LONDON—Despite the many difficulties the hospitality industry is experiencing throughout the world, hotels in the Middle East have been less affected than other areas. While the economic crisis has been disastrous for most hotels, many areas of the Middle East are still able to post positive average daily rate and revenue per available room figures. Even though occupancy at most hotels throughout the region has decreased, the positive ADR provides hope these hotels will recover much faster at the end of the economic crisis.
ADR and RevPAR figures for many regions through the Middle East have skyrocketed. In 2008, the Middle East achieved double-digit growth in RevPAR for the fifth consecutive year, at 21.1 percent, according to STR Global. This is different from the grim figures coming from most other regions throughout the world. For the first time, the Middle East had a better absolute RevPAR for the year than Europe. Additionally, ADR and occupancy percentages were the highest in the world for 2008, as determined by Deloitte’s Global Performance Review.
Looking at specific areas of the Middle East, Dubai seems to be the only one reporting negative figures for the past few months. All three measures have been negative for the past few months, and for 2008, RevPAR growth declined to 1 percent, a large dip from 16.4 percent in 2007. While occupancy is one of the main culprits in the area, it still isn’t as severe as the occupancy declines experienced throughout the world. Room rates and hotels in the pipeline are to blame, too. Thirty-six hotels are scheduled to open in 2009, adding 10,853 rooms to the area.
Abu Dhabi has generated large percentage increases in ADR and RevPAR, especially in February with increases of 42.6 and 35.5, respectively. Additionally, RevPAR for the area soared 46.3 percent for all of 2008. Beirut, however, has outshined most other locations in the Middle East in terms of all three performance measures. It’s the only city that has positive marks in all three measures, with surprisingly high marks in occupancy. The area has reported the fastest RevPAR growth in the world for 2008 at 101.3 percent. Occupancy, ADR and RevPAR have grown substantially from 2007 to 2008, with occupancy and RevPAR both greater than 50 percent.
Tourism throughout the Middle East is one of the main reasons for these positive hotel figures. According to Forbes, business and leisure travel has boomed in the Middle East, climbing 18 percent per year since 2005. As seen on the International Tourist Arrivals chart, the World Tourism Organization shows tourism is increasing much faster in the Middle East than in Europe or America. Some have forecasted extreme tourism growth by 2020, with 69 million tourist arrivals and about $4 trillion in tourism investments. Many areas have significant hotel and tourism developments under way, such as Muscat, where a 6,000-seat convention center and an international airport are in progress to gain corporate business travellers.
This doesn’t mean the Middle East is exempt from many of the challenges associated with the state of the economy. While there are many hotel and tourism projects underway, much of the construction has stalled because investments are slowing down. The economic crisis throughout Europe is of great concern. According to Deloitte, about 45 percent of hotel bookings in the Middle East are from European travellers, with 15 percent from the U.K. alone. As consumer confidence declines in this market, it’s worrisome that hotel business will decline significantly. Additionally, with the U.K. pound weakening, it has become 30 percent more expensive for U.K. travellers to come to the Middle East.
Despite these challenges, the Middle East still seems to be able to keep mostly positive figures for ADR and RevPAR. It’s a bit difficult to determine how much of an impact the crisis has had, as events such as Eid, where many people return to their homeland after Ramadan, took place near the end of 2008. However, hotels still are doing well into 2009, so it’s hopeful they’ll continue along this path. Furthermore, the considerable investments in the Middle East during the past decade will help the area recover much quicker from the economic crisis. With encouraging performance measures, hotels in the Middle East have optimistic hopes for the future.