Changing dynamics:
Middle East hotel sector forecast
The Arab hospitality market has been facing shakiness and instability due to security concerns, which have been shadowing activity during the last year. Building on previous forecasts and considering the impact of global trends, Philip Wooller and Nehme Ayoub tackle the year ahead
The strains of increasing supply in the Middle East will continue throughout 2016, especially on the back of the Dubai 2020 Expo and the FIFA World Cup 2022 in Qatar. However, in the past the area has demonstrated its ability to adapt rapidly to unpredictability, therefore, making this a really interesting market. This is particularly true now as we witness changing dynamics in both domestic and international travel patterns to and from the area. We expect that the factors that have affected the hotel industry in 2015 will continue throughout 2016, with a stabilization of the dynamics towards the end of the year. Despite the market being affected by regional conflicts, the increase in supply is still a sign of investor interest in the area, which is a continuation of historically strong demand. Demand might slow its growth in 2016; however, this will differ between countries. As a whole, we believe that hotels will still have the ability to perform well, but this might be mitigated by both local and regional constraints such as decline in oil prices and the continued increase in supply, leading to a more competitive pricing environment. Egypt should also become even more competitive. Occupancy still lags behind the historic trends, and the increases in ADR are more the result of the fluctuation of the local currency, which, according to Oanda, (a Canadian-based foreign exchange company), has been dropping against the US dollar since 2010. As is the case with many global markets, security can always be a concern. The situation in Egypt will require some monitoring due to the impact of the Russian plane crash.