DUBAI, United Arab Emirates—Hotel chains need to take more responsibility regarding the COVID-19 crisis, said Khalid Anib, CEO of Abu Dhabi National Hotels.
The Middle East and Africa will take a while to rebound due to guests remaining cautious of traveling and staying in hotels and the price of oil remaining low, Anib said during a webinar titled “Industry update and market sentiment” organized by the Arabian Hotel Investment Conference.
During the webinar it was suggested that Dubai Expo 2020 would soon be postponed to 2021, but when that event does arrive, along with 2022’s soccer World Cup in Qatar, sources said the region will start a notable rebound.
Christopher Lund, head of hotels for the Middle East and North Africa at business advisory Colliers International, said a postponement of Dubai Expo 2020 would be a good move.
“If it was in 2020, a lot of people would be afraid to come, and hotels would not have had time to re-engineer their processes,” he said.
Philip Wooller, area director of Middle East and Africa at STR, the parent company of Hotel News Now, agreed a 2021 expo would mark a big milestone.
“If, as they state, a vaccine might be available in 18 months, that would be around September 2021. Fears over travel will not subside until the virus danger subsides,” Wooller said.
Wooller added that public statements on the peak and flattening of COVID-19 cases in the region might foretell a “little milestone” of recovery for the Eid al-Adha holiday, which is 30 July to 3 August.
Anib said Expo would be the catalyst, a mega-event for the region.
“We are taking advantage of this crisis to refurbish our hotels, mostly in Abu Dubai, the (438-room) Sofitel Dubai (Jumeriah Beach). We do expect a very strong rebound when it comes,” he said.
But until then, the region is expected to endure considerable pain, which Anib said should be spread out more evenly than it has been for others.
“I’ve worked for 20 years for different operators, and every time there is a crisis, all we receive from operators are letters saying we are living in terrible times. There are funds only for headquarters’ employees,” he said.
Anib said some smaller chains, such as Barceló, have stepped up to what he considers the right mark.
“Responsibility has to be shared at this time of crisis. We wish to see some contribution from the operator side, but unfortunately this is not the case,” Anib said.
He said owners in the region are in survival mode.
“We would love to be as positive as everyone else, but we are bombarded every day with numbers showing a large amount of debt. Unless we have some form of vaccination to help people to get through this crisis, we did not see people coming and being able to trust to stay in a hotel,” he said. “Owners are left with burdens, liabilities, financials, loans, capital expenditures and employees to deal with.”
Richard Thompson, editorial director of the Middle East Economic Digest, said government spending in the region is determined by the price of oil being between $50 and $70 a barrel. That is now threatened due to COVID-19, as the International Monetary Fund predicts the average price per barrel through the end of 2020 will be approximately $35.
“There will be fiscal pressures over the next two years and less spending,” Thompson said.
Declines
ADNH’s Anib said he believed it is a mistake to compare recovery in the region to what is happening in China.
“We should not be looking at China, with its huge domestic market. We will be going through tough times here in the Middle East. We know how important the oil price is in this region,” Anib said. “Yes, Abu Dhabi has some good occupancy, but at what rate? (Average daily rate) is not anywhere near to the costs we have.”
Wooller said 620 hotels have closed in the Middle East, representing approximately 130,000 rooms.
Data from STR for March 2020 showed the Middle East posting a 45% year-over-year decline in occupancy to 30%, a 20% decline in ADR to $112 and a 57% decline in revenue per available room to $44.
There are a couple of markets standing out, Wooller said, but the reasons why they show relatively good occupancy include quarantine use, and government and long-stay bookings. He noted those reasons are why Doha has retained roughly 50% occupancy and Abu Dhabi is at 41%.
“I cannot see occupancy (across the region) getting back to 50% until the end of the year, as there remain so many unknowns,” Wooller added.
Markets with the biggest declines include Beirut, Dubai and Kuwait City, while other markets doing better are Doha—currently with approximately 50% occupancy—and Abu Dhabi.
For the week ending 5 April, Jeddah hotels posted a year-over-year increase in ADR of 14% to $170.67, while Doha hotel ADR grew 5% to $115.45.
Anib said occupancy increases are fine, but even if it gets to 40%, “that will mean ADR still is on the floor.”
As in all global markets, the owners who will survive are those who have cash.
“It will also depend on government restrictions and rules as regards to hotels. We see a pickup starting in 2021, not back to where we were until mid-2021,” Anib said.