2011 MIDDLE EAST HOTEL SURVEYSHIFTING SANDS APRIL 2011 | PRICE US$250 Hala Matar Choufany Managing DirectorHVS Dubai | Liberty House Building, DIFC, 7th Floor, Office 715, Dubai, UAE This license lets others remix, tweak, and build upon your work non-commercially, as long as they credit you and license their new creations under the identical terms. Others can download and redistribute your work just like the by-nc-nd license, but they can also translate, make remixes, and produce new stories based on your work. All new work based on yours will carry the same license, so any derivatives will also be non-commercial in nature. www.hvs.com cbna
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8/21/2019 HVS - 2011 Middle East Hotel Survey - Shifting Sands
HVS Dubai | Liberty House Building, DIFC, 7th Floor, Of fice 715, Dubai, UAE
This license lets others remix, tweak, and build upon your work non-commercially, as long as they credit you and license their new creations under the identicalterms. Others can download and redistribute your work just like the by-nc-nd license, but they can also translate, make remixes, and produce new stories basedon your work. All new work based on yours will carry the same license, so any derivatives will also be non-commercial in nature.
www.hvs.com
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8/21/2019 HVS - 2011 Middle East Hotel Survey - Shifting Sands
HighlightsWhile the global economies cautiously stepped onto theroad to recovery in the second half of 2010, current unrestin certain parts of the Middle East and soaring oil prices areposing new questions about future hotel performance in
several parts of the region.Following the cancellation and suspension of severalprojects in 2009, 2010 witnessed the re-engineering andre-designing of projects that are now aligned with morereasonable expectations of each market’s potential forgrowth in the short to medium term. This shift also allowsfor the development of much-needed asset classes suchas limited service and budget hotels that will support andenhance tourism potential in the future.
All in all, international visitation remained ratherconservative in 2010 and an increase in regional anddomestic tourism was recorded. The current unrest incertain parts of the Middle East will displace high levels ofdemand to those cities that are now considered ‘safer’.
Growth in corporate and leisure visitation came as a resultof improved economic conditions during the second halfof 2010, coupled with more affordable rates across manycities.
As a result, 22 cities achieved higher occupancies whencompared to 2009, despite the opening of a number of newhotels.
In line with occupancy growth, 23 markets recordedaverage rate growth while the remaining markets struggledto improve rates when occupancy was coming underpressure.
The Middle East Hotel Survey 2011 includes 352 hotels andsome 93,500 hotel rooms (an increase of 36% on last year)
across 52 cities in the Middle East, making it one of the mostreliable benchmarking surveys in the region.
Overall, investment in budget and four-star hotels is gainingmomentum across most cities in the Middle East.
A total of 30 branded hotels, or approximately 8,000 hotelrooms, opened in the region in 2010, of which 65% openedin the UAE alone.
Several markets remain undersupplied and underdevelopedand there are large opportunities for investors anddevelopers. Damascus, Beirut, Erbil, Yemen, Kuwait andOman have not seen much growth in hotel supply over thelast few years and are becoming increasingly attractive forinvestors and operators.
Asset conversion and brand conversion seem to deinethe new growth strategy of operators, especially in thosemarkets that offer little opportunity for new development inthe current limited investment climate.
By aligning the product offering and service levels withmarket needs, the market share of hotels is being redeined
in a number of cities.
Dubai continues to scale new heights with a record 47.2million passenger movements in 2010, a 17.6% increase onthe 40 million passenger movements recorded in 2009.
Saudi Arabia, the FDI magnet, attracted more than half ofthe total Foreign Direct Investment in the Middle East in2009 and unoficial data suggest the same was true in 2010.
Saudi Arabia, the UAE and Qatar remain at the forefront ofhospitality development .
Tourist arrivals to the Middle East increased by 14% in2010, registering approximately 56.6 million tourists.
Winners and LosersIn 2010, most Cities in Egypt saw occupancy levels grow asa result of improved regional leisure travel. Al Giza was thewinner with growth of 19 percentage points (pp) followedby Dahab (9 pp), Al Quseir, Red Sea and Sharm El Sheikh(7 pp) and Cairo Heliopolis and Taba (6 pp). Cairo CityCentre marginally increased occupancy by 2 pp while CairoPyramids’ occupancy fell by just 1 pp.
In Jordan, all markets experienced an increase in occupancyafter a strong dip in 2009. Aqaba, a predominantly leisuredestination, grew by 12 pp, followed by the capital Ammanat 6 pp and Petra at 5 pp.
After a sharp decline in 2009, Doha occupancy grew by 8 pp,driven largely by increased corporate visitation. With theannouncement of the Doha 2022 World Cup, it is expectedthat corporate business will accelerate over the medium tolong term.
Despite some 15 hotel openings in Dubai in 2010, andspeculation about a double dip in the market, marketwideoccupancy grew by 3 pp, reaching 72%, driven primarily byintraregional visitation as well as an increase in corporatedemand. All other emirates suffered occupancy drops in2010 as they faced stiffer competition from Dubai. AbuDhabi’s occupancy fell by 9 pp and we expect furtherpressure from new supply in 2011 to bring marketwideoccupancy in Abu Dhabi to the low-to-mid 50s.
In Syria, all markets experienced occupancy growth;Saidnaya achieved a 15 pp growth while Damascus andLatakia achieved 3 pp and 4 pp growth, respectively.
Neighbouring Beirutexperienced a 4 pp fallin occupancy, despite anincrease in visitation tothe city. The most recentaddition to supply inBeirut in 2010 was LeGray Hotel and the FourSeasons Hotel, both ofwhich are at the high endof the market.
New emerging marketssuch as Erbil areexperiencing growthas demand currentlyexceeds the supply ofquality accommodationin the city.
Sanaa, the capital of Yemen, has seen deterioratingoccupancy levels as a result of the ongoing tension and
political instability over the last few years.All markets in Saudi Arabia have seen drops in occupancylevels ranging from 1 pp in Jeddah to 30 pp in Al Qassim.Riyadh experienced a 4 pp drop in occupancy while supplyhas grown by approximately 10%.
Some 23 cities registered moderate increases in averagerate; topping the list were those cities that have previouslyachieved an average rate of less than US$75.
Owing to a shortage in quality accommodation, marketwideaverage rate grew by 10% in Erbil in 2010.
In the current economic climate and with a number of newhotels still coming on stream in the near term, we projectaverage rate to remain stagnant over the next few years.
Very modest, if any, RevPAR increases were witnessed in2010, resulting in a lower value per key for most markets inthe Middle East.
MacroeconomicIndicatorsFollowing the decline in GDP growth in most cities in 2009,the start of the recovery was evident in 2010, notablyduring the second half of the year. Qatar witnessed thehighest growth in GDP at 14%, followed by Lebanon at 8%.Most other cities grew between 3% and 5%. The overalloutlook for 2011 at the beginning of the year remainedpositive, albeit the unrest that is currently being witnessedin several cities will undoubtedly hinder growth, especially
if the situation endures. On the other hand, the recent surgein oil prices is expected to support the GDP projections ofoil-rich economies.
Egypt, Qatar and Yemen grappled with double-igureinlation in 2010, and this trend is expected to continue. Thecurrent unrest in Egypt and Yemen will further deine themacroeconomic trend for these countries and we expecta revision of these estimates short ly. The increasing oilprices are causing valid concerns in regard to the increase ininlation across the world’s economies and, as we have seenin the past, the snowball effect cannot be ruled out in theregional economies.
Oil-rich Kuwait and Qatar lead the region in terms ofbudget balance, despite signiicant public spending by theirgovernments in building infrastructure.
Foreign DirectInvestmentSaudi Arabia, the FDI magnet, attracted more than half ofthe total Foreign Direct Investment in the Middle East in2009. A large population base, rich oil reserves and strongmacroeconomic indicators make it the undisputed leader,followed by UAE and Egypt. Unoficial data suggest thatSaudi Arabia once again tops the list in 2010.
Qatar and Lebanon feature as other leading countries forFDI. With the upcoming Doha 2022 World Cup, Qatar isexpected to attract a larger share of FDI in the next ten yearswhile Lebanon needs to pave the way for political stabilityin order to consolidate on FDI gains in future years.
Worldwide TouristArrivals and Middle EastGrowthThe Middle East bounced back sharply in 2010 with 14%year-on-year gains in tourist arrivals – twice the growthpercentage for the entire world and the highest across allcontinents. Asia followed closely with a 13% increase on2009 igures. Europe found itself trailing behind with amodest 3% gain on 2009 tourist arrivals.
Various factors have contributed to the growth in visitationto the Middle East ranging from rate corrections in mostcities making them much more affordable to increasesin the number of regional budget airline lights and theintroduction of additional routes to Asia, Americas andEurope by the main Middle Eastern carriers, such asEmirates, Itihad and Qatar Airways.
Airport PassengerMovementsDubai continues to scale new heights with a record
47.2 million passenger movements in 2010, a 17.6% increaseon the 40 million passenger movements recorded in 2009.Jeddah, without any signiicant gains in 2010, marginallyincreased its year-on-year passenger movements to ranksecond, with more than 15 million passengers, just enoughto edge out Doha to third place. In terms of percentage gainsover 2009 passenger trafic, Erbil witnessed a 28% increase,Muscat 26%, Amman 14%, Abu Dhabi 12%, Beirut andRiyadh 10%, and Sharjah 9%. Plans to extend airports arestill underway in most Middle Eastern cities albeit the delaysin commencing and completing these projects.
Sanaa, Yemen witnessed more than a twofold increase inpassenger trafic between 2008 and 2009; however, theseigures are outliers and the absolute increase in passengertrafic is rather low, despite the healthy percentage gain.
Market SegmentationDammam, Al Khobar, Riyadh, Doha, Abu Dhabi and Manamaare markets predominantly driven by corporate demand.Cities such as Muscat, Dubai, Beirut, Amman and Cairoattract a balanced share of corporate and leisure demand.
The Free Independent Traveller (FIT)segment remains a lucrative source of
income for the majority of cities in theMiddle East, including Amman, Beirut,Cairo and Dubai. On the other hand,Dubai, Amman and Manama enjoy a highlevel of meeting, incentive, conferenceand exhibition (MICE) business. Dubai,although commanding only 15% ofits total demand from this segment, inabsolute terms is still the region’s MICEmarket leader.
Source MarketsVisitation to Middle Eastern countries
originates primarily from neighbouringArab countries (owing to the shortjourney time) and Europe (owing tothe number and frequency of lightsbetween the two). Markets such asManama, Amman, Dammam, Damascusand Saudi Arabia received more than 60%of their visitation from Arab countriesand are heavily reliant on the economiccondition and trends of the Arab region.
European source markets witnessed a signiicant declinefollowing the global economic slowdown in late 2008 tomid-2010; however, with a correction in average rates, mostof the Middle Eastern destinations became more attractiveto a wider base of European tourists and the second halfof 2010 witnessed an increased inlow from these sourcemarkets. Cairo, Oman, Beirut, Abu Dhabi, Ras al-Khaimahand Dubai attract a large share of visitation from Europe.
0%
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FIT
Leisure
MICE
Corporate
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10%
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40%
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60%
70%
80%
0%
10%
20%
30%
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70%
FIGURE 7: MARKET SEGMENTATION
FIGURE 8: VISITATION FROM ARAB COUNTRIES 2010
FIGURE 9: VISITATION FROM EUROPE 2010
8/21/2019 HVS - 2011 Middle East Hotel Survey - Shifting Sands
Distribution ofInternational BrandsDubai retains top position with an impressive number ofhotels and hotel rooms in the ive-star category justifyingits position as a luxury destination. Cairo ranks secondfollowed by Abu Dhabi, Qatar, Beirut and Jeddah.
In the international four-star category, Dubai once againleads the pack, followed by Manama and Abu Dhabi. Morerecently, several Middle Eastern markets have seen theopening of four-star hotels, which proved to be more
resilient during economic downturns.
There is limited supply of internationally branded three-star hotels in the Middle East. Few internationally managedproperties are currently established in the UAE, and notablyDubai, while most other markets have a number of locallymanaged budget hotels.
Proposed Supply andNew OpeningsThe Middle East is set to attract additional operators andhotels in the coming three to ive years. A total of 190hotels – equating to approximately 61,000 hotel rooms –is currently under design or construction for the variouscities.
The UAE will attract 30% of the proposed supply with some56 hotels, 24,000 hotel rooms, in the coming four years.
Not surprisingly, Saudi Arabia ranks second with a planned41 hotels or some 12,300 hotel rooms. Beirut will have theleast number of conirmed properties and each is set tosee the opening of ive hotels, or approximately 1,000 keys.The most recent addition in Kuwait will be the Missonihotel, opening towards the end of May 2011. This is the irstMissoni hotel to open in the Middle East. The average sizeof proposed hotels ranges from 200 rooms in Beirut to 400rooms in Dubai.
Questions have been raised over the effect of additionalsupply entering the market in next three to ive yearsand the resultant impact on marketwide occupancy and
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S o u r c e : H V S R e s e a r c h
Egypt
Saudi Arabia15%
Lebanon
6%
UAE
64%
Qatar
9%
Egypt
6%
S o u r c e : H V S
R e s e a r c h
S o u r
FIGURE 10: TOTAL NUMBER OF BRANDED HOTELS FIGURE 11: TOTAL NUMBER OF BRANDED HOTEL ROOMS
FIGURE 12: DISTRIBUTION OF NEW OPENINGS 2010
S o u r c e : H V S R e s e a r c h
0 5, 000 1 0, 00 0 1 5, 00 0 2 0, 000 25 ,000
Beirut
Kuwait
Syria
Oman
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Qatar
Egypt
Saudi Arabia
UAERooms
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Kuwait
Syria
Oman
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Jordan
Qatar
Egypt
Saudi Arabia
UAEHotels
FIGURE 13: DEVELOPMENT PIPELINE BY NUMBER OF HOTELS AND NUMBER OF ROOMS
8/21/2019 HVS - 2011 Middle East Hotel Survey - Shifting Sands
average rate. We estimate reasonable growth in demandfor transient accommodation for most of the markets inthe foreseeable future. We expect average rate to remainstagnant in the more established market and to increaseconservatively in markets welcoming high-end and luxuryoperators.
Some 16 hotels opened in Dubai in 2010, ranging for limitedservice to luxury brands. The Armani hotel, which occupiesa number of loors in Burj Khalifa, opened in May 2010.Other hotels that entered the market include ibis, Pullman,Soitel, Centro, Rotana, Mövenpick, Ramada and Holiday InnExpress. Dubai accounted for around 50% of the new hotelopenings in 2010. Saudi Arabia saw the entry of severaloperators, including IHG, Accor, Hilton and Wyndham.
Operator PresenceDubai is the leading destination with at least 16international lags currently in operation in the market.Cairo ranks next and has attracted some 12 international
operators, followed closely by Doha (11), Kuwait (10)and Abu Dhabi (9). Markets such as Dammam, Damascus,Sharjah, Ras al-Khaimah and Erbil have a large number oflocally managed properties and present large opportunitiesfor international operators to grow either through newdevelopments or conversions.
While most of these cities are expected to have additionalbrands in the near future, some of the destinations – likeDamascus in Syria and Erbil in Iraq – will be closelymonitored by operators for geographical expansion.
IHG, Hilton, Marriott, Rotana and Starwood will add morethan 8,000 rooms each in the next ive years. Both Accorand Mövenpick will also expand their geographical presencewith just under 6,000 rooms each while Kempinski, Rezidorand Wyndham will bring a total of 11 hotels (or 3,000rooms) each.
Mandarin Oriental has signed a management agreementfor Doha and Abu Dhabi while the Four Seasons is expectedin Abu Dhabi, Manama, Kuwait, Doha and Oman. TwoFairmont properties are expected to open in Saudi Arabia,with further hotels in Oman and Fujairah. On the otherhand, Kempinski is to intensify its presence with upcomingproperties in the UAE, Bahrain, Syria, Saudi Arabia, Beirutand Oman.
A b u D h a b i
A l K h o b a r
A m m a n
B e i r u t
C a i r o
D a m a s c u s
D a m m a m
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D u b a i
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J e d d a h
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M e c c a
M e d i n a
O m a n
R a s a l
K h a i m a h
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S h a r j a h
Accor
Banyan Tree
Dusit
Four Seasons
FRHI
Hilton
Hyatt
IHG
Jumeirah
Kempinski
Mandarin Oriental
Marriott
Millennium & Copthorne
Mövenpick
Rezidor
Rotana
Starwood
The Address
Wyndham
existing presence; proposed properties
S o u r c e : H V S R e s e a r c h
FIGURE 15: EXISTING AND PROPOSED OPERATOR PRESENCE BY MARKET 2010
Accor
Mövenpick
Rotana
Hilton
Marriott
Starwood
InterContinental (IHG)
0 2,000 4,000 6,000 8,000 10,000
The Address
Mandarin Oriental
Four Seasons
Fairmont
Kempinksi
Rezidor
Wyndham
Accor
venp c
u r c e : H V S R e s e a r c h
0 2,000 4,000 6,000 8,000 10,000
S o u r c e : H
FIGURE 14: PROPOSED NEW SUPPLY BY OPERATOR (NUMBER OF ROOMS)
8/21/2019 HVS - 2011 Middle East Hotel Survey - Shifting Sands
HVS is the world’s leading consulting and servicesorganization focused on the hotel, restaurant, sharedownership, gaming, and leisure industries. Establishedin 1980, the company performs more than 2,000assignments per year for virtually every major industryparticipant. HVS principals are regarded as the leadingprofessionals in their respective regions of the globe.Through a worldwide network of 30 of fices staffed by400 seasoned industry professionals, HVS provides anunparalleled range of complementary services for thehospitality industry. For further information regarding ourexpertise and specifics about our services, please visitwww.hvs.com.
HVS DUBAI has a team of experts that conducts ouroperations in the Middle East and North Africa. The teambenefits from international and local backgrounds, diverseacademic and hotel-related experience, in-depth expertisein the hotel markets and mixed-use developments in theMiddle East and a broad exposure to international hotelmarkets. Over the last four years, the team has advisedon more than 180 projects in the region for hotel owners,developers, lenders, investors and operators. HVS hasadvised on more than US$45 billion worth of hotel andmixed-use real estate projects in the region.
Note: No investment decision should be made based on the information
presented in this article. For further advice please contact the authors.
Hala Matar Choufany is theManaging Director of HVSDubai and is responsible forthe irm’s valuation andconsulting work in the MENAregion. Hala is multi-skilled inthe real estate and hotelindustry and has worked
extensively in several markets throughout Asia,Europe, the Middle East and North Africa, havingworked previously for the London andSingapore/Shanghai ofices of HVS. Hala holds anMPhil from Leeds University and an MBA fromIMHI (Essec- Cornell) University, Paris, France.Since joining HVS, she has worked on strategyrelated assignments and mid- and large-scalemixed-use developments and conductednumerous valuations, feasibility studies, operatorsearches, return on investment analyses andmarket studies in Europe, the Middle East, Africaand Asia. Hala has a strong understanding of thedynamics and success factors that governproitable mixed-use projects and she maintainsexcellent contacts with key private andinstitutional investors, developers, inanciers,owners and operators, having a goodunderstanding of their investment requirements.
Hitesh Gandhi is an Assistant
Consultant and ValuationAnalyst with HVS Dubai. Hehas recently graduated fromthe Emirates Academy ofHospitality Management (inafiliation with École hôtelièrede Lausanne) with a Bachelors
of Science degree. He started his career withJumeirah Hotels in Dubai as a house-keepingteam leader. He joined Emirates National Bank ofDubai in 2008 where he provided systemsolutions research for the IT department. Hiteshjoined HVS Dubai in September, 2010.
HVS Dubai | Liberty House Building, DIFC, 7th Floor, Of fice 715, Dubai, UAE
This license lets others remix, tweak, and build upon your work non-commercially, as long as they credit you and license their new creations under the identicalt Oth d l d d di t ib t k j t lik th b d li b t th l t l t k i d d t i b d