GCC hotels sector to grow only after enduring tough period ahead

Increasing numbers of travelers from newer source markets like India, China, the Far East and Saudi Arabia will eventually allow a return to growth in the region’s large hotel industry, but only after a tough period ahead.

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Hotel

According to an Alpen Capital Hospitality Report, the GCC’s hospitality market is expected to grow at a 7.6% compound annual growth rate (CAGR) from an estimated $25.4 billion in 2015 to $36.7 bn in 2020.

RevPAR in the UAE is anticipated to rise at an annual average of 1.8% to reach $143 by 2020. Despite a challenging period last year and a weak average rate environment in 2017, the market is likely to recover in the long term, driven by a rise in tourist arrivals stemming from upcoming mega events and government efforts.

Gulf Indian Ocean Hotel Investors’ Summit

Key industry players will convene on 6 and 7 February in Abu Dhabi at the Gulf Indian Ocean Hotel Investors’ Summit (GIOHIS 2017) to hear from around 90 speakers and discuss the challenges and opportunities presented by the evolving hotel industry.

“Diversification in new source markets will eventually allow a recovery in hospitality industry performance levels as emerging inbound markets gain traction,” said Simon Allison, CEO of HOFTEL, a leading association of hotel property investors and organizer of GIOHIS 2017.

First source market

Indian tourists

Marko Vucinic, senior vice-president, MENA, hotels and hospitality group, JLL MENA, said: “India is now Dubai’s first source market and countries like China are targeted by the Department of Tourism and Commerce Marketing in campaigns and actions.”

He added: “The UAE market will remain under pressure in the short term, while in the long term, we expect more positive sentiment. The UAE is building its place on the international map with the addition of new leisure, entertainment and tourist offerings.”

Online travel agents

Online travel agent

Allison noted HOFTEL’s owner-members are all concerned about the long-term trends in the sector, where the large hotel brands are consolidating into giant travel companies to combat the marketing power of the online travel agents (OTAs), who are meanwhile strengthening their grip on the online booking market.

He said: “Owners are usually far smaller than their business counterparts (brands, OTAs and lenders) and so face a struggle securing the right deal. They are still paying much the same fees to the brands as they were before the rise of the OTAs – and are now paying OTA commissions on top.”

Allison added: “That is hitting margins and owners are looking for ways to unite and leverage their combined strength – a theme that will be a key focus of GIOHIS. If they can do that, they will benefit fully from the upturn, when supply and demand stabilize.”

 

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