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Upscale, Luxury Segments Dominating Hotel Projects in Pipeline in the Middle East
and Africa Accounting for More than 75% of Development

By Muzaffar Rizvi, Khaleej Times, Dubai, United Arab EmiratesMcClatchy-Tribune Regional News

May 22, 2011--DUBAI -- The upper upscale, upscale and luxury segments dominate the hotel development pipeline in the Middle East and Africa.

The three segments account for more than 75 per cent of the total hotel developments in the region as 51,474 rooms are in various stages of construction, according to a report.

The Middle East and Africa hotel development pipeline comprises 443 hotels totalling 122,775 rooms, according to the April 2011 STR Global construction pipeline report.

Unlike the other parts of the world, midscale and economy segments fail to make major strides in the region as these segments will add only 6,115 rooms, the report said.

"The majority of hotel development is happening in the UAE and Saudi Arabia, so most of these developments should go ahead as planned, Konstanze Auernheimer, Director of Marketing & Analysis STR Global, told Khaleej Times.

The hotel development pipeline in Middle East and Africa will continue to strengthen as over 68,000 rooms are under various stages of construction, the report said adding that it would supplement the existing supply of 6,05,218 rooms in the region. "About 122,775 rooms comprising 6,05,218 and 68,588 are on the active pipeline in the region," the report said.

As per breakup of total active pipeline projects, the upper upscale segment made up the largest portion of rooms with 27 per cent, or 33,169 rooms. It is followed by the luxury segment -- 22.6 per cent, or 27,686 rooms, and the upscale segment -- 16.9 per cent, or 20,759 rooms. The unaffiliated segment is accounted for 22.9 per cent with 28,112 rooms.

"The economy segment made up the smallest portion of rooms in the total active pipeline with two per cent and 2,446 rooms," the report said.

"We see a diversification in hotel offerings in the pipeline even as the demand for upscale to luxury hotels is still quite strong," Konstanze Auernheimer said. In reply to a question about the unrest in the region she said some of the projects in the more affected countries might be delayed and it seems that most developers have taken a wait and see approach at the moment.

STR Global, part of the STR family of companies, provides a single source of global hotel data covering daily and monthly performance data, forecasts, annual profitability, pipeline and census information in Europe, Middle East, Africa, Asia Pacific and South America.

Hotel investment volumes to rise

According to another report, hotel investment volumes will increase in the region and lead the recovery in global hospitality sector, which is expected to post 30 to 40 per cent rise in the transactions. "Global hotel transaction volumes are expected to reach $28 billion to $30 billion in 2011 with Europe, Middle East and Africa are projected to increase to $13.1 billion," says Hotel Investment Outlook report launched recently by Jones Lang Lasalle Hotels.

Dominant acquirers of hotel assets in 2011 will be REITs, institutional investors, private and high net worth investors with opportunistic capital. Private equity buyers will also feature in 2011, but will not represent the lion's share of acquisitions as in 2007, the report said.

"Asian, Middle Eastern and US investors were keen to secure prime acquisition opportunities outside of their region, particularly in Europe," the Jones Lang Lasalle Hotels report said adding that EMEA investors will look to secondary cities in markets such as Spain, Ireland and provincial UK.

The report further said the performance in Eastern Europe and the Middle East is forecast to remain largely stable, although some markets, such as Abu Dhabi, Prague and Budapest, could continue to struggle under rapid supply growth.

"Hotel stock is largely concentrated in Dubai and Abu Dhabi limiting the possibility to invest in trading assets across the MENA region. Capital investment in Dubai and Abu Dhabi will mainly be driven by Russian, Asian and Middle Eastern investors looking for opportunistic deals," the report said.

muzaffarrizvi@khaleejtimes.com

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To see more of the Khaleej Times, or to subscribe to the newspaper, go to http://www.khaleejtimes.com.

Copyright (c) 2011, Khaleej Times, Dubai, United Arab Emirates

Distributed by McClatchy-Tribune Information Services. For more information about the content services offered by McClatchy-Tribune Information Services (MCT), visit www.mctinfoservices.com.



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