Security remains important for travelers visiting the Middle East, but they are coming in greater numbers due to exchange rates, a rise in midscale hotels and new theme parks.
DUBAI—Investment, especially in the midscale sector, is booming in the Middle East, but sources say the conversation continues to revolve around how security issues and the current oil slump are affecting the hotel industry.
Speaking at a panel titled “Eye on the future” at the 2016 Arabian Hotel Investment Conference in Dubai, United Arab Emirates, panelists said each country in the region needs to be looked at individually.
Alex Kyriakidis, president and managing director, Middle East and Africa, for Marriott International, said that the existence and introduction of value-added/sales taxes in Gulf Cooperation Council countries has not been consistent.
“It is suitable for governments to look at alternative revenue when the oil price dropped, but in some markets, it’s a very fine balance. Saudi Arabia has no VAT or service charges, while in the UAE, there are, and also a tax on serviced apartments,” Kyriakidis said.
He said there needs to be a balance between taxes and consumer costs.
“The level of duties starts to add up, so when you think you will add another 5% or so on top, you have to be careful not to alienate consumers. This has to be very carefully thought through,” Kyriakidis said.
He said that shift would have a disproportionate effect on the growing lower end.
“Dubai is definitely on the tourism track, and the world’s highest revenue per available room right now is here,” Kyriakidis said. “Five percent will not matter in some sectors, but another 5% might be of concern in economy and midscale, so let’s think this through.”
The panelists agreed the region is seeing solid growth despite obstacles.
This is fueled in large part by the region’s mega-airline companies, including Emirates and Etihad.
Thierry Antinori, EVP and chief commercial officer for the Emirates Group, said future growth for the Middle East will come through a new demographic of visitor, and the most successful companies will be those who capture this new demand.
“It will be about who is the best, the best (hotel) brand, the best airline, the best service provider. … We firmly believe in the virtuous circle,” Antinori said. “Thus, we are getting rid of 26 airplanes and adding 37 new, larger ones, and with one-third of the global population living a four- hour flight from the UAE, everyone will benefit.”
Freedom to travel
Security measures are paramount to getting all those new heads on new beds, many of them in the midscale sector, panelists said.
Gerald Lawless, head of tourism and hospitality for Dubai Holding and former Jumeirah Group president and CEO, said that while many measures needed to be taken to ease visa regulations, any new freedom of travel could not mean a “dilution in the idea of safety, as travelers will not travel without safety.”
“We are heading toward having a common visa platform, and countries will want to join in if there is a logical platform,” Lawless said.
He said countries should see spikes in visitor numbers if they streamline the process.
“Look at what success has come to the UAE since a few years ago (when its ruler) abandoned the need for visas from 30 or so countries, and now Saudi Arabia is moving in that direction.” Lawless said.
In the end, a drop in oil prices has pushed Middle Eastern countries to woo new visitors. That wave to boost tourism was started in the region by Dubai and the United Arab Emirates.
“In 1980, a consultant said when the Hyatt Regency opened, ‘we have six hotels in Dubai, and that is enough rooms,’” said moderator Nick van Marken, global head of hospitality for Deloitte.
Dubai’s latest push to bringing in a new type of traveler is via the creation of several high-profile theme parks, including Legoland Dubai and Indian movie-themed Bollywood Parks Dubai, both of which open in the last part of 2016.
Low oil prices also mean lower or stagnant air fares, panelists said.
“In the short term, the oil drop is good news for airlines, and it mirrors the difficulty in the global economy and slowing down in corporate travel, with companies changing travel policies, but it’s still looking good in terms of (our) bottom line, just not as good as it could be and has,” Antinori said.
“The customer is the big winner,” he added.
Kyriakidis said that the Arab traveler is becoming increasingly important in the region’s tourism makeup.
“Much of our focus is being spent on this guest,” Kyriakidis said. “Our response has to be to make sure we win market share and to follow a strategy to make sure for our owners we do bring in (return on investment) in challenging market.”
He mentioned one of those challenging markets as being Doha, Qatar, “where supply is increasing, although I believe that market will correct itself.”
Kyriakidis said Middle East could see a boost from more travel within the region.
“The Arab traveler is a traveler that before went outbound, but it, too, looks at what happened in Paris and Brussels. Their decision to stay in the region also came about as a result of exchange rates,” Kyriakidis added.