Cautious optimism returns to Arabian hospitality

Cautious optimism was the mood of delegates as the fifth Arabian Hotel Investment Conference drew to a close at Dubai’s Madinat Jumeirah Convention Centre.

Relative to the rest of the world, the Middle East hotel industry is riding the global downturn well and can look forward to a renewed momentum and resumed growth within two years, according to top hotel executives.
Co-organiser Jonathan Worsley said: “With more than 700 delegates from 45 countries, the conference looked in depth not only at current market conditions, but potential for the future. And what we saw was a unanimous agreement that the Middle East would remain a prime region for hotel development, that expansion would continue in cities such as Dubai and be mirrored in neighboring destinations such as Abu Dhabi and Doha. The concluding message is that while the short-term outlook looks challenging, overall expectations from the region remained high.”

“Our inaugural session on Saudi Arabia reflected the fact that the kingdom is a prime location for all types of hotel development - from resorts and heritage hotels to agro-projects and low-cost properties - while other speakers covered topics from spa development and green strategies through to new brands, tips for survival, mixed-use projects, budget hotels, structuring deals and hotel management agreements.

Underlining the structural strength of the region, Dr Henry Azzam, CEO Middle East and North Africa, Deutsche Bank said that the Middle East was not at the epicentre of the crisis and was influenced by what was happening elsewhere. He added that strong and expansionary government fiscal policies in the region have compensated for factors such as falling oil revenues and a lack of confidence in the private sector: “This has resulted in positive growth for economies such as the UAE, Bahrain and Oman while Qatar is still expecting double-digit growth rates,” he said.

Concurrent with infrastructure and economic growth, hotel markets in key cities around the Middle East are still seen as offering positive returns, according to the Jones Lang LaSalle’s April Investor Sentiment Survey, said Global CEO, Arthur de Haast: “The view of those surveyed was that cities such as Doha, Abu Dhabi and Riyadh would recover from the current downturn within a year, with Dubai coming back within two years - although the UAE was still the most attractive market for investors,” he said, adding that the decline in property values everywhere was expected to recover by 2011.

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Another byproduct of the global economic crisis was that postponement of many hotel projects would streamline the introduction of new rooms in to the regional market and help modify fluctuations between supply and demand: “We now have a reduced risk of oversupply, as well as a shift to demand for mid market and limited service properties,” Arthur added.

While potential for the future was seen as undiminished, if delayed, current hotel performances gave another cause for optimism, according to Marvin Rust, Global Managing Partner Hospitality for Deloitte. “The Middle East is still expected to be the top performing market worldwide during 2009, although double digit growth seen in previous years will slow to around two per cent,” he said.

“Dubai still leads the worldwide table for revPAR (revenue per available room) at more than US$200, even though this figure was down 12.9 per cent in the first quarter of 2009.”

Regionally, he pointed out that, while rates were down in Dubai and Egypt, other cities such as Jeddah, Beirut and Abu Dhabi continued to perform well.

For all delegates, the downturn has served to focus attention on the fundamentals of hotel operations, with a consensus that costs had to be curtailed, service and brand protected, and every avenue used to attract and retain custom.
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