Qatar’s successful World Cup bid has given the country’s hotel sector a huge boost along with an unmissable deadline, but the prospect of a post-2022 glut is a reality that needs to be addressed
Qatar’s hotel industry is on the cusp of another major boom and operators are vying for pole position, either by locating themselves in the best areas or by offering an extensive array of services. A raft of new openings, including the Hilton Doha, the St Regis and the Intercontinental Doha West Bay, is scheduled for 2011. With the government’s plans to provide 55,000 more rooms in 140 new hotels in time for the 2022 World Cup, launches will continue throughout the next decade.
“The four-star hotels in the market have benefited as a lot of guests moved away from five star”
Catalin Cighi, HVS
The industry is awaiting information on exactly where the new hotels are to be built, but it is already clear that the majority will be in the capital. According to Fifa’s evaluation report of the country’s World Cup bid, up to 17,000 new rooms are planned for central Doha, to complement the 20,000 in Doha that the government has already contracted for the event. Al-Wakrah, south of Doha by the new port, is in line for 13,000 additional rooms. Lusail, to the north east of Doha, is also set to house a significant proportion of the new stock with 12,000 earmarked for this part of the country. Smaller designations of 1,000-6,000 rooms are expected close to the planned stadiums at Al-Khorr, Al-Rayyan and Umm Salal.
“The World Cup award gave hotel development in Qatar a long-term boost and simultaneously set a new timeline. Hotels have to be up and running for that date,” says Chiheb Ben Mahmoud, head of hotel advisory Middle East and Africa at property consultant Jones Lang Lasalle.
|Qatar hotel sector performance|
|Source: STR Global|
There is no doubt the successful World Cup bid has boosted the sector, but analysts say the industry had already begun to recover following the downturn that pervaded through 2009. Although Qatar was less affected than much of the world thanks to its continued economic growth, hotel demand still dropped, bringing average room rates down with it. Last year saw the beginnings of a slow recovery. By February 2011, hotel consultant STR Global said that occupancy rates in Qatar averaged 73 per cent, compared with 63.4 per cent in February 2010.
Average daily room rates were also marginally up to $246, compared with $245 for the previous 12 months. Revenue per available room (RevPAR) was significantly higher at $180 from $156, indicating that, despite the rising number of new rooms in the market, demand is strong.
|Revenue per available hotel room (S)|
|Source: STR Global|
This year, the sector has benefited from the hosting of football’s Asian Cup in January and such events are becoming more frequent in Qatar. Hoteliers say the government is more active than ever when it comes to both hosting and marketing sporting events. At the same time, the Qatar Tourism Authority is working hard to encourage more visitors to stay in the country. Efforts include the promotion of festivals and events, along with initiatives such as Qatar 48, which encourages stop-over visitors to extend their stay in the country.
Part of the successful growth of the hotel industry in Qatar can be attributed to the array of food and beverage outlets and entertainment venues they bring to the market. International hotel operator Starwood Group opened the W Doha Hotel & Residences in March 2009, with 289 rooms and 156 residential units. “It was the first time there was a Michelin star chef opening two restaurants in the area, so it was immediately well respected by the local community,” says Guido de Wilde, senior vice president of Starwood Hotels and its regional director of the Middle East.
W is one of nine brands owned by Starwood, which is also the operator of one of Qatar’s earliest five-star hotels, the Sheraton, which opened in 1982. Despite launching its second major brand in the midst of the economic downturn, De Wilde says it has performed well. “Even though the business [environment] was challenging in 2009, the acceptance was almost instantaneous because it is so different from those that were in the market. We closed with 72 per cent occupancy for the first year, which was very good,” says De Wilde.
|Qatar hotel sector|
|Host city||Local population||Stadium||hotel rooms in 2010||hotel rooms in 2022|
|Al-Daayeen||36,592||Lusail Iconic Stadium||0||12,000|
|Al-Rayyan||422,877||Al Rayyan stadium, Education City stadium, Al-Gharafa stadium, Khalifa International stadium||0||3,000|
|Doha||841,591||Doha Port stadium, Qatar University stadium, Sports City stadium||20,000||37,000|
|Umm Salal||44,177||Umm Salal stadium||0||6,000|
|Source: Fifa World Cup Evaluation Report|
Starwood’s third launch, the luxury brand St Regis, is set to open in November 2011, taking the number of rooms the operator has in Doha to 1,151. De Wilde says this is about 23 per cent of the five-star market. “We are currently planning Le Meridian in Doha, a 350-room hotel that we assume will be opening at the beginning of 2014. That is the next property on the drawing board.”
Hotel consultant HVS estimates that five-star hotels account for about half of Doha’s current hotel stock. But there will be strong demand for cheaper accommodation during the World Cup event. “For many of the guests, the tickets to the World Cup will be the main investment,” says HVS associate director Catalin Cighi. “The new stock will need to accommodate the masses and the greatest proportion of these will be price conscious.”
A new trend for building lower-cost hotels actually emerged following the economic downturn. “The four-star hotels in the market have benefited as a lot of guests moved away from five star,” says Cighi. “Some guests moved down to lower than this, but found that standards of food and meeting facilities were just not the same, so many came back to the four star.”
Nonetheless, operators such as Golden Tulip Hotels, which has 55 hotels in the region and a range of mid-market brands, anticipates major growth in this sector. “Take an aircraft for example, how many are first-class passengers and how many are in business class and coach? Thus the future lies in four-star and particularly three-star hotels,” says Amine Moukarzel, Golden Tulip’s senior vice president and managing director Middle East and North Africa.
International hotel giant Hilton Worldwide is also targeting this segment. “I think there is a growing demand for mid-market brands like Hilton Garden Inn,” says Essam Abouda, vice president of operations for Hilton Worldwide Arabian Peninsula & Indian Ocean. “We plan to launch hotels spanning different segments, from luxury hotels like Conrad and Waldorf Astoria through to mid-market brands.” Hilton’s first hotel in Qatar, the 309-room Hilton Doha, is set to open on the Corniche in 2011.
Although all of the hotels in Starwood Group’s Doha operations are five star, De Wilde says they are considering other options. “There will obviously be a range of four and three-star properties required in the market. We have the brands that play in that segment, so over time I see the potential for our other brands to enter the market.”
The introduction of another 140 hotels in the Qatar market means competition will intensify for existing operators, but most are bullish about their prospects. Consultant HVS says some of the new stock will include modular hotels and accommodation in neighbouring cities that will be connected to the planned rail network and this should reduce the oversupply risk.
The government has already earmarked the use of 6,000 hotel rooms on cruise ships docked in New Doha Port - expanding on the strategy used for the 2006 Asian Games. “There is going to be a lot of competition, but these hotels are not all going to be built at the same time,” says De Wilde. “You are talking 140 hotels and they are saying that 127 projects will be finished before 2016, with the remaining 13 between 2016 and 2022. We will see.”
Some hoteliers have confidence in the government’s plans to build a sustainable tourism industry. They point to the improving transport links and development of new attractions such as the cultural village and Museum of Islamic Art. There is also a feeling that the Qatar National Convention Centre, due to open later this year, will give Qatar the option of hosting much larger international events and allow the country to compete with the UAE in the meetings, conventions and exhibitions industry. Doha’s growing role in international diplomacy will also create demand for venues and rooms.
But there is a limit to how much new capacity Qatar can absorb and the prospect of a post-2022 glut is a reality. “Although pieces of the jigsaw are appearing now and then, the full picture and scale of the 2022 Doha has not been unveiled yet,” says Ben Mahmoud of Jones Lang Lasalle. “And this has an impact on hotel development, amid strong eagerness by current and future hotel developers to see how best to integrate the World Cup opportunity in their plans.”
With just one million people visiting Qatar each year at present, operators are right to be cautious.