|Conference organizer Jonathan Worsley (front left) addresses attendees before moderating a panel on hotel investment.
DUBAI—The official theme of the 2012 Arabian Hotel Investment Conference is innovation and collaboration, but what is emphasized most is the inability to paint the Middle East hotel market with one brush. The 550-delegate conference, held at the Madinat Jumeirah Resort in Dubai, is attended by investors, brands, developers and consultants, about half of whom are from the region.
Nenad Pacek, co-founder of CEEMEA Business Group, underscored the region's growth potential. "Most of the growth of the Middle East and North Africa is driven by oil output," Pacek said in his macroeconomic overview of the region. "Ninety percent of the corporations I deal with told me 2011 was stronger than 2010, despite the impact of the Arab Spring. The reason? Higher oil prices."
The hydrocarbon-rich nations in the region are receiving the greatest amount of investment, he said, although the risk for any company looking to invest in the area is at risk of falling oil prices. The markets with the strongest recent gross-domestic-product growth include Saudi Arabia and Qatar.
Hotel opportunities in the Middle East
The health of hotel markets in the region is as diverse as their economic growth climate. Elizabeth Randall, managing director of STR Global, a sister company of HotelNewsNow.com, noted strong hotel fundamentals exist in many of the markets, but the emerging markets in the region are the ones experiencing the most growth.
"Dubai is one of the best performing markets," Randall said, emphasizing the city's maintained demand levels and strong growth in average rate. She also highlighted impact of the Arab Spring in Cairo, where demand levels plummeted during 2011. However, the first quarter of 2012 has seen a strong turnaround in the city, posting a 168% year-over-year increase in demand through March. Randall also noted the looming threat of new supply in the region, which amounts to approximately 30% of existing supply (over the next two to three years) for many of the regional destinations.
Stewart Coggans, executive VP, Middle East and Africa for Jones Lang LaSalle Hotels, commented on the diversity of hotel risk and opportunity in the region.
"Dubai is poised to see double-digit (revenue-per-available-room) growth in 2012," Coggans said, attributing much of the city's success in tourism to its perception globally as a "safe" destination to travel to in the Middle East.
Abu Dhabi, while not as strong as Dubai, has the most opportunity to develop as a destination as its infrastructure for tourism continues to develop; the city's hotel market is still as risk of massive amounts of new supply coming in during the next three years, however. Coggans noted Saudi Arabia is the largest market in the region in terms of tourist arrivals—largely comprised of pilgrims—with Makkah posting 33.8% RevPAR growth in 2011.
Struggling hotel markets include Egypt, Syria and Bahrain, which were either directly or indirectly affected by the Arab Spring political unrest in 2011, and Coggans said the 62.5% and 45.8% 2011 RevPAR declines in Damascus, Syria, and Cairo, respectively. The hotel investment market in the region also depends on the specific market, though Dubai will likely be the most attractive to global investors, Coggans said.
Cautious optimism expressed
In terms of where the region is headed, most panels expressed cautious optimism.
While 2012 RevPAR growth levels are generally lower than 2011, many of the region's emerging markets are supported by substantial levels of government investment, with tens of billions of dollars pledged by most countries over the next three years. Gerald Lawless, executive chairman of the Jumeirah Group, highlighted the role a country's government takes in supporting tourism in the Middle East.
"The region is highly diverse," Lawless said. "It's massively important for (regional) governments to recognize the impact of global tourism on their markets." Lawless noted the need for governments to focus on infrastructure and open-skies policy as major steps in the process, using Dubai as a successful example in these regards.
Kurt Ritter, President and CEO of The Rezidor Group, remarked that while it will be difficult, if not impossible, for other regional destinations to keep up with Dubai's level of development and tourism success, the potential for many emerging Middle East and North Africa markets to establish themselves as a global destination continues to thrive. He warned, however, the "copy and paste" method of applying Dubai's development blueprints to other destinations would likely be a recipe for failure, as each market needs to play to its own uniqueness.