now divided into winners and losers, with the outcome for the latter dependent on risk perception for investors, according to the latest performance monitors.

While overall, RevPar across the Middle East rose 10.4 per cent in the first quarter of 2012 compared to 2011– 50 per cent greater than Asia and North America – these figures varied between the major cities, with Dubai making the running with occupancy at 86.6 per cent and an average daily rate of more than $250, according to Elizabeth Randall, managing director at STR Global.

“While the average occupancy in the Middle East was 69 per cent, in markets such as Qatar, Bahrain and Kuwait, occupancy levels were down,” she said.

Stewart Coggans, regional executive vice president for Jones Lang LaSalle Hotels, emphasised the polarisation of regional markets, stressing the role of Dubai as regional leader in terms of performance.

“The market here is equipped to absorb the 12,000 rooms in the pipeline in the city with a healthy balance of 50:50 in terms of corporate and leisure business,” he said.  “Abu Dhabi, with an 80:20 split is not as robust with the 2,000 rooms opening in 2011 leading to a decline in average daily rate of 16 per cent.”

Saudi Arabia was the expected star performer for developers in the Middle East with stellar growth in domestic travel and religious tourism, giving Makkah the biggest regional RevPar growth at 33.8 per cent in 2011, as well as a pipeline figure, together with Madinah, of 20,000 rooms.

“Bahrain lost almost half of its hotel performance in 2011. It looks unlikely there will be any return to growth this year.

Muscat too suffered a fall in visitor volume last year. With a relatively small pool of international hotels any additions to the market will have bigger RevPar  implications,” he added.

“The Doha market remains finely balanced and I remain nervous about the performance this small market can deliver, while Syria and Cairo experienced a massive decline in 2011,” Coggans said.

RevPar in Damascus fell more than 60 per cent; Cairo by almost 50 per cent; Beirut by more than 20 per cent and Amman by more than 10 per cent, Coggans added.

For the hospitality industry, the figures underlined two contrasting points, according to AHIC organiser Jonathan Worsley, chairman & CEO of Bench Events and board member of STR Global. “While oil revenues are sustaining economic growth in the major producing countries and funding development of their travel and tourism industries, we have seen Dubai emerge as a striking example of a market that has thrived and survived with minimal oil reserves but a combination of private and public investment and joint will to balance supply and demand,” he said.

“Oil-rich economies are using their wealth to diversify away from dependency on hydrocarbon revenue.

This is very prudent and will benefit them in the long run. However, Dubai’s sustainable model could be adopted by non-oil economies,” he added.