HotStats MENA Chain Hotels Market Review – October 2014

The relative stability experienced in Manama during recent months has allowed hoteliers to record a strong growth in revenues for the month of October compared to the same period last year, according to the latest data from HotStats.

Average room rates (ARR) increased by 11.2% to US$213.13 in October, while occupancy grew by 4.5 percentage points to 55.9%. The increase in hotel demand drove a 20.9% rise in revenue per available room (RevPAR) to US$119.22 for the period. Other revenue streams including food and beverage grew by 13.3%, helping total revenue per available room (TRevPAR) increase by 17.0% to US$194.24. The TRevPAR achieved in October is the highest level in the past two years, resulting in strong bottom-line performance as gross operating profit per available room (GOPPAR) increased by 31.0% to US$79.55.

"The recommencement of key infrastructure and mixed-use development projects by the Bahraini government has resulted in a surge of corporate travellers to Manama, which at present is the key driver of hotel demand in the city. However, the market witnessed a marginal decline in conferencing demand as a result of increased promotional efforts by Dubai, Doha and Abu Dhabi to attract regional and international events. A growing level of confidence in the Bahraini market has resulted in a higher proportion of leisure visitors from neighbouring GCC countries, which is assisting in the overall growth in performance levels."' commented Peter Goddard, Managing Director of TRI Consulting.

Hotel demand in Beirut rebounds in October

The Beirut hotel market reported a significant increase in overall performance in October with a 2.8% increase in ARR to US$136.00 and occupancy levels rising by 8.5 percentage points to 60.7%. The growth in both overall demand and room yields boosted RevPAR by 19.6% to US$82.55. Top-line revenues were primarily driven by the surge in room revenues as F&B revenues declined during the month by a marginal 0.4%. As a result, TRevPAR grew by 10.9% to US$145.14, helping GOPPAR levels increase by 79.6% to US$28.66.

"Following a string of attacks witnessed in February and June of this year, several western and GCC countries issued warnings and travel bans for citizens to Lebanon. These events resulted in an immediate contraction of hotel demand in March and July, however, Beirut is known to be a tourism market that rebounds quickly, and this was the case from August to October as demand swiftly returned. The growth in hotel revenues was largely driven by corporate and group demand, while the leisure segment continued to decline as a degree of uncertainty related to the situation with Syria continues to impact the appeal from regional and international travellers." commented Goddard.

Hotels in Amman suffer from regional uncertainty

The ongoing civil unrest in neighbouring countries continues to dampen hotel performance in Amman, as ARR grew by a marginal 1.1% to US$160.90 whilst occupancies declined by 3.5 percentage points to 58.8%. The fall in overall demand resulted in RevPAR decreasing by 4.6% to US$94.65 and as a consequence, TRevPAR contracted by 7.4% to US$153.45. The fall in top-line revenues was compounded by a double-digit decline in F&B and conferencing revenues which contracted 11.3% and 19.2% respectively. The decline in top-line revenues also weighed down on the fixed expenses hotels need to bear in weak market conditions, as GOPPAR levels declined by 15.9% to US$48.71.

"The proximity of Jordan to a number of neighbouring countries that are witnessing civil unrest and the emergence of ISIS on the frontline has undoubtedly impacted hotels in Amman, as travellers reconsider their trip to the country. Although conference and leisure segments displayed marginal improvements, which was driven primarily by domestic demand, overall hotel performance softened due to the decline in the dominant corporate segment, which has been negatively affected by the ongoing crisis." commented Goddard.

Hotel demand in Cairo continues to flourish, as hotels reported a significant boost in RevPAR for the month of October, compared to the same period last year. The surge in room revenues was driven by growing demand from the leisure segment as occupancy increased 26.1 percentage points to 57.4%, while ARR reached a two-year high, rising to US$117.65. The spike in hotel guests also resulted in a trickle-down effect on other hotel services, as F&B and conferencing revenues grew by 57.4% and 32.7% respectively, allowing TRevPAR to grow by 78.3%. Despite the increase in certain expenses for the hotels, profitability was boosted by the substantial increase in top-line revenues with GOPPAR growing by 139.0% percent to US$68.68.

"The consistent growth in performance levels over the past few months for Cairo hotels reinstates why the market remains a priority for international hotel operators. Hotels in the market managed to extract significant value from both corporate and leisure segments, but have mainly benefitted from the increased volume and yields from leisure FIT and group business. The re-emergence of international tourists to the capital is an encouraging sign for the entire Egyptian hotel market which will surely feel the benefits of greater visitation to the country." commented Goddard.

The return of corporate travel boosts Kuwait's hotel market

Hotel occupancy in Kuwait improved by 4.5 percentage points to 53.5% in October, while ARR grew by 7.0% to US$281.87 and drove RevPAR up by 16.8% to US$150.84. However, the growth reported in top-line revenues was dampened by a slowdown in yields of conferences and stagnant growth achieved in F&B revenues. As a result, TRevPAR managed to grow by 8.6% to US$313.59, while GOPPAR increased by 11.9% to US$145.14.

"The return of corporate demand after the slow summer months benefitted hotel revenues in the city as hoteliers successfully improved room yields on certain corporate segments. Hoteliers also managed to protect room revenues by specifically targeting leisure guests, as temperatures cool down in the gulf country. However, given the relative low occupancy levels the market is currently achieving, ARR may be more difficult to protect in the horizon, as more hotels prepare to enter the market, especially in the mid-market segment." commented Goddard.

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