Hotel investment in the GCC
Hotelier Middle East speaks to several leaders in the hospitality industry, and also reports on the findings of the AHIC regional briefings that were held from January to March ahead of the show
Specialists in the hospitality industry across the GCC have termed the environment for hospitality investment as “promising”.
The outlook is positive ahead of the two major global events — the Expo 2020 in Dubai and the 2022 FIFA World Cup in Qatar. In addition, stakeholder, asset managers, owning companies and operators are confident of the growth beyond the major regional international events.
Katara Hospitality chief operating officer Hamad Abdulla Al-Mulla said the outlook for the hotel industry in Qatar is “especially promising” for 2017. “The region’s fundamentals are strong, making it an attractive investment destination. In Qatar for example, the outlook for the hotel industry is especially promising. According to the Ministry of Economy and Commerce, in 2015, income from tourists amounted to US$5.03 billion (QAR18.3 billion) in 2015, nine-times the $.58billion (QAR2.1 billion) recorded in 2010, demonstrating the clear opportunity for proven investors like Katara Hospitality in the region,” said Al-Mulla.
Filippo Sona, director, head of hotels MENA Region, Colliers International said that while global macroeconomic conditions may have caused projects to slow down in 2016, “developers have to continue their plans if they want to capitalise on the World Cup 2022”.
He added: “For existing hotels, the key to a satisfying 2017 is to prepare budgets focused on cost balancing strategies. This will entail a closer communication and marketing with customers via social media, attempting to minimise OTA costs.”
Al-Mulla agreed that 2016 “will be remembered as a challenging year for hospitality investors as a mix of global geopolitical and economic issues has resulted in a more cautious approach towards investment decisions”. However, he revealed that Katara Hospitality’s “healthy diversification strategy” delivered continued success and growth.
He added: “This business-driven approach ensures that a balance is met across assets of short- and long-term profitability and that the company’s cash flow projections adequately support its development. However, Katara Hospitality continues to identify new opportunities to create lasting value. Our current portfolio includes assets in Qatar, Europe, Africa and Asia, and we are continuously evaluating opportunities in emerging markets, which reflect and fit with our strategy of creating a portfolio of iconic hotels in prime locations. We also see opportunities in refurbishing hotels to restore them to their former glory and have developed a reputation for this type of investment.”
Katara Hospitality is investing in a phased renovation at The Ritz-Carlton, Doha to be completed in 2017, in addition to developing 18 new villas at the Sealine Beach Resort in Qatar. The group is also developing the Katara Towers development in Lusail Marina District.
Outlining the country’s future plans for hospitality, Qatar Tourism Authority head of tourism investment promotion Mohamed Al Mahmeed apprised delegates on the strides made by the authority in recent years. Al Mahmeed said: “Qatar has a clear strategy to develop a sustainable tourism industry through 2030. The past year saw several key developments: the growth of the cruise tourism sector, measures to ease entry to Qatar — including the introduction of a new transit visa — and a new hotel grading and classification system. The focus for us moving forward is to support the diversification of the hospitality sector’s offering and the development of new tourism products.”
Meanwhile, in Bahrain, the key message at the AHIC regional briefing was the importance of government support for tourism as key to a strong and resilient hospitality industry. The briefing, which was held in Manama on February 20, brought together hoteliers, hospitality investors, owners and tourism officials who discussed issues facing the hospitality industry.
The Cohen International Group (TCIG) CEO Hyder Cohen pointed out how the region is going through challenging times, and said: “It was valuable to hear in the briefing that Bahrain understands these challenges and has concrete plans on developing a comprehensive tourism eco-system which will enable the kingdom to offer a diverse and cohesive product.
“Creating bespoke products coupled with technologically enabled experiences will act as a key differentiator and will provide regional countries a unique selling proposition of their tourism product.”
Echoing his sentiments, Expedia Affiliate Network senior manager Fredrick Bonnalt said: “It’s clear to me that Bahrain has a clear and determined tourism strategy for the next five to 10 years.
“It’s very refreshing to listen to the vision, knowing that the government is standing behind this strategy to make Bahrain a top leisure and corporate destination. These are difficult times from a geopolitical, as well as a financial viewpoint and to diversify the country’s economy will be vital; there is no doubt in my mind that Bahrain is implementing this strategy.”
Bahrain Economic Development Board (EDB) executive director — tourism and leisure Jerad Bachar told Hotelier Middle East: “People continue to be drawn to Bahrain, not only for its wealth of history but for its open, liberal lifestyle and warm culture.”
He added: “We saw a 6% increase in the number of tourist arrivals between 2015 and 2016, with 12.2 million visitors last year. This figure is comparable to countries such as South Africa, Portugal and Croatia, and is a huge achievement for a country with only 1.3 million people.”
He added: “Hotel brands such as Four Seasons Hotel Bahrain Bay, The Ritz-Carlton Bahrain and Rotana, are helping us cater to this rising demand and to the individual needs of each visitor. A Wyndham Grand is under construction, as is a One & Only resort. Waterfront mall Avenues Bahrain will also be opening later this year. As Bahrain’s tourism industry continues to expand, we look forward to seeing many more of the biggest names in hospitality setting up here, helping us to provide a truly unforgettable experience for visitors.
Another key theme at AHIC, according to Colliers International associate director, hotels, Saahil Lalit will be asset management. “With revenues falling, we need to discuss how we can get more out of our properties,” Lalit said.
He went on to highlight the rise in popularity of Airbnb in the region, calling for the need for the region’s hospitality sector to respond to the challenge of the newcomer, and added that it “can add significant volume to the market at short notice, and at low prices”.
Speaking about new development opportunities in the UAE, Wyndham regional vice president Ignace Bauwens said: “If you look at the theme parks, it was one of the missing pieces to the puzzle. Now Dubai has that as well, and you see a different demand generator.” The Dubai Parks and Resorts and the IMG Worlds of Adventure are located on the periphery of the city, and Bauwens said that a few Wyndham brands —such as Super 8 and Days Inn which execute the motel model — will have a bright future.
“Sometimes guests who travel to Abu Dhabi for a get together, party or event, in a group want a room to stay just the night, and that’s where the intercity concept can develop a lot,” Bauwens said, indicating the company is in talks with a few owners to develop mid-scale and economy projects.
Developments in Oman continue as the country makes a push towards positioning itself in the MICE and ‘bleisure’ player. Approximately 2.5 million tourists touched down in Oman from the beginning of 2016 until October compared to 2.2 million during the same period last year, according to the National Center for Statistics and Information (NCSI).
NCSI also reported that 1,248,387 of the total visitors arrived from the GCC followed by Indian nationals with 244,292 and British tourists with 133,706. In October alone, a 10.7% decrease was registered where 192,000 visitors touched down, compared to 215,000 of the same month in 2015. Hotel revenues dropped YTD for the period ending October 2016, as hotels recorded OMR16.7million ($43.37m) in October 2016 — a 10.5% decrease compared to OMR18.7 million ($48.57m) in 2015.
Meanwhile, owners and investors continue to eye growth of their assets in Oman. Deutsche Hospitality recently signed a second InterCity Hotel for Oman, while three other mid-market hotels are planned to open in the next 12-odd months.
In addition, towards the end of March, Mövenpick announced it will enter Oman with its first property — Mövenpick Hotel & Apartments Al Azaiba Muscat.
In February 2017, Oman’s first low cost airliner, SalamAir, took off, beginning with inter-city flights. In early March 2017, the airline landed at Dubai’s Al Maktoum Airport for the first time, making its international debut. SalamAir, along with the country’s legacy carrier, Oman Air, will hope to replicate the success some of the other GCC legacy carriers have managed to achieve.
According to the World Travel and Tourism Council, Oman’s tourism and hospitality industry is building momentum, with total investment in the sector to hit $1.17 billion by 2026. The WTTC also said the total contribution of travel and tourism in the country set to rise to $785 million over the same period.
Several major operators continue to have large pipeline projects in the Kingdom of Saudi Arabia. Saudi Arabia will see a record 68 new hotels and 29,033 hotel rooms open across its major cities in 2017.
Riyadh, Jeddah, Al Khobar and Makkah are set to be the Kingdom’s busiest areas for hospitality development, according to the TopHotelProjects Saudi Arabia Hotel Construction Overview.
Major new hotels forecast to open throughout the Kingdom this year include Assila Hotel Rocco Forte (Q1 2017), Time Qurayyat Hotel (Q2 2017), Nobu Hotel Riyadh (Q2 2017), Swiss-Belhotel Al Khobar (Q4 2017) and the highly-anticipated Abraj Kudai Towers, which will become the world’s biggest hotel when it opens its 10,000 rooms in Q4, 2017.