Opportunity for mid-market by Hala Matar Choufany, HVS
The region has undergone a range of socio-political and economic shifts that have undoubtedly had ramifications for the MENA hotel industry. Hala Matar Choufany, president, Middle East and Africa at HVS, speaks about the opportunities emerging in the sector.
Historically, the main investors in the Middle East’s hospitality market have been government entities, followed by semi-private investment entities. Approximately 70 percent of the existing hotel inventory in the upper scale and luxury market has been developed and continues to be owned by these entities. The presence of upper scale and luxury hotels in key cities in the Middle East, most notably in the GCC, is well established, and, with the anticipated growth in tourism in the region, supported and facilitated by the expansion of tourism infrastructure, private owners and highnet-worth individuals are looking for suitable opportunities for the development of hotels.
Plenty of potential for mid-market
Mid-market hotel development became one of the fastest growing and successful segments in North America more than a decade ago. To begin with, developers were drawn to the appeal of the midscale hotel investment model - in many cases, an investment supported by low developments and operating costs - which, in turn, generated higher returns than the full service, four-to-five-star hotel counterparts. Another plus was that the mid-market hotel proved to be more resilient to the credit crunch and global economic downturn, experiencing a lower overall decrease in REVPAR than the typical four-to-five-star hotel rating during this time. Despite a series of current and future macroeconomic challenges, the MENA hotel investment and development pipeline remains strong, particularly amongst mid-market branded hotels. The Middle East consists of a diverse range of hotel markets that are stimulated by varied segments of demand, and, as primary markets continue to mature and saturate with four and five-star hotels, secondary markets are beginning to progress, supported by improved modes of accessibility and infrastructure developments.