Local Business

UAE and Saudi Arabia lead Middle East hospitality

Muzaffar Rizvi (muzaffarrizvi@khaleejtimes.com)
Filed on June 15, 2014

Gulf nations accumulate 68% of existing room supply in region

UAE and Saudi Arabia lead Middle East hospitality (/assets/oldimages/hosp15062014.jpg)The UAE and Saudi Arabia are leading the hospitality industry in the Middle East region as they have a stronger pipeline in terms of rooms under contract, according to data from STR Global.

The Gulf nations combined to accumulate to 68 per cent of the existing room supply in the Middle East, where STR Global tracks 13 countries. These two countries also account for 70 per cent of rooms in the region’s pipeline.

The Middle East overall is the fastest-growing region in the world, with 99,199 rooms under contract in the region. Existing room supply is expected to grow by 40 per cent.

In terms of supply and rooms under the total active pipeline, STR Global said the overall picture of development in the Middle East shows a clear differentiation between the strongest countries — the UAE and Saudi Arabia.

“Despite the 12-month moving average supply growth rate of the UAE [+8.2 per cent], Saudi Arabia has a stronger pipeline in terms of rooms under contract, or total active pipeline. The amount of rooms under contract in Saudi Arabia [35,587 rooms] is slightly more than the total in the UAE [34,226 rooms]. This would mean a 60 per cent supply growth in Saudi Arabia and a 32 per cent supply growth in the UAE,” STR Global said.

The under contract data included projects in the in construction, final planning and planning stages, but did not include those in the unconfirmed stage.

In Saudi Arabia, the upscale and upper midscale hotels lead with the most rooms under contract, while the luxury and upper upscale hotels top the most rooms under contract in the UAE.

In the UAE, Dubai remained in front due to strong persistent demand in May and the emirate is projected to post a three per cent growth in revenue per available room, or RevPAR, this year.

STR Global’s preliminary data for Dubai indicated positive RevPAR performance in May. The emirate reported an 8.8 per cent increase in room supply and 6.6 per cent rise in demand during May despite a 2.5 per cent decline in occupancy level to 78.1 per cent. The emirate recorded a 1.7 per cent jump in RevPAR to Dh632.23 while average daily rate, or ADR, rose 4.3 per cent to Dh809.88 last month.

“Demand remained strong for Dubai. However, supply growth continued to pick up for the fifth month in a row, leading to a decline in occupancy performance in May,” Elizabeth Winkle, managing director of STR Global, said in a statement to Khaleej Times.

STR Global provides clients — including hotel operators, developers, financiers, analysts and suppliers to the hotel industry — access to hotel research with regular and custom reports covering Europe, Middle East, Africa, the Asia-Pacific and South America. It provides a single source of global hotel data covering daily and monthly performance data, forecasts, annual profitability, pipeline and census information.

“Continued ADR growth pushed the metric above 2008 levels. Further rate growth is expected to drive positive RevPAR performance throughout 2014,” she added.

CBRE Hotel and Hospitality also noted the similar trend and said Dubai’s hospitality sector continued to benefit from strong tourist demand.

“After a fantastic performance in 2013, wherein average hotel occupancy rates reached over 80 per cent across the market, 2014 has started on a similar firm footing with rising visitor numbers and high occupancy rates,” the May update of CBRE Hotel and Hospitality said.

“2014 is set to see significant new supply with around 4,000 new hotel keys set to be delivered, taking total room inventory to 67,000 by year-end. In addition, there are also a further 2,000 hotel apartments set to be delivered during the course of the year,” it said.

In another report, STR Global said about 137,784 rooms are in total active pipeline across 589 hotels in the Middle East and Africa.

The upper upscale segment accounted for the largest portion of rooms under contract with 35.8 per cent and 49,260 rooms, according to the STR Global construction pipeline report for May.

Elaborating the chain scale segments, the report said three other segments each accounted for more than 10 per cent of rooms under contract.

“The upscale segment accounted for 19 per cent with 26,117 rooms, the luxury segment claimed 18.2 per cent share with 25,044 rooms and the unaffiliated segment accounted for 14 per cent with 19,327 rooms,” the report said.

It further explained that the upper upscale segment also made up the largest portion of rooms under construction (36.2 per cent with 23,570 rooms). “The luxury segment [20.8 per cent with 13,567 rooms] and the upscale segment [20.2 per cent with 13,174 rooms] each made up a significant portion of rooms under construction in the region,” the report said.

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