Sunday, October 21, 2018

Outlook for 2018

$14bn contracts may be awarded in 2018
January 2018 890

New data from Meed Projects, the online projects tracking service, predicts that more than $14 billion worth of hotel construction contracts will be awarded in the Mena region this year.

Ed James, director of Content and Analysis at Meed Projects, said: “After a relatively subdued 2017 up to end of November, which has seen $5.45 billion worth of new hotel construction contracts awarded, the value of hotels due to be awarded next year is more than $14 billion. This total would comfortably exceed the $8.5 billion awarded in 2016 and the previous record of $11.9 billion awarded in 2015.”

James added: “On the back of its forecasted performance, investment in hotels will comprise about 7 per cent of the total $200 billion scheduled projects spending in the Mena region next year, making it one of the most important construction subsectors. On a country basis, the UAE will be by far the largest market, with an expected $8.4 billion worth of contracts, followed by Saudi Arabia at $1.9 billion and Qatar at $1.7 billion.”

These figures will be discussed at the 14th edition of AHIC, which will be held from April 17 to 19 this year at the purpose-built AHIC Village in the grounds of the Waldorf Astoria Ras Al Khaimah, UAE, in partnership with Ras Al Khaimah Tourism Development Authority.



Hotels in the UAE already have a tourist tax and a municipality tax; adding on the 5 per cent value added tax (Vat) mandatory from January 1, 2018, will make things more expensive. Hoteliers are divided on their opinions on how the market will absorb this new cost, but Vincent Miccolis, country general manager Middle East & Turkey - The Ascott Limited, presents a positive and pragmatic view of things.

“As Vat is already standard practice in many countries and much of our clientele is International, we should not see too much hesitancy towards the business. For domestic travellers within the GCC, we may see some different behaviour trends to begin with, however through my experience with the initial implementation of Vat, within about six months trends stabilise again,” he says.

“In some markets we have absorbed the Vat, however, in other markets we have increased the rates to cover the Vat. It is a new challenge for us in this region, but one which we are not afraid to tackle"
– Vincent Miccolis


Will Vat eat into the profits of the industry and affect the bottom line? “In some markets we have absorbed the Vat, however, in other markets we have increased the rates to cover the Vat. It is a new challenge for us in this region, but one which we are not afraid to tackle,” he says.

The year 2018 continues to pose a downward pressure on average daily rates across all regions of the GCC and Turkey, caused by an increased supply accompanied by stable demand. It will be interesting to see which hotels in the country absorb the Vat, and which ones add it to the customer’s bill.

The UAE is often perceived as the thought leader in the region, so the rest of the Middle East will likely wait and see how Vat affects the market, and in due course introduce it in their own countries. 



Middle East carriers, on the other hand, are forecast to see net profits improve to $600 million in 2018 (up from $300 million in 2017), according to International Air Transport Association (Iata). Demand in 2018 is expected to grow by 7.0 per cent, outpacing announced capacity expansion of 4.9 per cent (the slowest growth since 2002). The region’s carriers face challenges to their business models and from low oil revenues, regional conflict, crowded air space, the impact of travel restrictions to the US, and competition the new super connector – Turkish Airlines. Despite the challenges, there is positive momentum heading into 2018.

The Airport Show, which will be held in Dubai from May 7 to 9, is the world’s largest annual aviation event and is expected to bring together more than 300 exhibitors from over 90 countries.

“The Middle East aviation industry is witnessing an exciting time with the region recording the second highest passenger traffic growth rate and continuing with its multi-billion-dollar airport expansion and modernisation programs. Whether it is the latest scanning technologies, passenger experiences or robot baggage handlers the region’s airports are investing in the latest of technology and concepts and stay ahead of competition. This exciting time in the industry will be reflected at the Airport Show 2018,” said His Highness Sheikh Ahmed bin Saeed Al Maktoum, president of Dubai Civil Aviation Authority.  

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