Arabian Hotel Investment Conference Blog
The 2011 event was held under the theme of Changing Gears: Navigating the New Middle East at the Madinat Jumeirah.
Arab Spring boosts Dubai hoteliers
Dubai’s debt problems have made headlines throughout the past two years, but the emirate’s political stability and heavy investment in infrastructure is seeing it gain from the uncertainty caused by the regional unrest
Burj Al Arab
The 550 hoteliers packed into Dubai’s Madinat Jumeirah Conference Centre for this week’s Arabian Hotel Investment Conference 2011 (AHIC) confirmed what many people in the emirate suspected, that Dubai, in business terms at least, has gained most from the Arab Spring. And in particular, Dubai’s hotel and tourism industry.
According to data from the US tourism tracking agency STR Global, Dubai’s hotels are experiencing occupancy rates of about 80 per cent. That is a very strong performance, especially when you consider that a high volume of new hotel capacity has come onto the emirate’s market recently.
In a conversation on the sidelines of AHIC, STR’s managing director Elizabeth Randall said there were several factors behind Dubai’s success story. Firstly, many families in the region, and particularly families from Saudi Arabia, have chosen to take holidays in Dubai, instead of traditional destinations such as Jordan, Egypt, Syria and Lebanon, where they are seeing often-violent TV images of government crackdown’s on protests.
Bahrain’s ongoing troubles are a second key factor in Dubai’s tourism boost. As a long-standing centre for business in the Gulf, and as a well-supported location for companies serving Saudi Arabia’s Eastern Province, Manama has for years been one of the region’s most important business hubs.
But the social and political uncertainty in the kingdom caused by the protests, and the government’s brutal crackdown, has forced many business travellers and events companies to move their meetings to nearby Dubai. The postponement of the Formula 1 Grand Prix in March is the most high profile, but it is not the only one.
Bahrain has, without doubt, lost most in the Gulf from the Arab Spring.
It is not only Dubai’s hotel industry that is bouncing back, capital inflows into the emirate are slowly boosting money supply, and the price of credit default swaps (CDS) for Dubai – the cost of insuring yourself against Dubai failing to repay its debt –has fallen to around 350 basis points, down from 500 basis points a year ago (although, at 260 basis points, Bahrain CDS are still cheaper).
But while the political uncertainty may have been the catalyst for Dubai’s economic boost, perhaps the most important factor is that Dubai has been in a position to take advantage of the opportunity.
Many people have enjoyed the schadenfreude of seeing Dubai’s real estate bust over the past few years, and in particular its humiliation as it struggled to get to grips with its huge borrowings. The emirate will be carrying its heavy debt burden for many years, and oversupply will hinder the recovery of its real estate sector. So far Dubai has been able to restructure the most pressing of its debt problems, and real estate globally is in the doldrums.
Dubai is now reaping the benefits of having invested heavily to develop world-class infrastructure that supports, among other things, a multi-faceted tourism industry catering for all sectors from family package holidays through to budget business travellers.
AHIC 2011 calls for more collaboration between hotel owners and governments
Speakers at the 7th annual Arabian Hotel Investment Conference (AHIC) called for closer collaboration among hotel owners and more dialogue between owners and Middle East governments as part of a new effort to take advantage of the opportunities in the region’s hotel and tourism market.
“I believe that the tourism market has huge potential which is untapped,” said Dubai-based Seven Tides managing director Mike Scully during an AHIC session exploring the perspectives of leading hotel investment companies.
“We need more clarity and feed-back from the authorities about the hotel industry,” said Fadi Mazkour, director of MENA Hotels & Resorts. “We have been talking about developing mid-market hotels in Saudi Arabia. In order to tap this market, definitely we need more information about the size of the mid-market.” Mazkour said this would require co-operation with other hotel companies operating in the kingdom and support from the Saudi government.
“Communication between owners and the authorities needs to be much greater,” said Siegfried Nierhaus, managing director of the Atlas Group Middle East.
“If you look at Dubai and Abu Dhabi, the infrastructure has been put in place by the government and it’s the responsibility of the hotel industry to make good use of what has been put in place,” said Scully. He called for more interaction within the hotel industry and with the authorities and greater supporter for initiatives to develop the Middle East hotel and tourism industry.
AHIC 2011 told Seven Tides plans to develop boutique hotel range
Seven Tides, the Dubai-based hotel ownership company, is planning to develop a boutique hotel range under London’s Dukes Hotel brand which the company acquired in 2006, the 7th annual Arabian Hotel Investment Conference (AHIC) was told this morning.
“We are in the process of creating the Dukes’ collection,” Seven Tides’ managing director Mike Scully said. Seven Tides was established in 2004.
Seven Tides owns three properties in Dubai: the Ibn Battuta Gate complex; the Oceana development on Palm Jumeirah, which also includes a Movenpick Hotel, and the Royal Amwaj development, also on the Palm Jumeirah.
Rotana tells AHIC 2011 that buoyant UAE market offset shocks in other Middle East markets
Rotana president and chief executive officer Selim El Zyr told the 7th annual Arabian Hotel Investment Conference (AHIC) this morning that a growth in business in the company’s hotels in the UAE in the first four months of 2011 has offset the impact on other markets in the Middle East.
Selim El Zyr
“So far this year, there is has been a balance,” El Zyr said. “Business in our UAE hotels is up. Our hotels in Bahrain have been affected but not as much as they have been in Egypt.”
El Zyr said that Saudi Arabia the most promising Gulf market. “We have one hotel in Makkah and we have signed agreements for five more in the kingdom.
“We were late into the Saudi Arabian market,” El Zyr said. “But it’s the market to be in. The potential is tremendous.”
Pipeline progress becoming a key indicator of hotelier performance
The progress of planned hotel projects is becoming an increasingly important indicator of hotel performance in the Middle East.
Puneet Chhatwal
The progress of new projects that hotel chains have planned, referred to in the industry as pipeline projects, is increasingly being used as a method for assessing future performance of major hotel groups, according to participants at MEED’s Arabian Hotel Investment Conference.
“Pipeline progress is a relatively new concept for the hotel industry. It is important as it gives an indication of growth possibilities and it affects share prices for listed hotel groups,” said Puneet Chhatwal, senior vice president and chief development officer, the Rezidor hotel Group.
Speaking on the panel at the AHIC event Christian Karroglanian, chief development officer at France’s Accor, said that the hotel group has 10,000 new rooms, 50 properties, planned for the Middle East and North Africa region. Chhatwal, also on the panel, said that the Rezidor Group currently has 7,500 new rooms in the pipeline for the region.
AHIC 2011 told that Syria remains a good long-term hotel market
The chief executive of Sryia’s Bena Properties, Hawazem Esber,told the 7th annual Arabian Hotel Investment Conference (AHIC) this morning that Syria remains an attractive long-term market for the hotel industry that will be not seriously undermined by short-term political shocks.
Hawazen Esber
“There is strong demand for tourism services in Syria,” Esber said. “The sources of equity are also there as are other financial resources.”
Esber said that Bena has four hotels under development in Syria: one in Damascus, two in Aleppo and one in Lattakia. He said that Bena had closed in April the financing for the Rotana hotel the company is building in the Syrian capital.
Sheikh Ahmed wins AHIC achievement award
President of Emirates Airlines presented with award for services to airline industry
Sheikh Ahmed bin Saeed Al Maktoum
Sheikh Ahmed bin Saeed al-Maktoum, president of the Dubai Department of Civil Aviation (DCA), has been awarded the Arabian Hotel Investment Conference (AHIC) outstanding achievement award.
The president of the DCA was presented with the award on 2 May at the AHIC conference in Dubai.
He was presented with the award in recognition of his role in developing Dubai’s airport infrastructure and airline industry.
Sheikh Ahmed was appointed president of the DCA in 1985, and has overseen the expansion of Dubai International Airport from 3.8 million passengers a year in 1985 to 47.2 million in 2010.
Sheikh Ahmed is also the chairman of Dubai Airports and Emirates Airlines.
Budget and mid-market hotels offer superior returns
Amine Moukarzel
Flamingo Hotel’s president Amine Moukarzel, who is also managing director of Golden Tulip Hotels & Resorts in the Middle East, told the 7th annual Arabian Hotel Investment Conference (AHIC) that returns on investing in budget and mid-market hotels were consistently higher than in hotel assets in more highly-rated sectors.
“It makes more sense from an ROI [return on investment] point of view to go for budget hotel projects,” Moukarzel said. “What is important is to know what the market needs. I will not a put two-three hotel in Saudi Arabia without meeting facilities. But we believe there is a great opportunity for growth. And definitely the return on investment is faster and better than for high-class budget investments.”
Lack of regulation makes Saudi mid-market hotel sector a “nightmare”
Rawaf Bourisli Action Real Estate Company of Saudi Arabia general manager Rawaf Bourisli told the 7th annual Arabian Hotel Investment Conference (AHIC) that those planning to invest in or manage mid-market hotels face a challenging environment in the kingdom.
Rawaf Bourisli
“There has to be a dynamic and elastic understanding of the market,” Bourisli said. “We are developing nine hotels in the mid-market sector. The mid-market is a nightmare because of the [lack of] regulation.”
Bourisli was responding to estimates that Saudi Arabia has a serious shortage of low-cost hotels suitable for the life-styles of many Saudi Arabian families.
AHIC 2011 told Saudi Arabia is ready for budget hotels
Jenan Real Estate Company of Saudi Arabia managing director Bassam Boodai told the 7th annual Arabian Hotel Investment Conference (AHIC) that the kingdom needs more budget hotels to satisfy pent-up demand.
Dr Bassam Boodai “In recent years we have seen a lot of investment in five-star facilities but very few plans for budget hotels,” Boodai said. “There is scope international brands to enter the market. There is a need for a family-focused product. Average family in Saudi Arabia size is 6.5. Living in a hotel is costly. Budget hotels have to cater for this sector.”
Budget and midscale hotels under-represented in the Middle East
Costas Verginis
Deloitte consulting director Costas Verginis told the 7th annual Arabian Hotel Investment Conference (AHIC) that the share of the hotel market accounted for by budget and midscale hotels was low and the sector offers the potential for profitable investment.
“This is an under-represented sector,” Verginis said. “But is there room for more budget and midscale hotels?”
Verginis said that there were a total of 210,000 hotel rooms in the Middle East but only just over 3,000 were budget. The number of midscale hotel rooms was 25,000.Verginis said that branded budget hotels account for 33 per cent of the US market and 24 per cent of the French market.
Kuwait had the highest proportion of its total hotel market accounted for by budget hotels (22 per cent) followed by the UAE (17 per cent) and Saudi Arabia (10 per cent).
IHG says Middle East is key emerging market
Kirk Kinsell
“Today we have within the Middle East and Africa region about 100 hotels and approaching 75 in Middle East proper,” Kinsell said. “We have five of our seven global brands in the region and IHG looks at the Middle East and Africa as a market that can hold its head up high with other emerging markets.”
Starwood aims for 100 Middle East hotels
“Starwood brands have been growing very rapidly in the region,” Vos said. “We now have nine hotel brands in the Middle East and we have 63 hotels. We expect to reach 100 hotels in the next two-three years. I don’t see any obstacle to us doubling the number of hotels in the region in the next five-10 years.”
Hilton aiming for 80 per cent growth in three years
Rudi Jagersbacher
Hilton Worldwide Middle East & Africa president Rudi Jagersbacher told the 7th annual Arabian Hotel Investment Conference (AHIC) this morning that Hilton is aiming for rapid growth in the Middle East.
“We have 50 hotels right now in the region and we expect to have growth of 80 per cent in the next three years,” Jagersbacher said.
Abu Dhabi hotels recorded strong performance in the first quarter of 2011
Richard Riley Chief executive of Abu Dhabi National Hotels Richard Riley told the 7th annual Arabian Hotel Investment Conference (AHIC) this morning that his company has recorded excellent performance in the first quarter of 2011.
“What has been bad for some of our neighbours has been good for the Abu Dhabi and UAE hotels industry,” Riley said. “We are positioned well and we expect to see gradual and stable growth for the next two-three years.”
Riley said that Abu Dhabi needs to tap into new sources of demand. “We have to look towards the east and countries like China for the demand needed to fill the hotels opening in Abu Dhabi,” Riley said. “We also need to see more in the entertainment area in Abu Dhabi.”
Morocco aims to double tourists by 2020
Anass Alami
“This is an ambitious plan, but we believe it is realistic,” Alami said.”The big challenge was increasing the number of tourists from 2.5 million in 2000.”
Alami said that the projected annual growth in the number of tourists is 7 per cent a year.
Deutsche Bank says economic impact of Arab uprisings is uneven
Henry Azzam
Chairman of the Middle East & North Africa (MENA) region for Deutsche Bank Henry Azzam told the 7th annual Arabian Hotel Investment Conference (AHIC) this morning that the Arab uprisings since the start of 2011 are similar in significance to the collapse of Communism in Eastern Europe and the radical political changes in Latin America in the 1980s.
But they are having an uneven impact on the economies of the Middle East, Azzam added.
“Every $1 a barrel increase in the oil price delivers more than $3bn to the Saudi Arabian Finance Ministry,” Azzam said. “That is why Saudi Arabia is going to enjoy a high rate of growth in 2011 compared with most other countries in the region.”
Dubai’s economy is also buoyant, Azzam said. “Dubai benefits when the region does well and it benefits when the region does badly,” Azzam said.
STR Global MD Randall says Middle East hotel industry grew in first quarter
Elizabeth Randall
STR Global managing director Elizabeth Randall told the 7th annual Arabian Hotel Investment Conference (AHIC) this morning that - with the exception of Middle East markets affected by political turbulence - the region’s hotel industry has performed well in the first quarter of 2011.
She said that demand in most markets was up though this has not been translated into higher room rates due to continuing supply growth across the region.
“We can see that supply is beginning to flatten out and drop a little bit in the Middle East region,” Randall said. “This suggests that supply has been absorbed.”
Randall said Abu Dhabi has seen an increase in occupancy in the first quarter of 2011. Other Middle East hotel markets that grew in the first quarter of 2011 were Al-Khobar, Doha, Dubai, Kuwait City, Medina, Muscat and Jeddah. Randall said that the occupancy rate in the Dubai, at about 80 per cent, was the highest in the Middle East in the first quarter of 2011.
“For most markets, with the exception of Dubai and Abu Dhabi, supply is going to be quite constrained,” Randall said. “Dubai is projected to have a 7 per cent rise in average hotel prices in 2011 and 2 per cent in 2012. This is because of people changing their travel plans away from unstable markets.”
Randall said that Abu Dhabi plans to build about 40,000 new hotel rooms and about 15,000 hotel rooms are due to enter the market in Dubai.
MEED Editor tells AHIC 2011 that regional uncertainty is growing
Richard Thompson
MEED editorial director Richard Thompson told the 7th annual Arabian Hotel Investment Conference (AHIC) that events since the start of 2011 were unforeseen and have had a negative impact on business sentiment across the region.
“Over the past four months the region has gone through unprecedented change,” Thompson said. “In the tourism and hotel industry, two of the region’s largest markets - Egypt and Tunisia ‑ have been hit substantially. Bahrain has also been affected. Libya had been seen as a market with potential but is off the radar for the time being.”
Thompson said that the region’s economic fundamentals remained positive. The IMF is forecasting real growth of 3.9 per cent for the region as a whole in 2011 and oil prices are averaging more than $100 a barrel.
AHIC 2011 opens at Madinat Jumeirah
The chairman of Bench Events Jonathan Worsley opened the 7th annual Arabian Hotel Investment Conference (AHIC) today with a call for hospitality industry investors to maintain their confidence in the economies of the Middle East.
“There has been a lot of negativity about the region,” Worsley said. “But there are many encouraging signs. For example passenger numbers passing through Dubai International airport have risen year-on-year and this is evidence that underlying trends are still positive.”
