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 Middle East Hotel Performance
- Is this as Good as it Gets?
All 26 Markets Improve During First Six Months of 2004


August 2004 - Excellent news for hotel markets in the Middle East. All 26 markets tracked on the Middle East edition of the HotelBenchmark Survey by Deloitte saw performance improve during the first six months of 2004. The majority of these saw double-digit growth in revenue per available room (revPAR). This news is not surprising following the events of 2003, as growth was to be expected. Therefore, to set hotel performance in context, this article looks at how performance in the region compares to the first six months of 2000, a good year for the hotel industry.

Small Gulf states benefit from tourism focus

Looking more closely at the major Middle Eastern destinations a revPAR comparison of the first six months of 2004 against 2000 shows a clear divide between the markets along the Persian Gulf and their western neighbours. As seen in the graph below, Kuwait City, Dubai, Doha and Manama have seen the strongest revPAR growth. However, at the bottom of the scale are the Egyptian markets of Luxor, Cairo and Hurghada as well as the Saudi cities of Jeddah and Riyadh.

Source: HotelBenchmark Survey by Deloitte

Kuwait - top of the league again

As highlighted in the June edition of the ‘HotelBenchmark Update’, Kuwait City achieved the second highest revPAR of the 320 market tracked globally in 2003. Although the market has experienced relatively limited growth so far this year, it has none the less managed to almost double its revPAR compared to 2000. With revPAR currently sitting at US$180, this is the best half-year result the city has achieved since the launch of the HotelBenchmark Survey in 1996.

Kuwait has benefited from its position as a trade hub for Iraq and from increased stability. The country continues to develop its tourism industry, and has recently announced its tourism master plan. The ease of visa regulations as well as planned developments in infrastructure and attractions, (for example the islands of Bubiyan and Failaka) will continue to help Kuwait in its drive to use tourism to diversify its economy.

Dubai - city centre hoteliers triumph over those at beach

The friendly battle between hoteliers in Dubai’s city-centre and Jumeirah Beach has for once been won by the city-centre hotels, who achieved a comparatively higher revPAR growth (46 percent) during the first half of the year compared to 2000. This being said, hotels at Jumeirah Beach continue to report both higher occupancies and average room rates than their city-centre counterparts. During the first half 2004 hoteliers in Jumeriah Beach achieved a revPAR of US$199, some US$95 higher than city-centre hotels.

Traditionally Dubai has led the region in terms of tourism investment. New attractions and infrastructure developments are constantly evolving and attracting news coverage as a result. Dubai was the first market in the region to create man-made islands, a concept which has since been followed by Qatar and Bahrain. The concept of supply-led demand works well for Dubai and should continue to help boost hotel performance.

Doha follows its neighbours

Doha hoteliers achieved a revPAR of US$98 during the first half of this year, a 44 percent increase on the same period in 2000. This growth has been driven predominately by occupancy (33 percent) as opposed to average room rates (eight percent). This is the smallest average room rate growth of any of the top five performing markets.

Currently Qatar attracts in the region of 400,000 visitors annually. By 2010, the government hopes to have increased this to one million. One of the ways Qatar is trying to raise its profile is by hosting international sporting events and conferences. In 2006, the country is due to host the Asian Games. In preparation for this the government has initially allocated US$20 billion for a range of developments including historical and cultural sites, new hotel supply and airport expansion. Qatar Airways plans to widen its network to include more destinations, opening up potential new markets for Doha. Projects like the ‘Friendship Bridge’ between Bahrain and Qatar and a man-made island are also in the pipeline.

Manama races ahead

Of the top five performing markets shown in the graph above, Manama reported the smallest revPAR increase during the first half of 2004 compared to the same period in 2000. However, this was still an impressive 34 percent, taking the city’s revPAR to US$101. Hotel performance has been boosted by the launch of the first Middle East Formula One Grand Prix in April 2004, which attracted high profile publicity. Bahrain also holds its own shopping festival (Bahrain Festival) during the summer months to capture some of the demand generated by Dubai’s shopping festivals.

Manama has followed the lead of its neighbouring markets in the development of man-made islands including Amwaj Islands and the Durrat al-Bahrain project. Bahrain is also focusing heavily on tourism to diversify its economy.

Saudi Arabia fighting visitor fears

The recent attacks and terror threats in Riyadh, Khobar and Yanbu led to travel advisories and cancelled flights. Despite this Jeddah and Riyadh still managed to keep their revPAR declines under ten percent, compared to 2000. Riyadh reported the smallest increase in revPAR of one percent compared to the first six months of 2003. It is promising to see that so far performance has been impacted less than expected.

Saudi Arabia’s market offering differs from other Middle Eastern markets. Its primary focus is on haj (pilgrimage), business and recreational tourists from the Gulf Corporation Council as well as other domestic source markets. In 2003, Saudi Arabia did not benefit as much from increased intra-regional travel as its neighbours. However, new initiatives such as “Umra-plus” (Umra meaning minor pilgrimage) which allows visitors to combine the pilgrimage with their leisure visits to other Saudi destinations, should help benefit towns like Jeddah.

Egyptian markets – getting better, but still some way to go

In 2003, Egypt received six million foreign visitors, an increase of 800,000 compared to 2002. However, to set this in context, for such a large country, this is only one million visitors more than Dubai. In terms of performance, Luxor, Cairo and Hurghada have all improved their revPAR during the first half of 2004 compared to the prior year. However all markets are still performing below the levels achieved in 2000. Luxor has also reported the lowest revPAR of any Middle Eastern market so far in 2004.

Half year results for selected Egyptian markets

. RevPAR US$ YTD 2004 % Change
YTD 2003
% Change
YTD 2000
Luxor  20 166 -30
Cairo 29 50 -25
Hurghada 48 91 -5
Source: HotelBenchmark Survey by Deloitte

In terms of development within the region, recent marketing campaigns focusing on key European markets and Gulf countries seem to have helped hotel performance, especially in the Red Sea Riviera. The Egyptian government remains dedicated to tourism development, citing this as the most important sector to the economy. The World Bank also recently approved a loan for airport development in Egypt. Airports in Cairo, Luxor and Sharm El-Sheikh are all expected to expand their existing facilities and develop new terminals. Hopefully these developments should help Egypt to reach their target of attracting 7.5 million tourists to the country by 2007.

Almost everything as expected

During the first six months of 2004 most Middle Eastern markets reported double-digit revPAR growth compared to the same period in 2003. This picture however is not as clear cut when compared to performance in 2000.

Markets along the Gulf are performing well, reflecting increased investment in tourism and supply-led demand. However, a number of markets in Egypt and Saudi Arabia are still reporting revPAR below the levels achieved in 2000. Terrorist threats and attacks have particularly affected hotel performance in Saudi Arabia. Hotel performance in Egypt has trailed behind the Emirate States (Dubai, Qatar, Kuwait and Bahrain) which have benefited from earlier investment in tourism infrastructure. However, with ongoing interest and investment in the region and providing political stability continues, revPAR performance should benefit as a result.

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 1.2 million rooms every month. 

HotelBenchmark Survey
Konstanze Auernheimer
+44 (0) 20 7007 0967
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
Performance of Selected Middle East Markets 2002 / Deloitte & Touche / May 2003
Winners and Losers in the Middle East War for Hotel Profits / Jan 2003
Middle East Region-wide Hotel Occupancy in 1999 Increased by Four Percentage Points to 65% / August 2000

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