The economy and mid-market hotel segment was identified as presenting a significant opportunity for hotel owners and operators alike at the Arabian Hotel Investment Conference.
Expert speakers also identified a gap in the market for more experiential accommodation and entertainment attractions, especially in Dubai, as the market continues to diversify its hospitality offering.
In an exclusive presentation, STR managing director Robin Rossmann provided insight into the midscale pipeline and performance in the GCC, revealing that mid-market supply is set to match luxury in the GCC by 2021.
According to STR, the ‘Midscale’ has out-performed the ‘Upscale & Upper Mid Classes’ and ‘Luxury & Upper Upscale’ classes since 2011 across the GCC.
Rossmann observed that mid-market hotels are under-penetrated and pointed to significant growth potential underpinned by growing intra-regional travel and demand for affordable travel.
Commenting on the trends, Jonathan Worsley, chairman at AHIC-organiser Bench Events, said: “The mid-market has been discussed at AHIC for several years, but in 2017, we have witnessed a significant shift as the compelling investment model for lower development costs and higher, quicker returns has put the mid-market in favour.
“It was fascinating to explore the long-term view, looking at costs, rate strategy and returns with our many speakers and sponsors.
“Testament to the potential for the mid-market in the Middle East is the launch of US-based hotelier Choice Hotels International in the UAE and Saudi Arabia, with a pipeline of seven signed hotels already and many more to come.
Commenting on the company’s expansion, Stephen Joyce, chief executive of Choice Hotels said the growth of the middle class and demand from travellers for quality, midscale accommodation had fuelled Choice Hotels International’s entry to the Middle East with three of its brands: Clarion, Comfort and Quality.
“We think the timing’s now finally right for a company like Choice to enter the market in a fairly significant way and establish a strong moderate tier lodging component which is purpose-built, value-oriented, but high quality,” said Joyce, during his live-on-stage interview with Jonathan Worsley.
Joyce added: “Historically when you look at this region and what people considered moderate, they kind of pull the chandelier and pull the marble and they don’t change the operating model.
“Our operating model is there should be 20-25 employees in the hotel; it should run very high margins; it should be relatively low capex to get in; relatively high margin production and low cost to operate, but at the same time, satisfy the guests’ needs in a way that isn’t being done currently.”