The latest HotStats survey of full-service hotels in seven MENA cities reveals that hotels in Dubai have witnessed rate-driven profitability growth — while hotels in Abu Dhabi are seeing a continuous increase in demand.
The survey conducted by TRI Hospitality Consulting Middle East, says Abu Dhabi hotels continued to attract an increasing number of visitors in June with hotels recording a 9.7 percentage point growth in occupancy during the month.
Although demand increased, Average Room Rates (ARR) declined 7.7 percent to USD 115.12; however it was not enough to prevent an 8.3 percent rise in Revenue per Available Room (RevPAR) and a 2.9 percent growth in Gross Operating Profit per Available Room (GOPPAR) to USD 29.57.
Peter Goddard; “Abu Dhabi is continuing to see an increase in visitor demand, as illustrated through a 9.7 percentage point growth in occupancy during June pushing year to date occupancy figures to 75.0 percent. The growth in demand is attributed to a 25.0 percent increase in visitors to the capital and a 12.6 percent rise in passengers through Abu Dhabi International Airport during the first half of the year. Although the market continues to rebound and strengthen, hoteliers continue to face considerable challenges in reversing declining average rates in the response to a substantial increase in supply.” — Peter Goddard, Managing Director of TRI Hospitality Consulting in Dubai
Dubai displays outstanding performance across the MENA Hotel Market
In June, key indicators maintained their growth with occupancy increasing by 3.6 percentage points to 79.2 percent, while a 6.2 percent rise in ARR to USD 207.49, drove RevPAR up 11.2 percent to USD 164.22. An increase in food and beverage revenues helped with driving a 7.3 percent growth in Total Revenue Per Available Room (TrevPAR) which boosted profitability by 12.2 percent to USD 90.37.
Peter Goddard; “Dubai’s hotel market continues to grow from strength to strength with a 3.5 percentage point growth in occupancy levels to an impressive 86.0 percent for the first half of the year. The high levels of demand continue to be driven by the strong economic activity within the city, coupled with its attractiveness as an all-round leisure destination. Furthermore, high attendance levels at large annual events and festivals have also contributed to this growth and assisted in boosting occupancy during certain periods of the year.”
Illustrating Kuwait’s performance, the survey revealed that Kuwait’s hotel market has shown resilience in the first half of the year with occupancy levels and ARR improving increasing 4.7 percentage points and 1.7 percent respectively, boosting RevPAR by 10.3 percent to USD 159.98. Strengthening performance in food and beverage revenues coupled with lower payroll expenses saw TRevPAR and GOPPAR increase by 17.4 percent and 20.8 percent to USD 357.20 and USD 168.72.
The major factor contributing to occupancy within Kuwaiti hotels has been corporate demand.
In 2013, the city hosted conferences and events, attracting government officials and private sector stakeholders — particularly in the energy sector. In June, Kuwait achieved a 10.7 percent growth in RevPAR performance to USD 147.84 driven by a 5.6 percentage point increase in occupancy. This resulted in a 12.8 percent increase in TRevPAR, however slightly higher payroll costs kept GOPPAR at USD 130.14.
Highlighting the hotel market performance across the Saudi Arabia, the survey states that Jeddah’s hotels achieved a 13.4 percent increase in Average Rate during the first half of 2013, while profits rise 45.4 percent in Sharm El Sheikh.
Riyadh’s hotel market maintained relatively consistent performance levels in June compared to the same period last year, albeit with a slight reduction of 0.7 percent in ARR to USD 223.67. For the first six months of 2013, the market witnessed a 1.3 percentage point increase in occupancy to 68.4 percent, however average rates fell by 2.1 percent to USD242.75. This reduction in average rates resulted in slightly lower RevPAR performance which fell 0.3 percent to USD 165.96, and when coupled with higher payroll expenses saw the market achieve a marginally lower GOPPAR levels at USD 150.52.
Hotels in Jeddah recorded 85.4 percent occupancy in June similar to the same period last year, however the market was able to achieve a 16.1 percent increase in ARR to USD 263.11, the second highest in the region. This growth saw total revenues and profitability increase by 11.7 percent and 17.1 percent respectively during the month and continues to follow the trend for 2013. The market recorded a 13.4 percent increase average rate during the first six months of the year, and although occupancy levels were lower by a marginal 0.9 percentage points, year to date figures of 79.7 percent shows the strength of the corporate and leisure demand. Hotel profits also rose 12.8 percent attributed to the increase in top line revenues.
Peter Goddard; “Saudi Arabia’s two main hotel markets recorded opposite trends in the first half of the year with Riyadh experiencing a reduction in average rate and profits while Jeddah continues to strengthen. Although, Riyadh is currently facing a situation of declining rates, this is only expected to continue in the short term as the market adjusts to the sharp increase in supply. Jeddah has been able to capitalise on strong demand by increasing average rates during peak periods, resulting in an increase in RevPAR by 12.1 percent. We expect this to continue for the remainder of 2013 as the limited new supply in the short term will allow hotels to maintain this growth strategy.”
Due to a strong increase in demand, Sharm El Sheikh hotels witnessed significant gains in revenue and profitability performance in the first half of 2013. A 26.7 percent growth in RevPAR was attributed to a 17.3 percent increase in rates to USD 47.18, and occupancy increasing 4.4 percentage points to 59.8 percent. TrevPAR growth was driven by high conference and banqueting revenue which propelled GOPPAR by an impressive 45.4 percent when combined with the effects of declining operating expenses and payroll costs.
Egypt shows improvement
Quoting performance of hotels in Egypt, the survey states that Cairo showed a 7.0 percent improvement in RevPAR, solely driven by ARR increasing 12.4 percent to USD 111.97 as occupancy fell 2.3 percentage points to 44.7 percent. The month of June saw performance exceed year to date levels, as top line revenue growth fuelled a 28.6 percent increase in profitability to USD 44.45. However, declining food and beverage revenues coupled with higher operating expenses resulted in a moderate 4.1 percent increase in GOPPAR to USD 40.29.
Peter Goddard; “Although both markets in Egypt experienced a marginal recovery from declining in performance suffered during previous years, Sharm El Sheikh registered the largest improvements in profitability, attributed to returning holidaymakers. Furthermore, RevPAR is being restored through a slow increase in average rates, which is considered critical to sustaining long-term recovery after the 2011 revolution.”