Middle East Hotel Cycle Enters New Stage
In the midst of global economic instability, the MENA region continues its rapid landscape and infrastructure developments. According to MKG Hospitality, new hotel products will help maintain growth and sustainability.
The UAE on the other hand seems to have sacrificed ADR (now at $260) in order to achieve an OR of almost 81% and attain a RevPAR of just over $210.
Kuwait and Bahrain came in third and fourth, both with a RevPAR close to $164. Where Kuwait recorded a high ADR ($282) and low OR (58.3%), Bahrain achieved a higher OR (73.6%) and an ADR of $164. Other notable performers were Oman and Algeria, with RevPARs of $158 and $148, respectively.
“Although these are still rather positive results, it signals that many markets throughout the region are ready to enter the next stage of their hotel cycle. It is a natural progression and part of the hotel industry’s evolution cycle – to grow, restructure and consolidate. Understanding this is fundamental towards adopting the right strategies,” stated CEO, MKG Hospitality, Vanguelis Panayotis.
According to Panayotis, economic cycles determine the level of demand faced by the hotel sector. Adapting supply and hotel product to the demand also impacts performances. These different components generate cycles that are peculiar to the hotel sector and identifying the factors that influence the trend in the short and mid term is fundamental in planning and making the right decisions.
“The recent pace of hotel development throughout the MENA region has been nothing short of amazing. What’s even more positive is that it has proven to be sustainable, with an increasing number of tourist arrivals and in turn hotel OR throughout the region, year-on-year. The Middle East is also outperforming the world in terms of RevPAR growth and pipeline growth,” added Panayotis.
The Middle East is also forecasted to be the fastest growing region by 2020, with an estimated growth of 7.1 per cent per year, 69 million tourist arrivals and nearly $4 trillion in tourism investments.
“Although MENA is the most dynamic region in the world, it is still susceptible to current international risks, especially in the upscale hotel category. Hence the need for more conservatism towards research and accurate forecasting,” said Senior Consultant and Director of MKG’s office responsible for the region, Colette Ambiehl.
According to MKG Hospitality’s forecasts, midscale and budget hotel products will help achieve the region’s next stage of the hotel cycle.
“A destination should not be mono-segment, but rather have an even-spread of hotel products. This balance opens up the market and fuels more visitors, particularly seeing that the region has the highest chain hotel penetration rate,” continued Panayotis.
“New hotel segments contribute to a destination’s overall goal of attracting an increasing number of arrivals. They diversify a destination’s available product and provide more options for visitors – not everyone wants to or can stay in upscale hotels these days – therefore they capture a greater market share.”
“Furthermore, and more importantly for owners, midscale and budget hotels are more resilient towards a bubble burst and endure external threats somewhat better, such as economic recession.
“Above all, these hotel products allow operators to sustain a relatively high OR, ADR and positive RevPAR, whilst offering owners a good Return on Investment (ROI), as their operational expenses are more flexible,” concluded Panayotis.
About MKG Group | Established in 1985, MKG Group has built a reputation for solid business expertise and substantial know-how in the fields of tourism, lodging and food service. MKG Group meets the needs of each of its clients by providing the valuable analytical and decision-making skills necessary for success.
Methodology & Innovation | With proprietary analytical tools and other customised online applications available in real time, MKG optimises client performance, whether they are major companies specialised in tourism or a small investor. MKG Hospitality is a leader in hotel tourism and catering consulting, with the largest database in the world (outside the US), representing all segments, from budget to upscale hotels. MKG’s database, CompSet, contains a sample of over 11,000 corporate chain hotels, representing more than one million rooms. Since September 2004, CompSet provides daily, monthly and yearly monitoring of hotel indicators and analyses of its sample.
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