Several countries that saw political uprisings early in 2011 are now reporting increases in hotel industry performance. But the region as a whole is not in the clear just yet.
GLOBAL REPORT—As the seasons come and go, the originating Arab Spring countries have started experiencing some green shoots this year as tension shifted focus to the Levant region.
Tourism numbers in Morocco and Tunisia, where revolutionary violence erupted in early 2011, are nearing pre-turmoil levels. Egypt, too, is heading in the right direction.
“Morocco has stabilized and is experiencing flat to anemic growth in arrivals in 2012. With a stable government in place, Tunisia is likely to come close to full recovery this year, and for Egypt it will likely be 2013,” said Michelle Grant, travel and tourism manager at Euromonitor International and HotelNewsNow.com columnist.
Egypt still has some ground to make up, as political strife continues to spark violent demonstrations and other security threats in Cairo.
While “the political situation is far from stable, there is evidence of returning tourists, especially from Arab countries,” said John Podaras, director at Christie + Co for the Middle East and North Africa. “This has led to a 20% improvement in occupancy, although (average daily rate) has slipped further by 5%.”
Egypt’s year-to-date occupancy during October stood at 51.5% compared with the prior year’s 43%, according to STR Global, sister company of HotelNewsNow.com. The higher occupancies give a welcomed jolt to revenue per available room, which is up 13% year to date in U.S. dollars.
But recovery is not widespread. Much of the rebound can be attributed to Egypt’s peaceful resort areas, such as Sharm el-Sheikh, where occupancies reached more than 74% and RevPAR increased by 5.1% this summer, according to HotStats.
The Rezidor Hotel Group
Still, widespread performance is headed in the right direction, according to a Jones Lang LaSalle report on Cairo. The report states Egypt’s Ministry of Tourism is convinced it will manage to increase the current number of 8.3 million visitors (an increase of 20% over September 2011) to 12 million by year-end. The numbers would need to grow further if the 8,000 rooms under construction in Cairo come to fruition. The city has an existing supply of approximately 27,000 rooms.
The Rezidor Hotel Group foresees further growth in Egypt if a sustained period of calm materializes.
“We predict that it will continue to recover and continue to progress in 2013. Political stability should be reflected in our RevPAR, growth and occupancy over the coming six months. We’ve had a good period of re-contracting with key inbound tour operators; this will also reflect positively,” said Mark Willis, Rezidor’s area VP for the Middle East and Sub-Saharan Africa.
Safety, however, is a question of perception.
“In terms of investment, the news of an intended settlement in the land dispute between the Egyptian government and the Dubai-based Damac and Emaar is doubtless good news. However, the continuing political instability is making investors cautious and the mobilization of moribund projects is proving extremely slow,” Christie + Co’s Podaras said.
Russian nationals, for example, have shunned Egypt because they view it as unstable and suffering in quality, according to the Association of Tour Operators.
Source: STR Data
All currency in U.S. dollars
Tourism trending downward in Turkey
Similarly, Russians have grown tired of Turkey, drawn to the country only by early booking discounts. Instead these travelers are increasingly headed to Tunisia, compensating for lost French and Spanish tourists, as well as traveling to Greece and Cyprus.
“At the expense of Turkey and Egypt, all three are competitive on prices,” Euromonitor’s Grant said.
Turkey’s occupancy declined 0.8% to 65.9% year-to-date October, according to STR Global. The country’s ADR also dropped by 6.6% to $150.71, leading to a RevPAR decrease of 7.4% to $99.34.
Podaras highlighted a BMI report that predicted a slowdown in arrival numbers through 2012, especially from Turkey’s traditional source markets in Europe, primarily Germany.
Instability in Yemen, Syria
Yemen, despite changing its president, remains far from stable. Podaras said the country’s development plans relied heavily on support from the Gulf Cooperation Council, which in the light of continuing political issues have become more cautious.
“We understand that Yemen is still facing political challenges, which is focusing international aid and investment into humanitarian rather than economic development,” he said.
Similarly, Syria’s tourism industry has all but shut down, although Rotana hotels in both Damascus and Latakia still experience 15% to 20% occupancy, according to Omer Kaddouri, executive VP and COO of Rotana Hotel Management Corporation.
Rotana Hotel Management Corporation
Christie + Co
“We have internal guests—Syrians moving away from affected cities come to stay with us. One has to remember hotels are a long-term investment. Yes, we need security, but we are always vigilant so it doesn’t really have an effect on our (gross operating profits),” he said.
Euromonitor’s Grant doesn’t think Syria or Lebanon are likely to see any signs of recovery before 2014, which could affect Jordan if the crisis spills over.
“The recent uncovering of a terrorist plot to attack foreign diplomats hasn’t helped,” she added.
Uncertainty in the Levant
This winter brings uncertain news for the Levant, including Jordan’s January elections, which could bring with them demonstrations demanding socio-economic change. The recent flaring of the Israeli-Palestinian conflict might exacerbate this possibility.
For now, though, performance figures in select regions seem to support hotel operators’ optimism.
“Jordan is up by 22.5% on RevPAR, buoyed by an 18% improvement in occupancy and a slight increase in ADR,” Podaras said.
The recovery has attracted investor interest. Rotana is planning to open two properties totaling 750 rooms in Amman over the next two years. And Rezidor is looking for new projects, either new builds or conversions.
“We would be keen to have a presence there,” Rezidor’s Willis said.
Lebanon, which borders Syria, is experiencing a sharper side effect of the Syrian crisis. The country’s hoteliers are used to performances singing in tune with the political mood, but the recent assassination of Lebanon’s intelligence chief coupled with the Gaza Strip crisis spells trouble for the near future.
Occupancy in the country has fallen 1.4% to 52.3% year to date, according to STR Global. ADR and RevPAR have suffered as a result, decreasing 5.8% and 7.2%, respectively.
Expectations lifted in Libya
Operators see more success in Libya, despite the fact that the country is still sorting out its differences within. The Radisson property in Tripoli re-opened earlier this year and since has enjoyed strong returns despite mounting security costs, according to Willis.
“Of course there have been incremental costs incurred by increased security measures in some of our hotels in the region. However, on the other hand, the safer the hotel is, the more business we attract,” he said.
Libya’s potential was highlighted in the recent “World Travel Market Industry Report 2012,” which found that 56% of respondents believe the country has strong future tourism potential once political stability is guaranteed and tourism infrastructure improves.
“We remain focused and would certainly develop further in Libya if the right opportunity should arise,” Willis said.
Battered Bahrain’s prospects looking up
Looking at the Gulf, while Bahrain’s Arab Spring offshoot has softened, leading to several countries lifting their travel bans and the country reporting an increase of 20% in visitor arrivals, the relative calm is reflected in hotel performances.
“Despite intermittent flare-ups in political tension, Bahrain has regained some lost ground. This is due to the 5-star hotel owners’ rate agreement, which seems to be shoring up rates for those hotels. It would appear that those outside the agreement are able to ‘buy’ occupancy and are in any case better positioned to attract the traditional Saudi market to Bahrain,” Podaras said.
Although occupancy is up by 5.3% to 43.7% year-to-date October, it is still far off the 66.1% achieved in 2010. Hotels responded by lowering rates 1.3% to $205. RevPAR increased 3.9% to $89.74, according to data from STR Global.
Rezidor’s Willis cautions that Bahrain remains a difficult and sensitive market. “People continue to travel, mainly on business, in and out of the country. However this is a period of low demand for all concerned,” he said.
Kuwait, meanwhile, continues its lackluster performance in 2012 despite rates remaining stable, protected by a hotelier rate agreement. “Kuwait’s visitor profile is focused on the country’s economic rather than political activity, which is still in recovery from the global financial situation,” Podaras adds.
Emirates emerge as a bright spot
The United Arab Emirates could be described as the winner entering the Arab winter.
“Russians flocked to Dubai, which saw a strong revival in 2012 amidst widespread unrest in the Levant and Egypt, its main competition for leisure tourism,” Euromonitor’s Grant said.
Although Radisson hotels in Turkey also have benefitted, Willis concurred.
“Dubai has certainly been the destination that has benefited greatly from other parts of the Middle East in turmoil,” he said, adding that the Radisson Muscat also took its fair share.
Performance data from STR Global, which is driven largely by Dubai, confirms the above comments. Occupancy in the region increased 2.5% to 71.3% October year to date, ADR was up 5.7% to $199.76 and RevPAR rose 8.3% to $142.37.
But any performance numbers, whether good or bad, must be viewed within the broader context of the global economic collapse that saw RevPARs plummet more than 25% in some regions, Podaras said.
“Therefore, one can only conclude that there is still some way to go to significant recovery, and so far as the GCC and Levant is concerned, that will not happen until the situation in Syria resolves itself,” he concluded.