Hotel markets across the Middle East and Africa maintain a healthy level of long-term hope from expected demand growth and continued interest from global brands even as the region copes with challenges from the COVID-19 pandemic.

During a series of Market Spotlight sessions at the Hotel Data Conference: Global Edition, data presentations by STR highlighted hotel performance and the construction pipeline in emerging markets. STR is CoStar Group’s hospitality analytics firm.

Philip Wooller, area director for Middle East and Africa at STR, said during the “Middle East and Africa Hotel Performance Overview” session that while China — as of March 14 on an absolute seven-day rolling average — led global standard occupancy with 58.2%, the Middle East was second.

He said it’s an incredible result that more than half the rooms in the Middle East are currently occupied.

Sarah Duignan, STR's director of client relationships, said during the “Market Spotlight: Saudi Arabia” session that the country’s ambitious plans for “giga-projects” will lead to a need for more hotels.

Many of those plans are already underway, including the development of the futuristic mega city Neom in northwestern Saudi Arabia, which will cover 10,000 square miles and is expected to be completed by 2025 with a price tag of $500 billion.

“Inclusive of the Neom project will be a 100-mile long, zero emission city called The Line, which will be home to up to 1 million residents,” she said.

Other happenings along the northwestern coast include luxury tourism project Amaala and The Red Sea Project. Jeddah and Riyadh also have their own large-scale projects in the works.

“Riyadh will double in size and population over the next decade,” she said. “With such ambitious giga-projects comes some equally ambitious needs for more hotel accommodations.”

Duignan said more than 76,000 rooms were under contact across the kingdom as of March 1. This number is increasing daily, with some in the planning and final planning stages but over half under construction.

Makkah alone is expected to have a minimum of 30,000 new rooms, with more than 10% in the luxury hotel segment. Riyadh and Jeddah will both “see a hefty increase in supply,” with about 10,000 new rooms expected for each city.

Almost 17% of these new rooms will be operated by brands under Accor, followed by 16% under Hilton brands and 12% under Marriott International brands, she said.

Demand drivers in Saudi Arabia include hosting the Saudi International golf tournament, the Formula E Diriyah 2021 and the first-ever Saudi Arabia Grand Prix in 2021.

While Africa is large in geographic size, its hotel supply hasn’t matched that. That’s changing however, according to Thomas Emanuel, director at STR.

During the “Market Spotlight: Emerging Cities in Africa” session, he said there are just around 5,000 hotels across the continent. That is “200 times fewer than the countries that could fit inside it,” he said. Only four countries in Africa have more than 50,000 hotel rooms: Tunisia, Egypt, South Africa and Morocco.

The prevalence of hotels is growing across the continent, though. In 2012, there were 18 countries with no globally branded hotels. Today, that number is down to only seven. There’s also indication that there’s strength and growth in domestic African operators, he said.

“The expansion of brands has been fairly consistent,” across 12 emerging African markets, he said. In 2016, Conakry debuted its first branded hotels, with the Sheraton and Noom Hotels brands. Kigali also saw significant growth with the Radisson Blu and Marriott brands.

In 2017, Dakar opened a Radisson Blu hotel and a Yaas Hotels property. Abidjan led the way with new hotels in 2018 through welcoming Accor-branded properties. In 2019, Niamey saw its first branded hotels open.

“And in 2020, as you’d expect, was a quieter year for openings, but we still saw new supply coming in both Bamako and Gaborone,” he said, adding that over the 12 cities, branded supply has grown by 53% since 2015.

Looking ahead to pipeline by room count, as of February 2021 data, Cairo and Addis Ababa are leading the way, with over 5,500 keys.

Emanuel said the supply growth isn’t just in Ethiopia’s capital of Addis Ababa. There are a further 1,700 hotel rooms in the pipeline across the rest of the country with projects by Hilton, Accor, Radisson and Wyndham Hotels & Resorts outside of Addis Ababa.

“A few years ago, those kind of figures [and] that kind of pipeline would simply have been unthinkable,” he said.

In terms of performance, full-year 2020 occupancy percentage change shows North African cities were hit the hardest — ranging from 58% declines in Casablanca up to 72% declines in Marrakech. Lagos, on the other hand, benefited from oil business and long-stay business, with only a 32% decline in occupancy. Addis Ababa also enjoyed diplomatic business throughout 2020, softening the impact of COVID-19 slightly, with only a 38% decline in occupancy.

Kostas Nikolaidis, Middle East, Africa and Greece executive at STR, said during the “Market Spotlight: South Africa” session that South Africa experienced almost a 20% decline in hotel supply in 2020 as many hotels were forced to close due to lockdowns.

Room revenue for the year stood at $629 million, a decline of 61.7% from 2019.

“That’s a loss of approximately $1 billion for the South African hotel industry,” he said, adding South Africa is experiencing a slow recovery.

During October of 2021, restrictions began to ease and provided hope. However, that all came to a halt in December when a new variant of COVID-19 emerged in South Africa. He said this was another hit to its tourism industry.

“Almost instantly, most countries banned arrivals from South Africa. A new lockdown was imposed in response to the upcoming second wave. That little recovery that took so long to achieve was gone,” he said. Some positive news, however, is that vaccines are now available.

In terms of pipeline, South Africa is an established hotel market but there are currently only 23 projects in the pipeline across the country, amounting to 3,254 rooms.

These projects are mostly concentrated in Umhlanga, Johannesburg and Cape Town. Brands to come include Marriott, Hilton and Radisson; very few are unbranded, he said.

“That’s good news for existing hotels, though, as there is limited risk of oversupply. The main problem remains the uncertainty around the return of demand, same as everywhere else,” he said.