7 ho­tel trends an­tic­i­pated this year

Hospitality News Middle East - - IN THIS ISSUE -

Dale Qi Shen, as­so­ciate di­rec­tor, ho­tels strate­gic ad­vi­sory ser­vices at CBRE Mid­dle East re­gion, one of the largest com­mer­cial real es­tate ser­vices and in­vest­ment firms in the world, pin­points seven grow­ing trends in the re­gion’s ho­tel in­dus­try to look out for 1. Growth in vis­i­tor num­bers prompted by an ease in visa reg­u­la­tions

In order to achieve their re­spec­tive tar­geted vis­i­tor num­bers (Dubai 2020 Tourism Vi­sion, Saudi Vi­sion 2030 and Oman Vi­sion 2020), GCC coun­tries are eye­ing new source mar­kets and easing their visa re­quire­ments. The UAE and Oman now grant visas on ar­rival to Rus­sian, Chi­nese and In­dian cit­i­zens. Saudi Ara­bia also re­cently an­nounced its own plans to is­sue tourist visas as of Q1 2018. The easing of en­try re­stric­tions in the UAE proved to be a suc­cess in 2017, with vis­i­tor num­bers from these source mar­kets up sig­nif­i­cantly. In Dubai, for ex­am­ple, ar­rivals from In­dia, China and Rus­sia in­creased by 17 per­cent, 46 per­cent and 111 per­cent re­spec­tively, yearon-year. Go­ing for­ward, ar­rivals from China are ex­pected to in­crease by 21 per­cent to reach 2.5 mil­lion by 2021. Fur­ther­more, ad­di­tional GCC ho­tels are ex­pected to be listed on Ctrip.com, China’s num­ber one travel web­site, as in the case of the Ar­mani Ho­tel Dubai, which ap­peared there in early Jan­uary. The In­dian source mar­ket is also ex­pected to be­come more im­por­tant in the GCC’S vis­i­tor seg­men­ta­tion due to the coun­try’s rel­a­tive prox­im­ity to the re­gion. In­dian mil­len­ni­als, some 400 mil­lion peo­ple, look­ing for a quick es­cape are likely to rep­re­sent a sig­nif­i­cant share of the coun­try’s out­bound visi­tors com­ing to the GCC. More­over, the de­ci­sion to re­store flight con­nec­tions be­tween Egypt and Rus­sia in Jan­uary is ex­pected to in­crease the flow of Rus­sian na­tion­als to the re­gion.

2. Sig­nif­i­cant in­crease in sup­ply

With GCC coun­tries aware that in order to achieve their vis­i­tor num­ber tar­gets, they must in­crease their ac­com­mo­da­tion ca­pac­i­ties, there is ev­i­dence of a sig­nif­i­cant port­fo­lio, both un­der con­struc­tion and in the plan­ning stage. The GCC re­gion en­com­passes around 2,000 on­go­ing hos­pi­tal­ity projects, two thirds of which are lo­cated within the UAE and Saudi Ara­bia. In 2018, Dubai is ex­pected to add ap­prox­i­mately 17,000 ho­tel rooms to its cur­rent in­ven­tory. Fur­ther­more, ac­cord­ing to MEED Projects, there are over USD 14 bil­lion worth of hos­pi­tal­ity con­struc­tion con­tracts to be awarded in 2018 in the MENA re­gion. This in­com­ing new sup­ply will put pres­sure on av­er­age daily rates (ADRS), as well as oc­cu­pancy, cre­at­ing ad­di­tional im­pe­tus for older prop­er­ties to un­der­take re­fur­bish­ment pro­grams or to seek re­clas­si­fi­ca­tion. The ad­di­tional sup­ply may also lead to a re­struc­tur­ing of the mar­ket in terms of own­er­ship, par­tic­u­larly within mar­kets where for­eign own­er­ship is a fac­tor, and we ex­pect a grow­ing num­ber of ho­tel trans­ac­tions in the years to come.

3. New de­vel­op­ments po­si­tioned to­wards life­style, green and mid­scale of­fer­ings

As the GCC hos­pi­tal­ity mar­ket con­tin­ues to ma­ture from its ex­ist­ing pro­vi­sion of lux­ury, branded ho­tels and aged owner-op­er­ated ac­com­mo­da­tion, the need for more up­scale and mid­scale de­vel­op­ments reach­ing in­ter­na­tional stan­dards is an­tic­i­pated to rise in order to meet the de­mands of a wider spec­trum of visi­tors. Con­se­quently, more life­style and mid­scale seg­ment prop­er­ties have be­gun en­ter­ing the mar­ket. In ad­di­tion, con­cepts with in­no­va­tive ac­com­mo­da­tion so­lu­tions of­fer­ing com­mu­nity spa­ces that in­crease guests’ in­ter­ac­tions, such as in­for­mal and open-plan meet­ing and lounge ar­eas, are gain­ing in im­por­tance. More de­vel­op­ers are also aspiring to de­liver en­vi­ron­men­tally friendly build­ings. In Dubai, Di­a­mond De­vel­op­ers has be­gun build­ing its IHG In­digo ho­tel in Sus­tain­able City, which will be 100 per­cent so­lar pow­ered. In a sep­a­rate move, Emaar re­cently part­nered with the Emi­rates Green Build­ing Coun­cil to get its ex­ist­ing and up­com­ing prop­er­ties Green Key Cer­ti­fied.

In­dian mil­len­ni­als, some 400 mil­lion peo­ple, look­ing for a quick es­cape are likely to rep­re­sent a sig­nif­i­cant share of the coun­try’s out­bound visi­tors com­ing to the GCC

4. Fur­ther oper­a­tion ra­tio­nal­iza­tion

In most of the GCC mar­ket, gross profit mar­gins (GOP) have de­creased due to the chal­leng­ing conditions of the past few years, which have forced ho­tels to

ra­tio­nal­ize their oper­a­tions and di­ver­sify their rev­enue mix. Ho­tel op­er­a­tors and own­ers have started to value-en­gi­neer their cost struc­tures and put their sup­port func­tions into clus­ters, as well as rene­go­ti­at­ing pro­cure­ment con­tracts and out­sourc­ing cer­tain back-of-house oper­a­tions. Ho­tels are also look­ing at var­i­ous ways of adding value to their pub­lic ar­eas by cre­at­ing new leisure con­cepts, such as pop-up cine­mas and mini in­door golf facilities, while also leas­ing out op­er­ated F&B out­lets, spa or gym com­po­nents. Mean­while, the func­tion of rev­enue man­age­ment is be­com­ing ever-more im­por­tant, since a de­tailed rev­enue strat­egy is cru­cial to avoid strong rate fluc­tu­a­tions.

5. VAT im­ple­men­ta­tion in GCC coun­tries

While Bahrain, Kuwait and Oman de­cided to de­lay im­ple­men­ta­tion of VAT to 2019, the UAE and Saudi Ara­bia in­tro­duced the tax from Jan­uary 1, 2018, at a rate of five per­cent. De­spite hote­liers across these mar­kets declar­ing that im­ple­men­ta­tion has been smooth, VAT is ex­pected to de­crease the rel­a­tive at­trac­tive­ness of the coun­tries that have im­ple­mented the tax com­pared to those that have not. While some ho­tels will do their ut­most to soften the im­pact of the tax by re­duc­ing the net room rate, guests will still, in most cases, have to pay VAT, which will in­crease ac­com­mo­da­tion costs. This, in turn, could weigh on oc­cu­pancy rates, with al­ter­na­tive des­ti­na­tions out­side the GCC, but within the MENA re­gion, per­haps reg­is­ter­ing a com­men­su­rate up­turn as a re­sult.

6. Tech­nol­ogy

Hote­liers are con­stantly look­ing at ways to im­prove guests’ ex­pe­ri­ence, and tech­nol­ogy will be mak­ing a ma­jor con­tri­bu­tion to their ef­forts in 2018. Pow­er­ful cus­tomer re­la­tion­ship man­age­ment (CRM) soft­ware, as well as smart tele­vi­sions that al­low guests to use their me­dia ac­counts on their room’s TV, are ex­pected to be part of this. Mo­bile phone ap­pli­ca­tions are also set to play an im­por­tant role in 2018, as op­er­a­tors con­tinue to im­ple­ment mo­bile check-in and mo­bile key­less ac­cess.

7. Health and well­ness

Health and well­ness are play­ing an in­creas­ingly big­ger role to­day, and hos­pi­tal­ity must amend its of­fer­ing to adapt to this trend. Prop­er­ties are ex­pected to re­visit their F&B el­e­ment and con­cepts, to match guests’ chang­ing expectations, as well as to re­view their spa and gym busi­ness ap­proach. Hil­ton re­cently in­tro­duced its Five Feet to Fit­ness room, where guests can work out within their own room and IHG’S EVEN brand is built around health and well­be­ing. Within the re­gion, The Re­treat Palm Dubai – Mgallery by Sof­i­tel opened in 2017, of­fer­ing dis­tinc­tive well­ness pro­grams for its guests.

Ho­tels are also look­ing at var­i­ous ways of adding value to their pub­lic ar­eas by cre­at­ing new leisure con­cepts, such as pop-up cine­mas and mini in­door golf facilities

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