Dubai, UAE – 13 May, 2014: According to PwC’s first Middle East hotel forecast*, the improving economic and travel backdrop has helped reinvigorate trading in the featured cities of Dubai, Abu Dhabi, Doha, Jeddah, Muscat and Riyadh. The “Gateway for growth” is a forecast snapshot looking at the prospects and key issues facing the hospitality industry. Whilst growth is forecast in all of the six cities featured, the pace of growth varies from city to city and the challenge for hotels will be to capitalise on this improving climate while responding to the megatrends impacting their business.
PwC anticipates RevPAR growth in all of the 6 featured cities in both 2014 and 2015. The only exception across all metrics is ADR growth in Riyadh which is forecast to be marginally negative. Encouragingly however, the rate of decline is slowing.
The top RevPAR growth stories in 2014 are Muscat (6.6%), closely followed by Dubai (6.5%) and Doha (5.2%). In 2015 this RevPAR growth is forecast to continue with Muscat and Dubai continuing to grow at 6.6% and 6.5% respectively and Doha forecast to grow at 5.4%.
Commenting on what’s driving growth, Viren Lodhia, Hospitality and Leisure Lead Partner at PwC Middle East, said: “Travel to the Middle East is expected to grow strongly over the next 10 years, with the region’s strategic location and investment in airports and infrastructure, establishing it as an important Global Hub. Combining this with future Mega Events being held in the region and an emergence as a magnet for both MICE and shopping travelers, provides for a wealth of opportunities for both hotel operators and owners”.
Alison Cashmore, Hospitality and Leisure Director at PwC Middle East, added: “It’s a mix of ADR and occupancy, with the cities really falling into two camps. In the strongest RevPAR growth cities of Doha, Dubai and Muscat we are anticipating ADR being the strongest metric. However for Riyadh, Jeddah and Abu Dhabi, occupancy is the principal driver with low growth forecast in ADR’s. Each city has its own supply and demand characteristics and may be on different stages on the hotel life cycle.
Whilst supply could cast a shadow in some cities, the strong demand should continue to drive growth.”
The six cities represent over 124,000 hotel rooms and have seen high levels of new supply added in recent years with more scheduled to open. In Qatar, 45,000 further hotel rooms are reported to be required to meet FIFA World Cup capacity requirements, with 21 hotels planned for construction by 2017. In Dubai, The Department of Tourism and Commerce Marketing estimate a need for between 140,000 to 160,000 new rooms by 2020, with a further 10,000 plus rooms being reported as needing refurbishment prior to the Expo2020.
Megatrends that are transforming today’s businesses include shifts in global economic power, innovation in technology and demographic change. Mobile and tablet hotel bookings are already beginning to overtake traditional web-based booking and the travel consumer is leading the way in driving technological change. Travel consumers want mobility, flexibility and easy real time access to information and to shop and pay safely and easily on the go. They expect seamless connectivity allowing them to access the content they want when they want it across all platforms, and also increasingly expecting seamless transitions between different platforms.
“We urge hotel owners and operators to pay special attention to the mega trends we are identifying – these are structural changes that will impact the business model of hotels in the region. We believe that digital and mobile platforms will change everything - as hotels battle to stay relevant to consumers, the technological revolution is taking them into a whole new world at an increased speed," noted Viren Lodhia.
The importance of feedback through social media is not to be underestimated. For example, Abu Dhabi plans to integrate social media rankings into its official hotel classification in 2014 – the first tourism authority to do so.
“This digital and mobile revolution has prompted the emergence of a new generation of travel customers – the digital natives,” added Alison Cashmore. “These new customers will judge the best deal based on feedback through social media. Travel customers are no longer talking in terms of four star and five star hotels; we are now seeing the 8.5 and 6.1 type of hotel rankings online”.
Viren Lodhia, Hospitality and Leisure Lead at PwC, concluded: All in all, it is a growth story across the featured cities, but some issues are likely to impact hoteliers’ profitability. Whilst we are not yet back at 2008 levels (particularly in relation to ADR’s), a number of cities are edging ever closer to those highs when we look at forecast occupancy rates.
The global economic landscape is changing quickly and hotels have to constantly adapt to these changes to remain successful in the market. The cost of doing business, regulations and taxes, competitive accommodation products and keeping hold of customers are just a few of the issues that the sector is grappling with”.
Notes to Editors
A copy of the report can be obtained from PwC’s website at this location [http://www.pwc.com/en_M1/m1/publications/middle_east_hotels_report.pdf]. For more information and specific data for each of the cities surveyed, please get in touch with the contacts listed in the report.
*Featuring 6 of the Middle East’s most important gateway cities, PwC’s forecast provides a breakdown of revenue and occupancy forecasts, opportunities driving tourism and investment in 2014 and 2015 and the economic outlook for each city. The cities in PwC’s econometric forecast are all important gateway cities and/or business and tourism centres, and some are enroute to holding Mega-Events and themselves becoming mega cities.
Data: STR Global Forecasts: PwC May 2014
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