The outlook for travel and tourism in the Middle East and North Africa (Mena) region is positive, despite fluctuations in recent years. Hotels have shrugged off the doldrums of 2016 and the softening of prices in 2017 to boost stable numbers. Airlines, too, are on an even keel, despite competition and geographical jockeying.
While incoming hotel supply continues to factor into a depression in room rates, more business is now being drawn from markets such as China and India, which Dubai in particular is aggressively courting.
Aviation has been a major catalyst for the growth of the tourism industry in the Mena region. As airlines continue to ply new routes, more people are visiting the region, and from further afield.
However, increased competition in the airline sector has resulted in airline profit margins being compressed. Airlines have had to use their initiative to stimulate demand by targeting higher yielding segments such as corporate business and premium leisure.
Emirates Airline, for example, has launched a major revamp of its Boeing 777-300ER aircraft, with fully enclosed private suites in First Class and refreshed cabins in Business and Economy, as well as changes in its seat selection and lounge access privileges.
Hotel occupancy rates and revenue per available room declined after the fall in oil prices in late 2014. But data for 2017 suggests recovery is on the way.
Vice president of sales and marketing for India, Middle East and Africa at hotel company IHG, James Britchford, says the positive movement in oil prices has improved both consumer and investor sentiment. “Moreover, government initiatives such as Dubai Expo 2020 and Saudi Arabia Vision 2030 have also rallied an upswing in investor interest in the hospitality sector,” he says.
There is plenty of extant hotel supply, but little sign of the spigot turning off. Ahead of the Arabian Hotel Investment Conference (AHIC) 2018, data from MEED Projects shows that more than $14bn-worth of hotel construction contracts are projected to be awarded in 2018 alone.
The UAE is by far the largest market for hotel investment, with an expected $8.4bn-worth of contracts. This is followed by Saudi Arabia with an estimated $1.9bn and Qatar with $1.7bn. And growth is expected to continue in the next few years, as regional governments announce significant tourism plans for the next decade.
Faced with oversupply in the sector as a whole, hotels and hospitality groups are turning to alternative strategies to diversify their revenue bases. Emerging markets are key, with China and India being targets.
Indeed, visitors from China are a huge growth market: Canada-based global real estate services organisation Colliers projects that the number of Chinese tourists to the GCC will grow from one million in 2016 to 2.5 million by 2021.
Tourism from China comes with its own culture-specific demands regarding factors such as the types of food and beverage on offer. Millennials and baby-boomers also have their own demographic-specific preferences and requests. And halal tourism and family travel are significant markets to be catered to in the Mena region.
The UAE is considered relatively mature in terms of its offering, though analysts point out a need for greater focus on mid-market tourist. Saudi Arabia, on the other hand, is in the early stages of a long-term tourism plan that will include theme parks, resort destinations, heritage tourism and historical sites.
In the meantime, growth in the supply of mid-range hotels and serviced apartments is expected to shift the pricing landscape, especially in these two markets.
The UAE has also done well to attract the family demographic. The amusement park sector is growing, with affordable options attracting a wider variety of visitors. The options for family packages are also becoming more varied, and the family segment is expected to grow steadily.
Regulatory changes can also play an important part in opening up destinations to new markets. In 2017, the UAE government extended visas on arrival to citizens of China and Russia, resulting in year-on-year increases of 41% for Chinese tourists and 121% for Russian tourists, according to the Dubai Corporation for Tourism and Commerce Marketing.
Many groups are now recognising the importance of social channels and IT systems in attracting and better serving guests.
Online sales channels for hotels and airlines have become hugely important. Social media and online reputation management have become an integral part of marketing strategy in the hospitality and tourism sector, as Hakan Ozel, general manager of Shangri-La Dubai, confirms.
“Influencers and social media now have a huge impact on buying behaviour,” he says. “Ensuring we know how to maximise this avenue of marketing is key.”
Digitisation and artificial intelligence are also driving innovations in the wider tourism segments, says Muhammad Chbib, CEO of online travel platform Tajawal. “A lot of the repetitive interactions with consumers are being automated through chat bots, for example,” he says. “This way, capacity is freed up to focus on creating exceptional experiences.”
Half of hotel payments are expected to be made via mobile or virtual payment platforms by 2021, according to Colliers. By 2023, it is estimated that most hotels will be able to comprehensively predict customer behaviour through the use of augmented analytics. Shangri-La, for instance, has already introduced Apple Pay and Samsung Pay throughout operations at several properties, so all guests have access to cashless payment.
No fear from peer
According to research by Colliers, Dubai has a total of 16,866 rentals on short-term lodging marketplace Airbnb in 2018, of which 5,872 are active rentals.
Despite the significant increase in the number of vacation home rentals, in addition to the increase in hotel supply, Dubai’s hotel occupancy continued to increase in 2017.
Hoteliers and industry analysts point out that although there is a degree of competition between peer economy offerings and conventional hotels, they are very different in terms of the experience and the services available. They maintain that hotels, and their banqueting operations in particular, remain an important aspect of society and culture in the Mena region.
IHG’s Britchford points out that the short-term rental market has always been there to address specific customer profiles, and that it this market that is being catered to by platforms such as Airbnb.
“This does not drastically change our market share,” he says. “It does, however, prove the [diversity] of consumer behaviour.”
Another trend in the Mena tourism industry is the increasing collaboration between businesses, government bodies and hospitality players when it comes to attracting tourism to the region.
Issam Kazim, CEO of Dubai Corporation for Tourism & Commerce Marketing, says much of Dubai’s success in marketing itself is the result of collaboration: “A priority for Dubai Tourism is to develop initiatives in support of, and in collaboration with, our partners and stakeholders, recognising the huge contribution that each player makes towards Dubai’s success as we work together to realise our shared goals,” he says.
Tajawal’s Chbib confirms that regional tourism boards play a key role: “As a neutral body, tourism boards drive partnerships and alignments between regional airlines and hotels to create packagesthat target different source markets,” he says. “You will see more and more tourism boards seeking a presence in key source markets in Asia, Russia, Europe and North America.”
Tourism boards are key players in positioning their destinations for a global audience. The UAE tourism authorities’ approach has been strategic in creating a “suite” of travel attractions and business opportunities. Saudi Arabia is following suit, with the announcements of the Red Sea project, Neom and planned entertainment complexes.
Enad Tannous, general manager of the Grand Millennium Al-Wahda Abu Dhabi, approves. “If hotel operators join forces and collectively promote the location, they will raise the overall demand instead of competing for existing demand,” he says.
The bigger the travel pie, the happier everyone is.
By Hisham Wyne
RevPAR slows its fall as reduction in average daily rates prompts rise in occupancy
The Middle East’s travel and tourism (T&T) market was buoyed by a 5 per cent rise in international tourist arrivals in 2017, resulting in a total of 58 million visitors, according to the UNWTO World Tourism Barometer.
However, the Middle East was the only region in the world to exhibit a decline in revenue per available room (RevPAR) in 2017, falling 5.6 per cent over the year, according to the hotel data benchmarking company STR Global. This was due in large part to oversupply in the hotel market.
Nevertheless, growth in hotel demand rose from 1.2 per cent in 2016 to 4 per cent in 2017, just shy of the growth in hotel supply, which rose from 4 per cent in 2016 to 5.1 per cent in 2017.
This trend has contributed to a reversal of the previous three years’ downward trends in occupancy and average daily rates.
The results in the Middle East were buoyed by the 17.9 per cent rise in RevPAR in Beirut – in a clear sign that the market is recovering from instability in neighbouring Syria – while in Dubai, the region’s largest T&T market by size and revenue, RevPAR declined by a modest 3.5 per cent, compared with a fall of 10 per cent in 2016. Occupancy also grew by 0.5 per cent in the market, indicating an upswing.
North Africa saw a 13 per cent increase in international tourist arrivals and enjoyed a strong hotel performance in 2017, led by the country markets of Morocco and Tunisia, which saw RevPAR grow by 8 per cent and 5.9 per cent, respectively. Occupancy rose by 26.3 per cent in Tunisia, in a sign of recovery from the 2015 terrorist attack in Sousse.
By MEED Staff
Tourism industry report continued …
Saudi Arabia’s Vision 2030 transformation programme promises huge opportunities for hotel investors