HO­TEL PIPE­LINE

Hote­lier’s ex­clu­sive list of ho­tels in 2019 and be­yond across the re­gion

Hotelier Middle East - - CONTENTS - By Derek Is­sacs

Based on STR data, the GCC is ex­pect­ing an ad­di­tional 58,000 keys en­ter­ing into the mar­ket in 2019 with Dubai, Makkah and Riyadh fac­ing the high­est in­creases in sup­ply. In cer­tain mar­kets, this will ei­ther tip the bal­ance to an over­sup­ply sit­u­a­tion, or in cases such as Dubai, fur­ther push the equa­tion to a sup­ply driven mar­ket. In light of this and ac­cord­ing to Christo­pher Hewett, di­rec­tor of tri Con­sult­ing, and Christo­pher Lund, Col­liers In­ter­na­tional MENA head of hos­pi­tal­ity, stronger com­pe­ti­tion is a key chal­lenge for hote­liers, with per­for­mance lev­els con­tin­u­ing to soften in 2019, which is in con­trast to the up­ward trend in per­for­mance of global mar­kets. That said, Hewett pointed out that STR fore­sees that global mar­ket could be en­ter­ing into a pe­riod of per­for­mance stag­na­tion dur­ing the next 12-18 months, fol­lowed by down­ward per­for­mance as the pro­jected global eco­nomic mar­ket cools. “Some of the key chal­lenges hote­liers will face is stronger com­pe­ti­tion, chang­ing source mar­kets and oper­a­tional ef­fi­ciency,” said Hewett, ad­ding that hote­liers need to avoid any re­ac­tionary view on daily changes within the mar­ket but rather need to have ro­bust strate­gies on how to re­spond to the strong in­creases in sup­ply and en­sure the fo­cus is on their tar­gets.”

This is echoed by Lund who said 2019 is ex­pected to re­main a chal­leng­ing en­vi­ron­ment for hote­liers for the most part in the MENA. “Op­er­a­tors and own­ers are ex­pected to re­main cau­tious, and look to fur­ther en­hance cost sav­ing mea­sures in an ef­fort to re­main com­pet­i­tive.” How­ever, Lund pre­dicts a more pos­i­tive out­look in the medium- to long-term due to the gov­ern­ment tourism ini­tia­tives be­ing im­ple­mented across the re­gion such as Vi­sion 2030 in Saudi Ara­bia, which, ac­cord­ing to Hote­lier ‘pipe­line fig­ures for 2019 and be­yond’ is in­dica­tive of the more than 10,000 new keys ex­pected in Saudi Ara­bia.

“Dubai’s Tourism Vi­sion 2020 is also an im­por­tant strat­egy for hote­liers as it pro­vides guid­ance and in­sights on how the city’s tourism sec­tor will grow and evolve in the com­ing years,” Hewett said. The new tar­gets of 21-23 mil­lion vis­i­tors by 2022 and 25 mil­lion by 2025, it was well re­ceived in the mar­ket as it pro­vides greater clar­ity on the gov­ern­ments goals af­ter the Expo 2020 event. “With the strong pipe­line of prop­er­ties ex­pected to open prior to the event, there were con­cerns on how the mar­ket would per­form post Expo and what ex­tent, if any, would per­for­mance lev­els be im­pacted,” he added.

Ac­cord­ing to Lund, the Dubai mar­ket has seen a rel­a­tively stable oc­cu­pancy per­cent­age over the past num­ber of years, de­spite the strong in­flux of sup­ply. “At­tract­ing de­mand for the Dubai mar­ket does not seem to be an is­sue. How­ever, we are see­ing the rise of more price sen­si­tive con­sumers, so pres­sure on rates seems to be a key fo­cus for hote­liers at present.”

He also pointed out that the Saudi Ara­bian mar­ket has its sights firmly set on do­mes­tic leisure tourism, which he says the coun­try is strongly tar­get­ing in terms of growth, open­ing up vis­i­ta­tion to in­ter­na­tional leisure guests and in­creas­ing re­li­gious travel. Lund put this down to the fact that “re­gion­ally, lower oil prices have af­fected cor­po­rate de­mand, putting pres­sure on many mar­kets across the coun­try,” he said.

One mar­ket to watch is Egypt, where Lund says there are re­newed ef­forts by the Egyp­tian Tourism Min­istry to strongly mar­ket and di­ver­sify the of­fer­ing, as well as tar­get­ing new source mar­kets. “It is show­ing fruition, il­lus­trated by the surge in tourism de­mand in the coun­try,’ said Lund. The more es­tab­lished tourism mar­ket of the UAE has wit­nessed an in­crease in more af­ford­able ac­com­mo­da­tion op­tions, fo­cused in

One mar­ket to watch is Egypt, where Lund says there are re­newed ef­forts by the Egyp­tian Tourism Min­istry to strongly mar­ket and di­ver­sify the of­fer­ing, and tar­get new source mar­kets”

the mid-mar­ket sec­tor. “This is a trend ex­pected to con­tinue in the com­ing years and will be a key fo­cus for de­vel­op­ment op­por­tu­ni­ties,” he said.

In the short term, how­ever, mar­kets more de­pen­dent on leisure tourism are fac­ing chal­lenges from chang­ing source mar­kets, ac­cord­ing to Hewett.

He said that this is im­pact­ing spend­ing power, con­sump­tion choices and the over­all length of stay. “Hote­liers will need to an­a­lyse their mar­ket seg­men­ta­tion and de­velop strate­gies to en­sure that they are able to main­tain an ap­pro­pri­ate bal­ance be­tween oc­cu­pancy and av­er­age rates in or­der to pre­vent fur­ther weak­en­ing of per­for­mance,” he said.

One trend that Lund says is caus­ing rip­ples across the re­gion is the in­crease in the pop­u­lar­ity of ho­tel branded res­i­dences.

“The MENA, par­tic­u­larly the UAE and Saudi Ara­bia, have wit­nessed an in­crease in sup­ply and fu­ture sup­ply of this type of prod­uct,” said Lund, who likened the trend to that of more de­vel­oped mar­kets such as in North Amer­ica, where he says the con­cept is very well es­tab­lished.

Christo­pher Hewett, di­rec­tor of tri Con­sult­ing

Chisto­pher Lund, Col­liers In­ter­na­tional MENA

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