WITH over 8,000 new budget hotel rooms expected to open by 2013, the region is opening doors to affordable travel. With the emergence of tourism hotspots like Abu Dhabi and Doha, the GCC can expect to see major changes in the development of tourism in the coming years. The scale of opportunity in the region means the GCC has become a hotspot for budget hotels among investors and operators in a market dominated traditionally by luxury and upmarket deluxe hotels. New budget hotel brands are entering the region with great speed and are set to revolutionise the range of choices for the budget-conscious travellers in both corporate and leisure segments.
Analysts and hoteliers believe that budget hotels stand to be the big winners from the growth in stopover traffic and the expanding number of low-cost carriers operating out of the region. The increase in the number of mid-market and more affordable hotels would also help boost the conferences and tourism sectors. The number of visitors travelling to the region is projected to double to 136 million by 2020 compared to 54 million in 2008.
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In view of the worldwide economic downturn which hit the average occupancy and room rates across the GCC, budget and limited service hotels offer strong investment opportunities because of their lower construction and operating costs and excellent returns even at modest occupancy levels. Historically also, budget hotels have shown to be recession-resilient.
Due to rapidly rising operating costs and reduced profit margins, an increasing number of local and international companies are cutting down on their annual travelling budgets and are seeking affordable but comfortable accommodation with brands that will not compromise on the service provided.
Hoteliers from different international chains thus strongly feel that there is an urgent need and a big gap in the market for quality budget hotels in view of the soaring demand not only in the UAE but elsewhere in the Mena region.
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Ghazi: budget hotels offer good opportunities |
The ‘no-frills’ limited service hotels or budget hotels as they are called traditionally operate on a fixed pricing model, relying on direct bookings, offering no corporate rates and paying zero commission to travel agents. But there maybe exceptions to this rule and some brands might want to operate in a manner usually associated with full service hotels offering higher rates during major events.
However, the power of the brand’s reputation will impact their growth as they will try to capitalise on the growing need for quality accommodation at a reasonable price throughout the year. In order to survive stiff competition in the market of relevance the particular brands’ established sales and central reservation systems will also help.
TRI research indicates a total of 8,678 rooms in the budget / limited service hotel category which will open in the GCC by 2013. Some of the well-known international hotel chains which have announced their foray into the GCC are tabled below, while the country-wise breakdown is listed in the table above.
TRI undertook extensive research to provide the most updated list at the time of going to press, however some properties might face delays in construction and opening dates/ or might announce that the project is not feasible at a later stage.
Link for the Future Supply of Budget Hotels in UAE, Saudi Arabia, Kuwait, Oman & Bahrain:
Link for the Budget Hotel Openings by Chain:
By SEMEEN GHAZI
Semeen Ghazi is a research manager with TRI Hospitality Consulting, Dubai, UAE.