DUBAI, United Arab Emirates—Don’t let softness in first-quarter performance data in the Middle East fool you. The region as a whole still posts some of the strongest numbers in the global hotel industry on an absolute basis, according to a presentation from STR Global’s Elizabeth Winkle during the Arabian Hotel Investment Conference.
Year to date through March on a constant-currency basis, the region reported decreases in the three key performance metrics of occupancy (-1.2%), average daily rate (-0.7%) and revenue per available room (-1.9%), when reported in U.S. dollars.
On an absolute basis, however, its performance was near the top of the 15 global subregions tracked by STR Global, which is a sister company of Hotel News Now. The Middle East finished the quarter with occupancy of 73.9% (behind only the Caribbean and Australia and Oceania), ADR of $215.15 (behind only the Caribbean) and RevPAR of $158.99 (behind only the Caribbean).
Winkle attributed the quarter-over-quarter decreases to an exceptionally strong first quarter in 2014 as well as some pressure from increased supply.
She characterized the slight performance dip as “nothing overly concerning from our perspective.”
Supply growth is a fact of life in the Middle East, the result of investors realizing the enormous potential in this emerging region, Winkle explained.
During the first quarter, supply growth was nearly 6% with demand growth trailing at approximately 4.5%.
The 12-month-moving-average (which removes seasonal fluctuations) paints a more favorable picture, with demand outpacing supply growth of 7.6% compared to 5.7%, Winkle said.
Looking through the same analytical lens, occupancy is up 1.8% while ADR is down by 0.2%.
Pricing power is in hoteliers’ favor in the Middle East, however. In the U.S., hoteliers typically are able to push rate once average occupancy exceeds 62%. In the Middle East, average occupancy during the quarter was considerably higher at 73.9%, according to STR Global data.
Those high marks are felt across chain scales, with the luxury segment reporting 72% at the low end of the occupancy range and economy reporting 88% at the high end.
“The question is: What will the balance be and what will the normal be in this region in terms of normal occupancy performance?” Winkle asked.
Regional leaders bullish
In a separate AHIC session titled the “Regional leaders’ panel,” four locally based executives shared outlooks that mirrored STR Global’s performance data for the region as a whole.
- Read more from the executives in “Hotels face familiar challenges in the Middle East.”
Alex Kyriakidis, president and managing director of the Middle East and Africa, Marriott International: “In a nutshell, the region is really performing very, very strongly,” he said. Despite some geopolitical challenges swirling about, “the region’s really performing exceptionally well.”
Marriott reported a RevPAR gain of 9.3% within its Middle East/Africa portfolio during the first quarter despite a 1.5% decrease in ADR in U.S. dollar terms.
Christopher Knable, COO, Katara Hospitality: “We believe very strongly it will be an engine of growth for many, many years to come,” he said, pointing specifically to his home base of Qatar as a growth engine.
Also on the upswing: Egypt.
“We’ve seen Egypt come back very strongly,” Knable said. “We believe Egypt is a very attractive market—perhaps competing with Dubai for business.”
According to Winkle, Egypt began its recovery in 2014, and that should continue in 2015.
Henning Fries, managing director – hospitality, Al Habtoor Group: “We’re very bullish on the outlook,” he said.
Al Habtoor plans to triple its existing footprint of three hotels in Dubai during the next three years, he added.
Badr Al Badr, CEO, Dur Hospitality: So strong is Dur’s outlook that it has committed 1.5 billion Saudi riyal ($400 million) for 14 new hotels in its home market of Saudi Arabia during the next seven years, Al Badr said.