Mideast is biggest growth market for new hotels
Tourists click pictures in front of Jumeirah Beach Residence in Dubai. The year 2016 is expected to see a huge boom in hotel supply, which is set to outpace visitor demand.
Opportunities exist for boutique hotels and independent operators.
Dubai: The travel industry in the Middle East is expected to witness a lot of opportunities this year but there will be challenges as well, according to a new study by Insignia.
The Dubai-based brand enrichment company on Sunday disclosed predictions for the future of the region's travel and tourism industry. The report details opportunities for boutique hotels, independent operators, lifestyle accommodations and peer-to-peer models, such as Airbnb, as the region is saturated with luxury hotels.
Other predicted trends include a spotlight on the untapped destination of Iran, growing demand for home-grown experiences, rejuvenation of Dubai's historic district, the sourcing of sustainable talent, the need for local hospitality schools, and a boost in merger and acquisition activity, allowing hoteliers to tap into new visitor segments and markets.
"As a leading authority in brand creation for travel, hospitality and destination brands, we are privileged to be at the frontline of brand innovation within this vibrant sector," Insignia Worldwide chief executive officer Gaurav Sinha said.
The Middle East is the biggest growth market for new hotels as a percentage of existing supply.
The pipeline of under-contract hotels in the region is expected to increase 30 per cent, while room supply will see a 50 per cent boost. The Middle East holds the strongest pipeline growth percentage of all subcontinents, with 501 hotels totalling 144,321 rooms under contract.
Elaborating, the report said Dubai tops among five global pipeline cities in terms of rooms under contract with 39,323 rooms, followed by New York at 31,314 rooms, Makkah at 29,866 rooms, Sanya (China) 19,942, and Houston, Texas (USA) 17,905 rooms.
2016 will see a huge boom in hotel supply, which is set to outpace demand and exacerbate the continuing economic and geopolitical challenges by driving down hotel rates and adding big competition to a flat market. The winners will be creative, confident and agile companies that can navigate the bumpy road ahead.
Over the past 18 months, the Middle East has experienced a number of geopolitical and economic challenges, creating disruption to feeder markets and adding further pressure to a year which was characterised by terror attacks, currency fluctuations and the lowest oil prices the world has seen in over a decade.
While many of the geopolitical and economic issues of 2015 will linger this year, the tourism industry can look forward to the fruition of major infrastructure projects, such as new theme parks, convention centres, theatres and airport expansions, which towards the last quarter, promise to herald an influx of visitors from all sectors, and in particular, the MICE and family segments.
The Middle East is maturing in certain markets, such as Dubai and Abu Dhabi, and hoteliers and developers will have to get used to a cool-down as accommodation supply outpaces demand and an influx of mid-market hotels promises to push down rates.
Low cost airlines are already tapping into new markets - particularly those in Central Europe - to match up in-bound visitors with the new asset classes coming online.
A big question on everyone's mind this year is where staff will come from in the future. As the region continues to struggle in the absence of a local talent pool, hoteliers in particular will be forced to consider options. Power in numbers is set to be a big theme, as travel brands seek valuable tie-ups for a stronger position in a more competitive marketplace.
Merger and acquisition activity will continue in the wake of high-profile hotelier deals, such as FRHI's buy-over by AccorHotels at the end of 2015. The big three Gulf airlines, Emirates, Etihad and Qatar Airways, will continue to explore partnership opportunities with European and Asian airlines.
Mobile continues to evolve and travel brands will focus on app development to tap into ancillary revenues, create a more seamless booking experience and to communicate with guests. Exciting developments are also taking place in the mobile payment space, with Facebook Messenger now allowing businesses to transact with customers in a way that mimics peer-to-peer models.