Monday, January 21, 2019

Outlook for 2018

Optimism in the air
January 2018 7577

The recent oil price increase, ambitious country diversification plans and larger government spending budgets being announced are contributing to increased optimism in the market, although it has yet to translate into a significant improvement in corporate travel performance.

In 2018, some leisure markets are expected to fare better than purely corporate ones, Saudi Arabia will be introducing its much-awaited tourist visa and Muscat in Oman may see 1,868 keys added to its portfolio. Here is a further breakdown of 2018 projections for key countries in the region:



The UAE is a diverse tourism market with each destination catering to a variety of sources. The leisure markets within these cities have fared the best in 2017, and such trend is expected to remain in 2018.

Dubai: As the Expo 2020 is closing in, supply growth in Dubai is expected to gain increased momentum as over 20,000 keys are planned to enter the market in 2018, although the actual number may be lower than this depending on delays which are common due to typically overly optimistic development timeframes. Majority of hospitality supply share and growth continues to be positioned as upper-tier hotels (4-star and 5-star) in 2018.

Abu Dhabi: Abu Dhabi witnessed two notable openings in 2017, both of which were properties under Marriott International’s brands. It is expected that majority of the expected openings in 2018 are properties that were initially planned to open in 2017.

Ras Al Khaimah: As a growing leisure tourism hotspot alternative to Dubai, Ras Al Khaimah is expected to see notable activity in 2018 where over 1,000 resort keys expected to open in 2018. A number of new hotel projects were announced in 2017, especially on Al Marjan Island, consequently adding more resort keys to the market in the years 2019-2022.

Fujairah/Sharjah: Both Fujairah and Sharjah are anticipated to see over 1,000 keys enter each of the markets, respectively in 2018.


The recent oil price increase, ambitious country diversification plans and larger government spending budgets being announced are contributing to increased optimism in the market, although it has yet to translate into a significant improvement in corporate travel performance


With tourist visas planned to start in 2018, the hospitality market is expected to see a gradual increase in international tourism, starting with special interest groups in the short term. Historical sites (such as Mada’in Saleh) and large cities are expected to see the first influx of tourists in 2018. This will open new opportunities for various components of the value chain, including hotels, tour operators, tour guides, activity companies, etc. Despite this, domestic tourism is expected to be the major contributor in the near future. In 2018, domestic tourist trips is forecasted to reach 53.8 million, compared to 22.1 million inbound trips (including business and religious tourists).

Riyadh: In 2017, a total of 1,151 keys entered into the Riyadh hospitality market including the second internationally branded serviced apartment property in the market (Ascott Riyadh Olaya). In 2018, a total of 5,782 keys are announced to enter market; however as found in previous years a significant amount of supply is expected to be delayed by a further one to two years.

Jeddah: Jeddah witnessed a further increase to its primary hotel supply segments of four-star and five-star hotels as a total of 505 keys entered these segments in 2017. In 2018, initial plans indicated that supply growth is planned to reach over 20 per cent growth but it is envisaged that only 2,000 keys may actually be introduced to the market due to projects being put on hold or being delayed.

Khobar / Dammam: Notably in 2017, Carlson Rezidor demonstrated its growing presence as a key operator by supply in the tri-metropolitan area having opened two properties under the Radisson Blu brand. Similar activity is expected by Carlson Rezidor in 2018 as four properties or 886 keys are scheduled to open in 2018.

Makkah: Makkah had an active 2017 in terms of supply introductions with over 3,832 keys entering the market. The most notable opening being Holiday Inn Makkah Aziziyah (1,126 keys). As a core market for religious tourism, Makkah is expected to have the highest supply growth rate of all KSA markets over the coming years. In 2018 (with potential spill over to 2019-2020), a total of 12,884 keys are anticipated to enter the market with over 95 per cent of this supply positioned as four-star and five-star hotels.

Madinah: Coincidentally, as demolitions and expansionary works to areas around the Masjid Al Nabawi remain slow, so did supply growth in 2017 and as such no internationally branded supply entered the market. This trend is anticipated to continue further into 2018.



Muscat: Muscat has seen relatively few new hotels open in the past five years. Hence, with a large number of new hotels – including three and four-star hotels – the destination will appeal to an increasing number of visitors. The traditional European leisure markets will become less important for Muscat and Oman in general, while the main increase is expected to stem from Asian and Middle Eastern tourists. This trend is already apparent and expected to remain in 2018. The shift in source markets and increasing number of midmarket hotels is likely to drive an increase in affordable tourism within Muscat. In 2017, Muscat’s notable supply openings were all in the four-star hotel segment with 858 keys entering this segment. In 2018, a total of 1,868 keys are expected to enter the market; however, delays should be anticipated.

Salalah: The Salalah hospitality market is generally divided between the large beach resorts targeting the traditional European and Russian leisure markets, and the hotels which are closer to the city and khareef route. The latter hotels are relatively seasonal with the peak season during the khareef season (mid July to end of September). In 2018, beach resorts will continue their strategy to increase tourist groups to the destination, while the entire market will benefit from an increasingly popular khareef season, with visitors growing by 27 per cent last year and expected to continue the strong growth. Notable hotel openings that are confirmed for 2018 include Shaza Salalah and Agarwood.



Bahrain is expected to see a RevPAR decline of 7 per cent in 2017 compared to 2016, partly due to fewer leisure tourists from Saudi Arabia. Two notable hotel openings occurred in 2017 with the opening of Ibis Styles Bahrain Diplomatic Area and Wyndham Garden Manama. Delays have largely affected anticipated openings and the same should be expected in 2018 despite over 4,000 keys confirmed in the pipeline.



Kuwait has traditionally been a very stable hospitality market, and 2017 is expected to follow this trend with a negligible 1 per cent drop in RevPAR performance. In the short-term, relatively limited movement is expected in terms of Kuwait hotel performance. A new Four Seasons Hotel opened in 2017 with 284 keys. It anticipated that both AccorHotels and Swiss-Belhotel should open two properties each in 2018.



In 2017, the overall GCC countries’ hospitality markets saw a drop in performance in 2016 mainly caused by macro-economic factors such as the lower oil price, which resulted in lower corporate spending budgets, as well as the strong dollar which made it more expensive for European tourists to visit the region.

Leisure destinations in the region seem to be faring better than the purely corporate destinations, partly due to a comeback of the Euro and Ruble currencies, as well as a diversification of the source markets. Resorts are generally widening their reach, especially by targeting increasingly more Chinese and Indian tourists. In 2017, leisure markets such as Palm Jumeirah, Dubai Marina, Fujairah and Ras Al Khaimah are not expected to see RevPAR change more than +/- 3 per cent from last year, suggesting these are very stable markets.

This is compared to some of the corporate markets such as Riyadh and Al Khobar, which are expected to see 11 per cent and 14 per cent decline in RevPAR in 2017. These markets however, have longer terms plans to diversify their offerings and increase their demand base over time.

* Filippo Sona is director, head of hotels, Colliers International Mena

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