UAE & Qatar to Drive Gulf Hospitality Market to $37-B by 2020
Mega events in both countries will drive growth, despite current challenges, according to Alpen Capital
The Gulf Cooperation Council (GCC) hospitality market is expected to be worth $37-B by Y 2020, driven by strong growth in the UAE and Qatar, according to a new report.
In its GCC Hospitality Industry Report investment bank Alpen Capital forecast the regional market would grow at a compound annual growth rate of 7.6% from $25.6-B in Y 2015.
The bank forecast occupancy rates would grow 3% during the period to 70% and average daily rate would increase 1.4% annually.
However, in the short-term it said operating metrics would remain under pressure, particularly in the UAE and Qatar.
Despite this, both countries are expected to demonstrate the fastest annual growth during the period, at more than 10%, due to Expo 2020 and the 2022 FIFA World Cup.
The other GCC nations, with the exception of a more buoyant Bahrain, are expected to average growth of between 5 to 6%.
Alpen forecast total regional room supply would grow 4% annually during the period, despite a 5.7% expansion in tourist arrivals each year.
“Dubai is likely to witness an addition of nearly 57,000 rooms in hotel and serviced apartments in the 5 years to Y 2020, whereas Saudi Arabia has a pipeline of over 47,000 rooms. Addition of such massive capacity is expected to extensively scale up the region’s hospitality sector,” the bank said.
Outside of mega events, the bank said Key growth drivers would be the meetings, event and conferences market, with several convention centers under development in the region to attract international Summits.
Expansion works at the 2 holy mosques in Makkah and Madinah are also expected to boost the hospitably market in Saudi Arabia.
Key challenges for the regional industry are expected to be low Crude Oil prices impacting business sentiment and events, depreciation of currencies making Gulf travel more expensive, political instability in the wider Middle East and demand failing to match room supply putting pressure on occupancy and average daily rates.
Failure to attract a continuous flow of tourists before and after the mega events could also create an oversupply situation in Dubai and Doha, while more broadly the bank warned of a potential shortage of skilled personnel due to the number of properties opening.
“The hospitality industry continues to present interesting opportunities to investors,” said Alpen Capital Managing Director Sanjay Bhatia. “We expect consolidation and M&A activity in the hospitality sector to accelerate given attractive valuations.”
By Robert Anderson
Paul Ebeling, Editor
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