The Middle Eastern Hotel Sector - May 2011
- Recent and ongoing civil unrest has severely impacted the hotel performance in much of the region, including Bahrain, Egypt, Lebanon, Syria and Yemen, in particular. However, the UAE, which is considered to be a safe haven, is seen to be benefiting from the crisis gripping much of the region.
- The Saudi Arabian hotel market is being buoyed by soaring energy prices and a significant level of domestic demand, as compared to other countries in the region.
- Putting aside the present political turmoil, the Syrian market presents the best prospects for hotel investment in the region in the medium term, due to growing inbound business and leisure tourism and an outlook for controlled supply growth.
- Qatar and the major UAE markets of Abu Dhabi and Dubai present major supply risk due to overbuilding and the large number of rooms in the pipeline, which is likely to outstrip demand by a wide margin for the foreseeable future.
- Of the major international chains, InterContinental Hotels Group (IHG), Accor, Hilton and Starwood have the strongest presence in the region. Hilton’s portfolio is particularly weighted towards Egypt, while IHG has a heavy concentration in Saudi Arabia and the UAE. Meanwhile, Starwood has a reasonably well-balanced portfolio across the region, with, nevertheless, significant capacity in the UAE.
- Most of the regional hotel investment companies and chains, such as Kingdom Hotel Investments, Jumeirah Hotels and Resorts, Qatar National Hotels Company and Nakheel Hotel & Resorts have been obliged by the crisis to substantially cut back on expansion activities and, as has been the case of the latter, have had to go through substantial financial restructuring.
- Abu Dhabi-based Rotana Hotels & Investments, due to astute management and an asset-light structure, has prospered and continued to expand at a healthy pace.
- There exist good opportunities for developing economy, limited service and extended-stay properties throughout much of the region and even in the saturated markets of Qatar and the UAE.
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