Hotels & Palaces

Steady trend

While there has been a significant drop this year in the number of new hotel projects, the good news is that active projects are going ahead as scheduled and the pundits indicate a steady growth for the hospitality sector.

November 2011

ALTHOUGH the Middle East and Africa will see a drop in the number of new hotel projects planned for the future, industry experts agree that the region continues to retain its appeal for development and that earnest efforts are being made to ensure that ongoing hospitality projects are completed on schedule.

The number of confirmed future hotel projects planned in the Gulf has dropped for the second consecutive year, however, the good news is that the majority of active projects have been proceeding on schedule, says Viability, a Dubai-based specialist hotel and real estate development consultancy.

Viability partner Guy Wilkinson says the total number of confirmed future hotel projects has dropped further this year to 274 from 283 in 2010 and from a peak of 325 reached in 2009. In terms of the room count, an almost identical pattern was followed, with this year’s total being 77,020 hotel rooms (excluding serviced apartments and villas) compared with 92,026 in the record year 2009.

Nevertheless, he indicates that the picture in 2011 is far from one of gloom and doom. “This year’s drop in planned supply represents just a nine per cent reduction over 2010 levels of room development and a 20 per cent fall compared to 2009,” he says.

Forecasting a steady growth for hotel development, STR Global, in its latest Construction Pipeline Report, says a total of 119 hotels are predicted to be built in the Middle East/Africa region this year. Year-to-date, 50 hotels have opened in the region supplying a further 9,663 rooms with another 69 hotels (15,420 rooms) in the pipeline for completion before the end of 2011, STR Global says. During 2012, 131 hotels are planned to open with 36,205 rooms, it adds. The hotel industry expert says the region has 481 hotels totalling 130,479 rooms.

Wilkinson indicates that increasing importance is being given to keeping active projects on track. “Our investigations revealed that 167 projects were still bang on schedule, which represents 61 per cent of the total, as compared to just 50 per cent in 2010,” he says, adding that in fact nine projects that were even ahead of schedule.

However, he admits that uncertainties in various parts of the GCC have put the brakes on many hotel projects. “To be precise, 98 projects had been delayed by between one and five years compared to their original programmes declared to us in 2010, and this is without taking into account that in many cases they were already behind schedule by at least a year last year,” says Wilkinson.

When Viability consultants tracked down the status of each project that was confirmed last year, they found that no less than 58 projects had been ‘put on hold’ or cancelled altogether since the 2010 rankings, accounting for 15,757 potential rooms. “Since the recession started in 2009, we calculate that around 50,000 rooms in total have fallen into this category,” he says.

Among the regional players, UAE continues to be the hub of development activities, followed by Saudi Arabia, says STR Global, which expects the UAE’s hotel sector to grow by more than 55 per cent if all 48,071 rooms in its pipeline open.

Viability canvassed no less than 104 hotels chains that are active in the region, compared to 80 last year. “Against the odds and against the pundits’ predictions just a few years ago, the UAE continues to be a hot bed of development activity, spurred on by the recent tourism windfall caused by the (hopefully temporary) closure of erstwhile competing destinations such as Bahrain, Egypt and Lebanon, due to continuing unrest,” says Wilkinson.

However, Saudi Arabia is close on the heels of the UAE doubling its hotel pipeline over the past year that has jumped from 46 to 95 projects, almost catching up with the emirates’ total of 110 properties. Last year, the kingdom barely had a third of the UAE’s total of 160 projects. This year has seen 15 chains each declaring more than 1,000 rooms under development, which compares with 23 achieved this figure in 2009.

According to STR Global, 13,000 rooms are under construction in Dubai and another 21,000 have been announced. Branded economy and midscale hotels have been growing in the past few years as Dubai diversifies its hotel offering, which was until recently focused mainly on upscale to luxury segments, it adds. The expert anticipates demand growth of nearly 15 per cent for the full year for the UAE city which attracts more than eight million tourists. It says that new supply growth in 2012 is expected to reach 9.6 per cent, causing both rate and occupancy to slow down.

Turning to Abu Dhabi, STR Global sees a further 90 per cent growth in the emirate’s hotel offerings if all the 13,534 rooms currently in its construction pipeline are built. The Tourism Development & Investment Company (TDIC), a master developer of major tourism destinations in Abu Dhabi, is a key player in this sector with several hotel projects under way throughout the emirate (see separate article on Page 92).

Qatar’s hotel sector will grow by nearly 80 per cent if all the properties in its development pipeline open for business, it says. According to STR Global’s Middle East/Africa hotel development pipeline report, Qatar has 6,604 rooms in its total active pipeline. If they are all built and opened, they will add 78.3 per cent growth to the current number of rooms open in the state, it says.

Other countries to report significant expected room growth are Oman, whose number of hotels will grow by 57.9 per cent with 3,734 rooms planned.

Despite a major downturn in occupancy rates during recent uprisings, Bahrain is also eyeing significant growth with 3,155 rooms (49 per cent) proposed, STR Global adds. The country saw the opening in September of Kempinski, a five-star property in the heart of the city’s Seef district.

The room growth in the region still continues, as 4,390 rooms have been added to the total active pipeline since August, says Elizabeth Randall, managing director of STR Global. “With 36,205 rooms in the region’s pipeline for 2012 and 29,260 rooms planned for 2013, it is clear the Middle East/Africa region is still an attractive area for development,” she adds.

Among the hotel sectors, the upper upscale will be boosted by 3,733 rooms and 15 projects this year and the luxury segment by 3,052 rooms and 13 projects.

STR Global says in 2012 the most rooms are planned to open in the luxury segment (11,123 rooms and 34 projects) and the upper upscale category (10,198 rooms and 31 projects).

According to Viability, Marriott again tops the all-important rooms-based ranking with an all-time record of 10,472 rooms, the previous record 9,572 rooms) having also been set by Marriott last year. Hilton is in second place, up from 11th last year, with many takers for its core brand in particular. Other management companies in the top 10 in both years include Accor, Fairmont Raffles, the InterContinental Hotels Group, Millennium, Movenpick, Rezidor, Rotana and Starwood.

Outside the top ten, Best Western jumped from 24th place last year to 11th in 2011, with more than 2,000 rooms including six hotels under its four-star Best Western Premier brand. Hyatt also moved rapidly up the rankings from 33rd place in 2010 to 14th this year, with four hotels and 1,340 rooms (excluding serviced apartments).

One single extraordinary development in Makkah has been largely responsible for keeping Marriott, Hilton and Hyatt at the top of the rankings. Between them, these three operators are planning to open 12 hotels with almost 7,000 rooms in the $5.5-billion Jabal Omar project, soon to upstage even the almost 3,000-unit Fairmont-Raffles-Swissotel project in terms of front row access to the Holy Mosque. Hilton will open no less than six hotels with more than 4,000 rooms at Jabal Omar, under its Conrad, Hilton, Hilton Suites and DoubleTree brands.

Wilkinson says this year has also seen a number of new chains in the rankings. “For example, Ayla is a new operator specialising to date in the oasis town of Al Ain in Abu Dhabi emirate. Formosa is the Taiwanese company that bought the upscale Regent from its previous owner, Rezidor. Another Far Eastern luxury chain that is making its debut in the GCC is the Mandarin Oriental, with upcoming properties in Abu Dhabi and Doha,” he says.

“Spain’s Melia (formerly Sol Melia), which has taken an interest in the GCC for some years now, is now working with the owners of Dubai’s independent hotels the Ascot and the Royal Ascot, to establish a 164-room Melia city hotel in Bur Dubai.

“Sami Al Hokair’s new Saudi chain Mena is growing strongly and will soon open its first non-Saudi property, a 116-room hotel in Muscat.

“A very different kind of operator is MGM, star of Las Vegas, which is bringing its Bellagio and MGM Grand brands to grace two of the multiple hotels planned at the Dubai Pearl project facing the Palm Jumeirah. Another US chain, established by former Ritz-Carlton pioneers, is West Paces, which is debuting its luxurious Solis brand in Doha, as well as seeking opportunities for its arguably better-known sister brand, Capella. Accor will also open the first example of its design-focused MGallery concept in the Qatari capital.

“Hyatt, which recently purchased a mid-market US all-suite brand called AmeriSuites and rebranded it Hyatt Place, will see the first GCC property under this brand open in Makkah. And Hong Kong-headquartered Langham will open its first venture in the GCC in Doha.”

Link for the Graphs:

Link for the Upcoming Hotels in the GCC:

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