HotStats MENA Chain Hotels Market Review – June 2014

The Abu Dhabi hotel market continued to grow from strength to strength, as strong top-line performance elevated profitability levels in the first six months of 2014, according to the latest HotStats survey of full service hotels in five MENA cities commented on by TRI Hospitality Consulting Middle East.

Increasing demand raised occupancy levels by 4.9 percentage points to 78.2%, drove revenue per available room (RevPAR) up by 6.8%, while average room rates (ARR) remained stable in the first half of 2014. In the month of June, ARR and occupancy increased by 4.8 percentage points and 3.7% respectively, prompting RevPAR to rise 11.4% to US$85.25. Higher contribution of non-rooms revenues, particularly from conferencing activities, boosted total revenue per available room (TRevPAR) by 9.0% to US$200.96 and pushed the bottom-line profits up 31.3% to US$31.39 during the month.

"Occupancy growth allowed hoteliers to maintain steady average rates during the first six months of the year, as the market showed signs of stabilisation. ARR have increased for four consecutive months while occupancies have seen a consistent upward trend for nearly two years. Demand growth within the hotel market coincided with the strong performance of Etihad Airlines during the period, as the national carrier saw passengers rise by 22% from the previous year" commented Peter Goddard, Managing Director of TRI Hospitality Consulting in Dubai.

Jeddah hotels saw average room rates surge 15.5% to US$305.92 in June, reaching the highest level amongst MENA hotels surveyed by HotStats. Despite occupancies declining 3.1 percentage points to 82.3%, ARR drove RevPAR growth of 11.3% to US$251.71. High corporate and MICE demand caused double-digit growth in F&B and conferencing revenues, which elevated TRevPAR levels to US$386.95. Payroll costs and operating expenses fell 1.6 percentage points and 2.0% respectively, further growing the bottom-line performance, as gross operating profit per available room (GOPPAR) rose by 18.0% to US$204.44.

"Hotels in Jeddah historically record strong revenues in June, however, performance was particularly robust this year, as corporate and conferencing segments drove double-digit growth in average rates, with the two segments contributing to 56% of demand for the city's hotels. The hosting of regional events also generated higher dining and conferencing revenues, which helped to boost profits by 18.0%." commented Goddard.

Doha hotels record a 20.8% surge in RevPAR in June

Doha experienced an 11.4 percentage point growth in occupancy to 75.9% in the first six months of the year, pushing RevPAR up by 11.5% to US$166.66 despite ARR declining 5.3%. F&B activities generated 45.8% of hotel revenues, which is a high contribution relative to other regional markets. The F&B operations benefitted from double-digit growth in revenues coupled with lower departmental expenses and payroll costs, leading TRevPAR to grow by 12.0% during the first semester. Elevated by the top-line performance, efficient operating cost control coupled with a 1.5 percentage point reduction in payroll expenses boosted GOPPAR by 19.1% to US$166.74.

"Doha hotels are yet to show signs of stabilisation in average room rates during the first half of the year, although occupancy levels continue to grow on the back of increased demand from international and regional visitors, particularly, Saudi Nationals. Profit margins were boosted by strong F&B demand primarily driven by the local residential population which contributed over 45% of total hotel revenue," commented Peter Goddard.

Sharm El Sheikh hotels see profits fall 49.2% during the 6 months to June

Hotels in Sharm El Sheikh suffered from a decline across all performance metrics during the month of June. An 8.9 percentage point drop in occupancies to 59.7% coupled with ARR falling 8.7% to US$41.07 caused RevPAR to plummet by 20.5%. The low demand resulted in a double-digit decrease in F&B and conferencing departments, pushing TRevPAR down by 17.6% from the previous year. Operating costs continued to rise substantially, while payroll costs surged 6.3 percentage points, resulting in bottom-line profits falling 50.5% to US$9.56.

"June typically generates strong demand from leisure tourists and charters across the CIS region and Europe, however, the travel bans imposed by many European countries during the year diverted visitors to safer holiday destinations. Hoteliers were forced to lower the average rates for leisure visitors and tour groups by 18.1% and 15.0%, respectively, during the first half of the year. Since the two segments constitute the primary demand base for hotels in Sharm El Sheikh, substantial reductions in the top-line performance caused profits to plummet 50.5% in June, which drove GOPPAR down by 49.2% in the first half of the 2014" commented Peter Goddard.

Hoteliers in Cairo experienced improving performance levels, with ARR increasing 5.5% during the month of June. The growth in average rates caused RevPAR to rise 2.7% to US$57.64, although overall demand continued to fall, with occupancy declining 1.3 percentage points. Despite a loss in the corporate segment, leisure visitors returned to the capital and helped raise non-rooms revenues, leading TRevPAR to increase by 5.5%. Coupled with a marginal decline in payroll costs, profitability levels grew 7.7% as GOPPAR reached US$47.66.

"Although June saw an increase in average rates, revenues were not restored during the first half of the year due to the continued pressure on occupancy levels. The hotel market was disrupted by violent clashes seen at the beginning of the year that caused subdued performance in the following months. However, the improved hotel performance witnessed in June coincided with Abdel Fattah el-Sisi winning the Presidential election which has provided a sense of stability to the capital. The concomitant positive market sentiment is expected to result in a gradual uplift in demand by year-end" commented Goddard.

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HotStats provides monthly P&L benchmarking and market insight for the global hotel industry, collecting monthly detailed financial data from more than 8,500 hotels worldwide and over 100 different brands and independent hotels. HotStats provides more than 550 different KPIs covering all operating revenues, payroll, expenses, cost of sales and departmental and total hotel profitability.

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