News and analysis from the investment world
Middle East hopes for
2021 recovery
The region rethinks its approach in order to return to profitability .
One of the takeaways from the Arabian Hotel Investment ( September 29-October 1 ) was how the Middle East ’ s tourism sector is reassessing its business models in a bid to regain its footing .
“ Maybe [ we need to try ] to push away from an ADR focus and look more at a TRevPAR mentality to try and drive a better value proposition for anyone visiting our properties to spend a little bit more on-property ,” says Stuart Etherington , vice president of asset management at Dubai Holding , owner of Jumeirah Group .
Christopher Hewett , vice president hospitality at Ras al Khaimah , UAEbased Al Hamra Group , believes that it is time for the industry to reappraise its whole cost model . “ Do we look at seasonal workforce ? Do we [ Ras Al Khaimah ] start looking at having an operating model that ’ s different from other parts of the UAE ?” he asks . “ How can we try and do something a little bit different ? We ’ re looking at every scenario because it ’ s a good opportunity to do so .”
Hewett says that with budgets looming , companies are starting to understand what they are looking at for 2021 and beyond . “ From the current situation , we have come to value the domestic market more than maybe historically . There was a strong focus on the international segment because they were driving long average length of stay — they were generating 70 % to 80 % of room nights . But we have seen that the domestic market is valuable .”
According to Colliers ’ MENA Hotel Market Survey , a recovery will start during this final quarter of 2020 with Q4 2021 witnessing a noticeable increase in demand . The UAE and Kingdom of Saudi Arabia are expected to recover faster , with the former set to benefit from Expo 2020 ( now moved to October 2021 ), and the latter helped by the upcoming mega- and giga-projects , as well as domestic tourism .
“ There are some green shoots coming in from Russia and CIS , and we ’ re starting to see a little more activity from wholesalers , but what we will see is a continuation of what we have now ,” Hewett adds . “ We will probably see a little bit increase in Q1 and Q2 next year as we get more international business coming through , but material increase in demand isn ’ t going to really start until Q4 next year .”
Simon Hasdell , vice president of asset management at Kuwait-based developer IFA Hotels & Resorts , says that while demand will increase , rates will suffer for a while . “ The rates are where they have tumbled to — and are going to remain until we get past summer next year and we have Expo coming at us . With hopefully more activity there , you ’ ll have a demand curve that will go up .”
STR Managing Director Robin Rossmann offers good news : A majority of the increased supply set for 2020 now won ’ t come through until 2021 . He forecasts that , assuming a pandemic cure is meaningfully distributed during Q1 2021 , increased travel could really begin in Q1 2022 . “ We will see a recovery — although not completely rapidly — with Abu Dhabi having a 12 % RevPAR increase and Dubai with Expo coming , a 43 % increase ,” Rossmann says .
“ Fundamentally , we believe that travel demand will recover ,” he adds , pointing to China ’ s recovery as a benchmark for the Middle East to follow .
Contributed by Devina Divecha
www . hotelsmag . com • HOTELS ’ Investment Outlook • November / December 2020
A