Archive
The Highs, The Lows...
Issue 25 July / August 2009
Although some parts of the Middle East are suffering at the hands of the economy, others are seeing unprecedented growth. Catherine Martin looks at the facts and figures from the latest performance studies and presents her findings.
REVIEWS
In early 2008, the Middle East was booming. Year-end results for 2007 showed that the region had the largest increase in visitor numbers in the world, its hotels achieved the highest occupancy and average room rates in the world, and it was attracting the attention of the world through its explosive growth and record-breaking developments. As a global economic crisis crippled Europe and America, the Middle East looked resilient. But, by the end of 2008, despite celebrating its fifth consecutive year of double digit growth in revenue par available room (revPAR), cracks were beginning to show. The financial woes that were affecting the rest of the world eventually caught up with the region: projects due for completion were delayed, some cancelled altogether, and new announcements were few and far between.
As 2009 dawned, the cranes that dominate the skyline ground to a halt and construction slowed, particularly in Dubai, the Emirate that was had previously been dubbed the fastest growing city in the world. With gloomy forecasts dominating the headlines, many speculated that Dubai was doomed. Year-on-year it doesn’t fare well. Deloitte’s latest Middle East Performance Review revealed that the revPAR reign Dubai had become accustomed to, may be about to end. In the first quarter of 2009, revPAR fell 36% to US$203, and with more rooms coming to the market occupancy fell to 72.4%, down 16.7%. This is likely to continue, with Lodging Econometrics calculating an influx of 13,250 rooms in 2009, and an additional 10,208 in 2010. Clearly rates have also been impacted and the bad news is that any bounce back of occupancy is likely to be at the expense of room rates as hotels heavily discount prices to attract guests.
Data compiled by STR Global shows that the Middle East and Africa region reported declines in all three key measurements in year-over-year results for April 2009 versus April 2008. Occupancy dropped 13% to 66.8%; average daily rate decreased 1.3% to US$164.41; and revPAR decreased 14.1% to US$109.80.
“It is getting harder to find a positive angle in the Middle East/Africa performance data,” says James Chappell, Managing Director of STR Global. “The region, which had been insulated somewhat from the effects of the global economic recession in the past, now seems just as susceptible as are the other three global regions.”
According to Lodging Econometrics’ Construction Pipeline survey for EMEA, project cancellations and postponements remain at high levels. In the first quarter, the Middle East saw 32 projects / 8,178 rooms cancelled.
However, there is some cause for optimism. Those who are confident of survival are focusing on the medium term and taking opportunities now to ensure that once the economy does recover, they are present in the marketplace. An annual survey of Gulf Co-operation Council (GCC) chain hotels conducted by Viability, a specialist hotel and real estate consultancy firm in Dubai, found that the majority of interviewees agreed that the next two years were looking very healthy throughout the wider Middle East region, largely thanks to the continuation of projects that were well underway before the recession kicked in. The study also revealed its strongest future pipeline ever recorded confirming 325 planned hotels with 92,026 rooms as of April 2009, compared with 295 properties and 82,357 rooms at the same juncture last year. A separate study by Proleads – Status of Developments in the Middle East Leisure Industry – found that currently there are 306 hotel projects under construction worth in excess of $140 billion.
Deloitte has reported a number of success stories so far this year: average room rates are rising in Riyadh; Doha now has the second highest revPAR in the region; Abu Dhabi is still solid with US$230 billion to be spent over the next five years; Syria is ramping up tourism investments with the aim of attracting 8 million visitors by 2015; and Beirut was one of the few destinations to see growth in occupancy, average room rates and revPAR, which was up a staggering 157.6% year-to-March 2009.
Even though the downturn has tarnished the region’s performance year-on-year, the fact remains that so far in 2009, the Middle East continues to be the best performing region in the world. Some might even say, it’s booming...
