GCC hotel revenues to hit $24.92 billion by 2016

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Kuwait Financial Centre “Markaz” in its latest ‘GCC Hospitality report’ reveals GCC hotel revenues will reach USD 24.92bn by 2016.

The report also discusses key drivers of growth, identifies existing and emerging trends and illustrates challenges within the GCC hospitality industry.

Jumeirah Beach Hotel Dubai
GCC hotel revenues are expected to reach $24.92 billion by 2016, reveals Kuwait Financial Centre “Markaz” in its latest report. Photo: Sarah Ackerman/Flickr

The GCC Hospitality report analyses the Hospitality Industry’s supply/demand dynamic, estimates the current and potential market size, discusses the various investment opportunities while analysing the major players. The report also discusses the key drivers of growth, identifies existing and emerging trends and illustrates the challenges in the hospitality industry.

The estimated room revenue for the year 2011 stands at USD 17.83 Bn which is expected to reach USD 24.92 Bn by 2016 at a CAGR of 6.93 percent. The average occupancy rate for GCC is estimated to be 68 percent for the year 2012 and expected to reach an average occupancy of 73 percent by 2016.

The GCC is home to a high percentage of luxury hotels, and its pipeline is also dominated by many high profile projects. As such, the Average Daily Rent (ADR) for the year 2012 is estimated at USD 204 which is on the high side in comparison with other regions. While issues like political unrest and oversupply affected the OR and ADR in the past, the forecast for both these metrics is positive with increasing business as well as leisure tourist demand.

There are several growth factors driving the hospitality industry in the GCC, but international tourism has to be the most significant one. The GCC region is home to some of the finest hotels in the world and people visit the region for niche tourism offerings such as cultural, religious tourism as well as sports and event based tourism.

The region is increasingly seen as a MICE destination (Meetings, Incentives, Conferencing and Exhibition) while cities like Mecca and Medina are visited by religious pilgrims across the world. The improving economic condition, government support to the private sector, the strategic location of the GCC as an ideal transit point, along with the better reach from the airline industry bodes well for the hospitality industry.

Skewed supply of hotel rooms towards the upscale and luxury segment is a key trend in the hotel industry. These hotels provide services including spa and gymnasium facilities as demand for these amenities is on the rise. Also, some big international hotel chains are increasingly showing willingness to form tie-ups with local players and the latter are being recognized for their remarkable and novel services. Service apartments have grown in the GCC region with the rise of business travelers and expatriates who look for longer stays at reasonable prices.

The possibility of a negative shift in the socio-economic and political instability of countries in the Middle East could impact the revenues of the region’s hospitality industry. Other issues like oversupply in countries like UAE, Qatar and some parts of Saudi Arabia affected the OR and ADR values in the region. The high employee turnover and the labour laws in the region are a cause of concern for the hoteliers. The rising cost of construction coupled with stringent lending policies is some of the other key challenges in the industry.

The Middle East/Africa hotel development pipeline

STR Global in its Construction Pipeline Report for June 2013 has said that the Middle East/Africa hotel development pipeline comprised of 491 hotels totaling 120,795 rooms.

Dubai, the region’s key market, reported the largest number of rooms under construction with 10,391 rooms. Five other markets reported more than 1,000 rooms under construction: Riyadh, Saudi Arabia (5,598 rooms); Abu Dhabi, United Arab Emirates (3,727 rooms); Jeddah, Saudi Arabia (2,213 rooms); Cairo, Egypt (1,744 rooms); and Amman, Jordan (1,547 rooms).

Dubai’s Vision 2020 plan aims to attract 20 million visitors to the city state by 2020. A winning bid for Dubai at Expo 2020 will help grow the tourism sector and spur new hotel development.

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