Full of Middle Eastern promise - Hotel Performance at All Time High

17th May 2004

A year has now passed since the outbreak of the war in Iraq. Despite continued uncertainty over the country’s future as well as further degradation of the Palestinian-Israel conflict, the bitter irony is hotel performance across the Middle East has never been better. First quarter 2004 results from the HotelBenchmark Survey by Deloitte show that hotel performance across the region is at an all time high. Occupancy, average room rates and revenue per available room (revPAR) are at the highest level seen in any first quarter since the HotelBenchmark Survey was first launched in 1996. RevPAR is now 36 percent higher than in the first quarter of 2003 and 19 percent higher than in the first quarter of 1996.
Strong performance is not a new phenomenon. In 2003 the Middle East saw revPAR increase by 9.2 percent on 2002 levels. Figures from the World Tourism Organisation (WTO) show that tourist arrivals to the region increased by 10 percent in 2003, up by 27 percent on 2000 levels. Impressive, given that the Middle East was the only region in the world to report any growth in tourism arrivals in 2003. The good news however does not stop there. The WTO expect the region to become the fifth largest tourism destination in the world by 2020.

It is hard to believe that the region is performing quite so well particularly given that the situation in Iraq has been headline news for over 12-months. The reality is however, political and humanitarian issues aside, the war has brought commercial benefits to a number of markets. No where is this more apparent than Kuwait which saw hotel occupancies alone increase by 62 percent in 2003, largely due to the surge of correspondents, journalists and military officials in the region, both pre and post the war.

This however is not the only factor driving Middle East hotel performance. The increase in intra-regional travel, in particular intra-Arab travel, is helping to push the tourism boom. No big surprise that people are choosing to holiday closer to home given that both the US and Europe seem less appealing given both political relations as well as the strength of the Euro at present. Also improved infrastructure, including the development of low-cost carriers, is making easier to travel around the region. Air Arabia is currently the regions only low cost carrier however more airlines are expected to follow suit. New international markets such as Russia and Asia are also seen to provide strong potential for Middle Eastern tourism.

According to the International Congress and Convention Association (ICCA) the Middle East is also fast emerging as a key destination for the meetings, incentives, conference and exhibition (MICE) market. Cities such as Dubai are starting to compete more aggressively against the likes of Hong Kong and Singapore for this market.

Investing in the Middle East is also becoming easier. October 2003 saw Kuwait revise its foreign ownership legislation to enable 100 percent foreign ownership across a number of industries, including tourism.


Given the circumstances, hotels in the Middle East are performing well. Both the growth in intra-regional travel as well as increased spending on tourism infrastructure in countries such as Kuwait and Qatar bodes well for the future of the region. There is some concern however in markets, such as Kuwait, that hotel performance will struggle as the military and media start to depart. Whilst the war may be over, the situation in Iraq does remain fragile and a degree of uncertainty remains as to the future of the region.


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