AHIC 2017 reveals strong potential in the mid-market hotel sector, with supply set to match that of luxury hotels in the GCC by 2021, reports STR

Dubai, UAE – The economy and mid-market hotel segment was identified as presenting a significant opportunity for hotel owners and operators alike at the Arabian Hotel Investment Conference 2017 (AHIC), being held at Madinat Jumeirah in Dubai from 25-27 April, 2017 and organised by Bench Events and MEED.

Expert speakers also identified a gap in the market for more experiential accommodation and entertainment attractions, especially in Dubai, as the market continues to diversify its hospitality offering.

Now in its 13^th year, the annual knowledge and networking platform for the global hospitality investment community, AHIC, attracted more than 700 delegates keen to better understand regional hospitality market fundamentals, opportunities and investment potential.

In an exclusive presentation, STR Managing Director Robin Rossmann provided insight into the midscale pipeline and performance in the GCC, revealing that mid-market supply is set to match luxury in the GCC by 2021.

According to STR, the 'Midscale' has out-performed the 'Upscale & Upper Mid Classes' and 'Luxury & Upper Upscale' classes since 2011 across the GCC.

Rossmann observed that mid-market hotels are under-penetrated and pointed to significant growth potential underpinned by growing intra-regional travel and demand for affordable travel.

Commenting on the trends, Jonathan Worsley, Chairman, Bench Events, Board Director, STR and Co-Founder of AHIC, said: "The mid-market has been discussed at AHIC for several years, but in 2017, we have witnessed a significant shift as the compelling investment model for lower development costs and higher, quicker returns has put the mid-market in favour. It was fascinating to explore the long-term view, looking at costs, rate strategy and returns with our many speakers and sponsors.

"Testament to the potential for the mid-market in the Middle East is the launch of US-based hotelier Choice Hotels International in the UAE and Saudi Arabia, with a pipeline of seven signed hotels already and many more to come. We were delighted to welcome Stephen P. Joyce, President & CEO, Choice Hotels International, Inc, as one of our keynote speakers to gain insights from one of the world's leaders in the mid-market hotel industry."

Commenting on the company's expansion, Stephen P. Joyce said the growth of the middle class and demand from travellers for quality, midscale accommodation had fueled Choice Hotels International's entry to the Middle East with three of its brands: Clarion, Comfort and Quality.

"We think the timing's now finally right for a company like Choice to enter the market in a fairly significant way and establish a strong moderate tier lodging component which is purpose-built, value-oriented, but high quality," said Joyce, during his live-on-stage interview with Jonathan Worsley.

Joyce added: "Historically when you look at this region and what people considered moderate, they kind of pull the chandelier and pull the marble and they don't change the operating model. Our operating model is there should be 20-25 employees in the hotel; it should run very high margins; it should be relatively low capex to get in; relatively high margin production and low cost to operate, but at the same time, satisfy the guests' needs in a way that isn't being done currently."

In a dedicated plenary panel session focused on investment in the mid-market, Elie Milky, Vice President Business Development MEA for The Rezidor Hotel Group, echoed this.

"We are very active in the midscale market in the Middle East, with 20 percent of our properties within that bracket. However, we have more in the pipeline along with serviced apartments. Operational efficiency starts at the development of the product; you may not need a comprehensive back of house and you can reduce the staff-to-guest ratio," said Milky.

In the same panel, Christian Nader, Vice President Development, Middle East & Africa, Kempinski & Shaza Hotels, said the company's new venture, Mysk by Shaza, is carefully positioned in the upper-midscale bracket.

"While Shaza is five-star, we studied the ROI to position Mysk above the four-plus star rating," said Nader.

"Owners are taking a different approach than previously, moving away from the need to have a luxury five-star property. However, they tend to demand add-ons such as ballrooms. We are managing their expectations by explaining that the Mysk brand and offering is sufficient for the market," Nader added.

In a separate session focused on Dubai and The Next Five Years 2017-2022, Gurdish Bassi, Economist at GRMC Advisory Consulting, revealed insights into tourist spend patterns in Dubai.

He predicted that total tourist spend in Dubai is expected to reach AED144 billion by 2021, compared to AED113 billion in 2016, and that the largest spending increase would be in the Entertainment sector.

Bassi said: "Shopping malls may not have it all; Entertainment and Experiential concepts will capture a significant proportion of total spend."

Klaus Assmann, Vice President – Hospitality and Retail, Dubai Parks and Resorts, added his views on the further potential for Dubai.

"I think theme parks, I think more MICE space, I think much more out of the box thinking from hotel operators [will follow]. As we know, there's growth already regarding shopping malls, there are many, many more projects coming up like this. I think it becomes much more residential, much more freehold, just in general I think it will grow more and more but on the same pattern as it is now," said Assmann.

Dr Martin Berlin, Partner, Deals Strategy ME, Global Deals Real Estate Leader, PwC, concluded: "Dubai will develop into a city that is on a par with other cities, other global megacities, other global destinations and gateway cities".

The conversation at AHIC centred around the theme Catalysts of Change, with technology and digitisation highlighted by many speakers as having a major impact on the future of the hospitality industry, and also featured discussions centred around topics including asset management, overseas investment, F&B, brands, third-party management and alternative investment models.

For more information visit: www.arabianconference.com

About AHIC 2021

AHIC, now in its 17^th year, is the annual gathering for the Middle East's hospitality investment community organised by global hotel investment event organiser Bench in partnership with Middle East business intelligence brand, MEED. AHIC creates a knowledge and networking platform for global and regional investors of all backgrounds, offering essential insights to investing in hotels, showcasing regional and international hospitality investment opportunities and facilitating direct connections with hospitality industry stakeholders. AHIC 2021 will be held at Madinat Jumeirah in Dubai from 20 to 22 September under the patronage of His Highness Sheikh Ahmed bin Saeed al Maktoum, Chairman of Dubai Airports, President of Dubai Civil Aviation Authority and Chairman and CEO of Emirates Airline and Group, whose continued support of the industry and AHIC has been critical to the region's tourism growth.

AHIC 2021 Sponsors

Sponsors include: Jumeirah Hotels & Resorts as Host Sponsor; Accor, Dur Hospitality, Hilton and SMIT as Platinum Sponsors; Emaar Hospitality Group, IHG, Marriott International, Millennium Hotels and Resorts, NEOM, Radisson Hotel Group, Rotana and Taiba Investments as Emerald Sponsors; Aleph Hospitality, Bespoke Modular Solutions, Colliers International, Compass Project Consulting, Farnek, HVS, The Indian Hotels Company, Insignia, IT Hospitality Group, Katch, Louvre Hotels Group, OBMI Architecture, SSH, STR, TIME Hotels, Toggle Hospitality and The London Project as Gold Sponsors; Al Tamimi and Company, Colliers Project Leaders, Deutsche Hospitality, Diriyah Gate Authority, Hotstats, JLL, MMAC Design, CHIC-NAIA, PWC, Ròya, Shangri-La Group, The Red Sea Development Company, and Voltere by Egis as Silver Sponsors; The Emirates Academy of Hospitality Management, Hospitality Asset Managers Association, Sustainability Hospitality Alliance and WiH Global as Supporters; JA Resorts and Hotels as Golf Supporter; and Nespresso as Official Coffee Partner.

Anne Bleeker
In2 Consulting FZE
+971 56 6030886
MEED