Despite the global recession denting appetite for travel last year, the Middle East still maintained the highest average hotel occupancy levels and room rates in the world.

Figures from STR Global show that the Middle East region achieved an average occupancy rate of 61.3 per cent in 2009, with average room rate of $202 and average revenue per available room (revpar) at $124, some $44 higher than in Europe.

Recent years have seen countries across the Middle East invest heavily in tourism, hotels and leisure. Regional occupancy levels plummeted last year, due to a combination of the new room supply coming on stream and the impact of the global recession.

However, there are early signs of recovery for Middle East tourism, with the rate at which demand was falling slowing from September 2009 onwards.

While pessimists might argue that improved demand towards the year-end reflects the traditional peak season for Middle East tourism, when the region attracts visitors from the northern hemisphere in search of winter sunshine, the Middle East is now third only to Asia Pacific and Europe in terms of improving demand.

STR Global tracks hotel performance in key Middle East cities. Of the nine major cities it analysed, just three achieved improved revpar levels last year: Beirut, Amman and Jeddah. But their ability to buck the global trend was more anomaly than an indication of strong underlying demand.

Beirut, in particular, stands out from the pack, having achieved a 54 per cent increase in revpar last year to $146, representing improved hotel room revenues for the second year in a row and the strongest performance in the Middle East last year. But to conclude that Beirut is recession-free would be misleading.

Rather, the market is continuing its slow recovery following the month-long stand-off between Israel and Hezbollah in 2006.

“In Beirut in 2008 and 2009, we have seen a clear demonstration of the value created when a world-class leisure and business destination is combined with peace and stability,” says Deloitte Middle East partner for travel hospitality and leisure, Robert O’Hanlon.

Nevertheless, Beirut’s hotels achieved record performances last year, with occupancy approaching 71 per cent and average room rates topping $200 for the first time. Figures from Lebanon’s Ministry of Tourism show a 39 per cent increase in visitor numbers in 2009, with the country attracting a record 1.85 million tourists.

Visitor numbers plunged to just 767,000 in 2007. The country’s previous tourism performance peaked at 1.4 million visitors in 1974. A return to stability earnt the country more than $2.5bn from tourism in 2009, in terms of direct returns, representing more than 9 per cent of gross domestic product.

With traditional tourist-generating markets gripped by recession, Lebanon was particularly successful in attracting visitors from the Arab world. Arab countries accounted for more than 40 per cent of visitors to Lebanon in 2009, with Europeans accounting for just 25 per cent.

The UN World Tourism Organisation named Lebanon – and neighbouring Syria – among just 15 countries worldwide that had achieved an increase in tourism numbers to September last year. Lebanon’s prospects this year rest heavily on maintaining peace at home, but also on factors that relate to general consumer confidence in the world’s tourism-generating economies.

Jeddah, meanwhile, was the strongest performing city on the Arabian Peninsula, according to STR Global’s figures, achieving an average occupancy rate of 71 per cent, and a 10 per cent increase inrevpar to $125.

STR Global marketing director Konstanze Auernheimer attributes last year’s strong performance to Jeddah’s proximity to the holy sites of Mecca and Medina. Commanding a unique tourism niche, Saudi tourism has benefited from a steady flow of Muslim pilgrims that has proven more resilient to the recession than the general travel market.

However, Saudi Arabia’s commercial capital commands an underlying strength in its established mix of luxury, mid-market and budget hotels. Unlike Jeddah, most Gulf cities have anchored their tourism strategy to upmarket developments, in the belief that top-class hotels would deliver maximum return on investment.

The global downturn has exposed the weaknesses inherent in this strategy, and strengthened the case for building more affordable accommodation to give Middle East cities wider appeal.

Timing played a critical part in Middle East cities’ performance last year, with new hotel capacity contributing to a general downturn in revenues and occupancy rates. The last decade has seen regional governments invest heavily in tourism promotion, drawing an influx of global hotel brands to the region.

The fortunes of Amman in Jordan contrast with those of oil-rich Muscat, Doha or Abu Dhabi; Amman, which has seen steady but unremarkable expansion of its hotel stock achieved a 12 per cent increase in average daily room rates to $147 last year.

Jordan’s southern neighbours have gone for faster growth, however. The oil boom of 2005-2008 made it possible for wealthy Gulf states to plough profits into new industrial sectors, as part of a drive to diversify. Tourism is high on GCC government wishlists, offering both an opportunity to reach out to the wider world and to anchor inward investment.

Abu Dhabi has positioned itself as a hotspot for high culture, Doha has carved a niche in education, sports and medical travel, while Muscat has targeted lovers of rugged nature and outdoor adventure. All three saw a significant increase in new hotel stock last year.

But since this coincided with the global downturn, increased capacity spelt bad news for occupancy levels and room rates in all three Gulf capitals. Although Abu Dhabi achieved a 1.4 per cent increase in average room rates to top the list of Middle East cities at $285, new hotel properties flooded on to the market and pushed revpar rates down nearly 12 per cent.

Expanding hotel stock also meant that Muscat and Doha struggled with occupancy levels of just 54 and 57 per cent respectively, and both saw revpar levels plummet last year. Riyadh, which has an acute shortage of mid-market and budget hotel capacity achieved occupancy levels of 58 per cent, but saw revpar levels drop 15 per cent.

No Middle East city, however, was hit as hard as Dubai last year. Although the emirate maintained the second-highest revpar in the region at $163 last year, the collapse of business travel and an increase in new room stock had a huge impact on the emirate’s hotel performance last year.

Dubai’s revpar plummeted 31.4 per cent, and some analysts believe that worse is still to come. While upscale Dubai hotels had secured solid corporate bookings last year – many linked to conferences and exhibitions, and placed months in advance – corporate bookings have plummeted this year.

This summer will see Dubai launch a seasonal promotion, with some 80 partner hotels on board, that aims to lure leisure travellers to make up for the shortfall in business bookings. But it faces stiff competition from many other markets across the Middle East and beyond, some more geared than Dubai to the needs of younger, budget-conscious travellers.

In the past year or so, the Middle East has flipped from being a region that lacked hotel capacity to one facing a mounting oversupply – and STR Global’s figures suggest that this situation will continue for several years to come. Projects initiated during the boom years are coming to fruition, bringing new stock on stream at a time when demand remains weak.

According to STR Global, in February 456 hotels were under construction in the Middle East and Africa region, which combined will deliver 123,764 new rooms.

Dubai leads the pack with more than 30,000 rooms planned and 15,563 under construction, followed by Abu Dhabi with 13,596 rooms planned, and work under way on 7,200 more. Altogether, the seven emirates that make up the UAE plan to add 51,515 hotel rooms, with work already under way on 7,200.

The global recovery will improve the region’s tourism prospects in the medium term, but the continued new supply entering the market means the Middle East tourism industry faces mounting pressure in the short term.