Hotels throughout the Middle East are showing signs of recovery in demand or a slowdown in decline, according to the latest findings revealed by French research firm, MKG Hospitality.
The region recorded a 4.2 per cent growth overall as per MKG's June 2010 report.
A quick look at the UAE hotels specifically reveals that trends are starting to show stabilisation in demand in all the emirates, and as occupancy continues to improve (and then start to grow), hoteliers are expected to be able to focus on stabilising ADR (average daily rate). This will then have a "positive impact on RevPAR" – the hotel industry's key performance indicator, according to Vanguelis Panayotis, Director of Development, MKG Hospitality.
"The RevPAR is still down in the UAE hotels. Year-to-date April 2010 by almost 16 per cent, and over 20 per cent for the 12 rolling months prior," said Panayotis "What is interesting to notice is that beach locations in Dubai and the UAE seem to be performing better. Jumeirah Beach, for example, is even showing signs of growth, with RevPAR increasing by 4.7 per cent in both April and the last three rolling months prior."
Hotel supply development in the Middle East, meanwhile, has declined, with many cancellations and postponements, especially large-scale standalone projects.
"Difficulties in sourcing financing and continued decreases in key performance indicators are fuelling this trend. However, smaller projects and those associated with a brand are still moving along," said Panayotis.
Dubai and UAE hotels overall are expected to slash room rates further during the course of this year.
Accordin to Panayotis: "Indeed, prices came down in the Middle East over the past 12 months. Now that demand has somewhat returned, prices should stop dropping so much and remain rather stable. However, it is also summer, the traditional low period for the region. Hoteliers will find it difficult to fill rooms with limited Mice and leisure activity. As such, prices will be vulnerable to further decreases.
"Towards the end of the year and into 2011, economists are predicting continued improvement in the global situation. In turn, hotel demand should return and start to see some growth. Hoteliers will then see better results with average prices. When OR [operating revenue] is low, hoteliers tend to lower prices in order to stimulate demand."
With beach locations as a priority, occupancy in Middle East's hotels is projected to be high in the second half of 2010 and ADR "much better" than the corresponding period in 2009, Panayotis said. "The Middle East will most likely have to wait until the other end of summer to see better results. In the meantime, hoteliers should focus on maintaining decent OR. When OR starts to move upwards, hoteliers will enter the next phase of the hotel cycle, able to start stabilising ADR and reducing the decline in RevPAR," he said.
"Of course, all of this is assuming the economy continues to improve, and demand returns from both business segments, and key source markets in Europe."
Furthermore, new hotel openings should still appear in 2010 and 2011, Panayotis said, because of pipeline projects still under construction. "So supply is expected to increase. The challenge will be how these markets sustain this injection of new supply in such an already volatile situation," he said.
Overall, though, signs of improvement are appearing in the Middle East and North Africa as well as the rest of the world, according to Panayotis. He said: "The hotel industry moves along a cycle, phase-by-phase. So we can expect continuation of what trends are already appearing. The only uncertainty that remains is the speed of movement."
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