Double-digit Growth / Deloitte
|December 2004 - Year-to-October 2004 results from the HotelBenchmark
Survey by Deloitte show hotel performance in the Middle East regained lost
ground against 2003. All 27 markets tracked across the region, recorded
double-digit growth in revenue per available room (revPAR), except Kuwait
City, Provincial Saudi Arabia and Riyadh.
The progress of hotel performance in the Middle East marks a move away from historic occupancy and average room rate volatility. In consideration of the impact of the Iraq war, we compare year-to-October 2004 to pre-war performance to identify the leading and lagging markets in the region.
Middle East continues to attract visitors
The Middle East continues to be the centre of much attention. Aside from the ongoing media coverage of political events, the number of international and inter-regional visitors has grown, exceeding other global destinations. According to the International Air Transport Association the region has seen a 29% rise in air passenger traffic in the past nine months. Statistics compiled by the World Tourism Organisation support this. Latest figures year-to-August 2004 show Lebanon (30%), Jordan (18%), Bahrain (19%) and Dubai (9%) reporting the highest growth in visitor arrivals compared to the same period last year.
These improvements in air passenger traffic and inter-regional travel activity have naturally had a positive impact on hotel performance. Year-to-October 2004 hotel occupancy levels in Lebanon's largest city, Beirut, have increased by 19.6% while average room rates climbed US$12 to US$151 compared to the same period in 2003. Jordan's capital, Amman, has seen revPAR grow by 52.1% following three years of poor occupancy performance. Average room rates in Manama have achieved steady year-on-year increases since 2000, peaking at US$128 year-to-October 2004. Not surprisingly, hotels in Dubai's Jumeirah Beach continue to be among the region's top performers with revPAR climbing to US$188.
Which markets lag behind 2000 results?
The strong improvement in 2004 hotel performance against last year masks
the low base from which some of these markets have grown. Comparing the
most recent results within the Middle East to the same period in 2000 separates
the top performing markets from those yet to regain historic highs. The
following graph illustrates markets which are yet to return to 2000 levels.
Year-to-October 2004 vs. the same period in 2000
Source: HotelBenchmark Survey by Deloitte
Egypt hotel recovery commences
All hotel markets in Egypt have witnessed double-digit revPAR growth year-to-October 2004 against the same period last year. Despite this many Egyptian markets have yet to recover the losses incurred during 2001 and 2002. During 2003, Cairo Pyramids, Hurghada, Red Sea Resorts and Sharm El-Sheikh were amongst the first to see rate improvements although these were nominal. Year-to-October 2004 revPAR has remained below US$50 in all markets, except Cairo City Centre (US$60) however this was as low as US$15 in Luxor.
To date, the only Egyptian markets to surpass 2000 revPAR results are Hurghada, Red Sea Resorts and Sharm El-Sheikh. The following table compares the performance of these markets.
Hotel performance of Egypt's emerging markets
Reflecting improvements in hotel performance, Egypt's tourism industry has begun to see a recovery. Visitor arrivals to the country rose from 5.19m in 2002 to a record 6.04m during 2003, almost 10% above the previous record of 5.5m visitors in 2000. Supporting improvements in demand, the depreciation of the Egyptian pound against both the US dollar and the Euro has helped improve the country's competitive position. Egypt has begun to attract visitors who may have otherwise chosen Mediterranean destinations such as Greece and Turkey. However, the recent bombing in Taba is likely to have some bearing on future visitor numbers to the country.
Key Saudi Arabian markets stepping up
As you can see from the graph above, Provincial Saudi Arabia has been struggling to regain levels achieved in 2000. RevPAR fell to US$25 for year-to-October 2004, a more significant decline than the loss incurred in 2003. This result was driven by a 13.8% fall in average room rates, while its occupancy of just 27.5% was the lowest recorded by any market in the Middle East.
Encouragingly, other Saudi Arabian destinations such as Makkah and Jeddah have shown improvement. Year-to-October 2004 results show that revPAR in each of these markets are above the levels achieved during the same period in 2000.
Saudi Arabia has the largest economy in the Gulf region. While the Kingdom is dominated by the petroleum sector there has been a move by the government to diversify its economy. Early last year, the Secretary General of the Tourism Higher Authority, announced the launch of intensive tourism development in Saudi Arabia. With 45.3m tourists expected by 2020, foreign investment is needed to help increase accommodation supply by 50,000 hotel rooms and 74,000 housing units. A commitment to training over 2m Saudi nationals to work in the sector has also been advanced.
With occupancy levels struggling to reach 60% in most markets in Saudi Arabia, the industry is currently unable to contend with such increases in supply. Despite this, evidence suggests steady growth in demand. The country's domestic market is an important segment for hoteliers as Saudis have shown a preference to holidaying at home. The population is expected to grow by 50% to over 30m within the next five years further underlining the importance of this segment.
Top performing hotel markets within the Middle East
Having identified the hotel markets in the Middle East, that have been unable to return to 2000 performance levels, we now turn to those that have posted strong improvement.
Encouraging, the majority of markets have recorded growth over 2000
results. The following graph illustrates revPAR results for the top performing
markets within the region comparing year-to-October 2004 against the same
period in 2000.
Year-to-October 2004 vs. the same period in 2000
Source: HotelBenchmark Survey by Deloitte
Kuwait demand turns away
Kuwait's hotels have benefited from war related demand which has helped push up average room rates. Over recent years occupancy has moved from 50% in 2000 to reach a peak of 85% last year. Unsurprisingly due to the displacement of demand, year-to-October 2004 results show occupancy levels falling 16.6% compared to the same period in 2003. While the city was able to achieve a 4.6% increase in average room rates, it has lost its position as the most expensive city tracked by the survey, a standing Kuwait held for four years.
Jumeirah Beach hotels reach new heights
Dubai's Jumeirah Beach achieved a revPAR of US$188 as both occupancy and average room rates continue to grow. Year-to-October 2004, occupancy has peaked at 86.6% while average room rates reached US$218. Positioning Jumeirah Beach with the highest occupancy, average rate and consequently revPAR of any of the 27 markets tracked across the Middle East
While Dubai City Centre lags behind the revPAR performance of Jumeirah Beach, hotels within this district recorded a second year of impressive rate growth. Moreover, the city is the only market surveyed within the Middle East to record four consecutive years of revPAR growth despite a fall in average room rate post 9/11.
Dubai to double supply
The United Arab Emirates continues to receive growing numbers of business and leisure travellers. To attract international attention, the Dubai government has committed significant resources to the continual development of its tourism industry. Dubai Tourism and Commerce Marketing (DTCM) projects 15m tourist arrivals by 2010 compared to approximately 5m visitors during 2003. To cater for these arrivals, the DTCM anticipate the need for 70,000 - 80,000 hotel rooms by the end of the decade. Currently, there are around 275 hotels (including 33 five-star properties) with 25,000 rooms, in addition to 96 hotel apartments and nearly 7,500 furnished apartments within Dubai.
Middle East outlook marches forward
The majority of hotels markets within in the Middle East can expect continued growth moving forward. Improvements in occupancy are likely to precede rate increases in Saudi Arabia and the Egyptian markets of Luxor and Cairo. Upward movement in demand during 2004 is expected to see room rates drive revPAR growth in Hurghada and Sharm El-Sheikh in the short term. Improvements in average room rates in these markets will be impressive against the low base from which performance is expected to continue climbing. Similarly, room rate growth is anticipated to lead improvement in revPAR at Red Sea Resorts pending the ongoing strength of occupancy levels.
Top performing markets will continue to sustain impressive results with Dubai's Jumeirah Beach leading the way. While war induced demand begins to soften for Kuwait City, average rates are not expected to be significantly compromised in the short term.
Despite some markets remaining vulnerable to regional instability, many Middle Eastern governments are turning to the tourism industry to profile their countries. Improvements in infrastructure and new additions to supply will continue to help induce demand moving forward. Increases in inter-regional travel within the Middle East will further support occupancy levels while international arrivals are expected to post ongoing growth and further drive accommodation demand in the medium term.
Notes: All analysis in US$
The HotelBenchmark Survey contains the largest independent source of hotel performance data outside of North America and tracks the performance of over 6,000 hotels and 1.2m rooms every month.
+44 20 7007 3520.
|Also See:||Half-year Results for the Middle East and Africa Hotel Markets Indicate Occupancy Levels Dropping by 8%, to just 54% / HotelBenchmark / Aug 2003|
|Middle East Hotel Performance - Is this as Good as it Gets? All 26 Markets Improve During First Six Months of 2004 / August 2004|