Bahrain committed to driving hotel demand
11 FEBRUARY 2015 7:23 AM
Although the Bahrain hotel industry has experienced some challenges, sources believe the market’s performance points to its buoyancy.
REPORT FROM BAHRAIN—Challenges remain, but Bahrain’s performance points to a more buoyant market as hotel development and demand creation strengthens.
“Occupancy figures suggest Bahrain hasn’t been a strong market historically, but moving forward we expect a full recovery will be made between this year and 2017 as the political issues have moved away,” said Hala Matar Choufany, regional managing director of HVS Dubai. “The market will be growing nicely, if not aggressively, hovering around 62% occupancy, and in five to seven years’ time around the 66(%) to 67% occupancy mark.”
According to HNN’s sister company STR Global, occupancy in December 2014 (the most recent data available) grew 11.4% to 50.6%. Average daily rate decreased 3.3% to 75.81 Bahraini dinars ($201.07). Revenue per available room was up 7.7% to 38.32 Bahraini dinars ($101.63).
Manama, Bahrain, recorded a rolling 10-year average of 63.5% occupancy, but supply is expected to mute occupancies below this average, according to the HVS market pulse for the country’s capital.
David Vely, senior VP of development for MEA and India at Premier Inn International, said political strife would stabilize over the medium term but together with new supply in 2015 and 2016 could limit rate growth in the short term.
“Visitor arrivals from neighboring (Saudi Arabia), have already bounced back this year,” he said. “There is a dearth of quality budget supply. We will attract, in line with the market, a high proportion of visitors from (Saudi Arabia), other (Gulf Cooperation Council) countries, South Asia and the U.K.; more business than leisure.”
The company is preparing to open a Premier Inn by mid-year, and will follow owner Action Hotels’ first property Ibis Seef Manama, which opened this month with 304 keys, including suites and apartments.
“The GCC’s middle class is looking for quality offering at the $100 price point,” said Alain Debare, CEO of Action Hotels. “We’re confident that our family-driven property, around 60% leisure, will achieve occupancies at the market average at least, and after its first year well above that.”
He added: “Bahrain is back to normal; it feels like anywhere else in the Gulf and planes are full. It has been busy for a year now, and I expect it to continue that way.”
Although he said political stability could become a challenge again, he believes issues have been solved.
“This is not Syria. A group of people have asked the government for some changes, and since, these have taken place. The government is creating jobs and holding elections,” he said.
According to STR Global’s January 2015 data for Bahrain, there are 2,833 rooms in the pipeline and 8,997 existing rooms in the market.
“Room supply in Manama is set to increase by 40% over the next three years with over 2,000 new rooms entering the market, and only (about) 400 in the midscale segment, and is expected to put some pressure on rate across the upscale and luxury segment, but should only cause a slight knock-on effect on the budget market,” Vely said.
Driving segments, growth
Choufany, who is involved in several feasibility studies, said discussions on a possible ban on entertainment in lower asset class hotels could drive business to the higher segments. “So the impact may be felt, or not, at lower segments, as they attract a lot of Saudi families,” she added.
Debare pointed out Bahrain enjoys active diplomatic, financial and consultancy visitation as a gateway to Saudi Arabia and a regional financial hub. And high-end offerings, such as the Ritz-Carlton, Sofitel Bahrain Zallaq Thalassa Sea and Spa, and upcoming JW Marriott, Four Seasons and One & Only, add to the menu.
“The challenge really is to drive more business to the destination; the investment into 5-star hotels already brings people to the country,” Debare said.
According to MEED Intelligence, the Bahraini government has set millions aside to build a theme park, six major malls and markets. A second causeway linking Bahrain with Saudi Arabia complete with regional rail is in planning, while one with Qatar seems to remain on hold. Bahrain’s airport is undergoing a $2-billion upgrade.
“Government commitment is clear. Roads still dominate over airport arrivals. We expect when the Bahrain-Saudi causeway completes within three years visitor numbers will yet increase again,” Choufany said.
Vely highlighted Bahrain’s recently announced 2015 to 2018 tourism strategy, focused on promoting nature-driven experiences, including plans to create one of the world’s largest offshore preservation sites, similar to the Maldives.
In addition, existing Durrat Al Bahrain and Amwaj Island are developing further entertainment, such as golf courses. Bahrain Bay and Bahrain Financial Harbor are focused on attracting investors and businesses.
“The new and easy visa on arrival and E visa process is aimed at supporting tourism travel to the country,” Vely added.
Debare and Choufany said Bahrain could compete with destinations such as Dubai by simply being cheaper, attracting corporate events demand and leisure. At the same time, Bahrain’s Culture Ministry asked hoteliers to charge a minimum rate until year-end.
“The recent end of the rate agreement (cartel) will assist in driving competitive room rates across the market,” Vely said, adding variances in weekend-weekday RevPAR would even out alongside improving business sentiment.