Market update: Sharjah - the culture capital
The emirate of Sharjah is working strategically to build its image as the cultural tourism hub of the GCC. Hotelier Middle East takes a look at Sharjah’s hospitality and tourism sector, as it seeks to diversify its economy
Sharjah is incorrectly considered as the often overlooked emirate while its neighbours, Dubai and Abu Dhabi, forge ahead. But of late, Sharjah has been making some noise and people are beginning to notice.
The emirate is currently trying to market itself as the UAE’s capital of culture and history — and it does that well. A number of eco-tourism projects, built around the concept of sustainability, are also being developed, including the Fossil Rock Lodge in Mleiha and the Kalba eco-tourism project.
While the hospitality market took a hit back in 2015 and 2016 due to drop in oil prices and the declining visitor numbers from the Commonwealth of Independent States (CIS), both factors have since been on an upward curve which has helped register more stable numbers in Sharjah. Sharjah’s authorities are also focused on moving away from being an oil-dependent economy and diversifying.
“Due to the improved transport infrastructure as well as the development of new luxury resorts and attractions, the emirate is now witnessing a steady growth in visitor arrivals,” says TRI Consulting director Christopher Hewett.
In 2017, Sharjah welcomed 1.7 million visitors and the revenues generated by its hotels and hotel apartments amounted to US$188.94 million (AED694m) for the fiscal year, up from US$181.86 m (AED668m) registered in 2016, according to Hewett.
The influx of visitors can be credited to Sharjah Commerce and Tourism Development Authority’s (SCTDA) ongoing initiative to market itself as a family-focused, historical and Arabic cultural destination as opposed to the glitz and wealth promoted by its neighbour, Dubai.
SCTDA chairman HE Khalid Jasim Al Midfa tells Hotelier Middle East that the emirate is also focused on internal infrastructure development to attract more business and elevate Sharjah on the whole.
“We just opened a mega project in the UAE — the Khor Fakkan Road, which connects Sharjah city to the beautiful city of Khor Fakkan, on the emirate’s east coast. This project took 10 years of hard work and cost us US$1.5 billion (AED5.5 billion) but it cuts travel time from Sharjah by half to just 45 minutes. The project is part of the Sharjah ruler’s long-term vision to connect the east to the west to attract more investments and developments on the east coast strategically,” Al Midfa explains.
In 2015, SCTDA launched the Sharjah Tourism Vision 2021 which aims to attract more than 10 million tourists by 2021, coinciding with the UAE’s 50th anniversary. In line with that aim, the hotel market in Sharjah, which currently accounts for 46 hotel apartments and 53 hotels as per SCTDA, has seen quite a few recent additions and a horde of new signings but the upswing in pipeline, Hewett says, has not completely disrupted the emirate’s occupancy rates.
“According to SCTDA’s statistics, the emirate’s occupancy levels remained relatively stable at 70% despite the addition of new hotels. The stabilisation of occupancy rates was primarily attributed to an increase in tourist arrivals and SCTDA’s ongoing marketing and promotional efforts,” Hewett explains.
Currently, Al Midfa says Sharjah has approximately 10,000 hotel rooms in operation and says the emirate is expecting to add 5,000 more rooms this year. “More importantly, it’s the big names that are coming to Sharjah,” Al Midfa notes, referring to Marriott International, Emaar’s Address, Vida and Rove, AccorHotels and other brands like the Anantara resort which is scheduled to open in 2020. “These brands are important to Sharjah’s collection of hotels and the perception of the emirate,” he adds.
In the first quarter of 2018, approximately 2,200 keys were either in a planning or a development stage, with the majority of the future hotel room supply falling into the luxury and upper-upscale segments. Hewett forecasts that there might be short-term downward pressure on the occupancy rates because of the new additions but only “until the new supply is fully absorbed by the market”.
The same sentiment is echoed by Swiss-Belhotel International regional director of sales and marketing, Middle East Priyanka Kapoor who oversees Swiss Belhotel Sharjah, a four-star deluxe hotel with a total of 205 rooms and suites.
“2017 was a very good year for us. We saw a healthy increase in the RevPAR compared to last year. SCTDA introduced a special report, in which they were able to keep track of the occupancy and ADR levels of all hotels in Sharjah and seeing the analysis, it seems the market was able to remain steady even with increase in room supply,” Kapoor says.
Centro Sharjah general manager Michael Kasch agrees: “2017 was a successful year for Centro Sharjah. We saw an increase in the average rate, room revenue as well as food and beverage revenue in comparison to 2016. Our occupancy percentage was also maintained.” Kasch also attributes some of the success to Sharjah tourism bouncing back from the slump it experienced a few years ago.
At present, Sharjah’s hotel market is dominated by three- and four-star hotels but is short on five-star hotel supply. However the tide has been shifting. Hewett says due to the noticeable increase in demand for “high-quality premium accommodation” in the emirate, the hotel pipeline features some noteworthy four- and five-star properties set to enter the market.
Hotel brands set to enter Sharjah’s hospitality market over the next five years include brands like Anantara, Pullman, Kempinski, Dusit, Emaar’s Address, Vida and Rove, Novotel, DoubleTree and Jannah. Diversifying the inventory, Hewett says, will help Sharjah target new source markets and “less price-sensitive tourists”.
In addition to the leisure tourist market growth, Sharjah’s MICE market is also picking up as authorities are making a determined push to increase corporate travellers and capitalise on it, Hewett points out.
“In addition to being a popular tourist destination for leisure travellers, the emirate continues to develop its MICE tourism segment. Expo Centre Sharjah recorded a 7% increase in the number of visitors during Q1 2017 with a total of 302,474 guests who visited 12 exhibitions. The MICE sector is forecast to grow at an annual rate of 7% in the UAE and in order to capitalise on the anticipated growth in demand, Sharjah is currently developing the Al Tai exhibition centre, which is expected to add approximately 370,000 square metres to Sharjah’s total exhibition and conference space,” Hewett explains.
The UAE, as a whole, is working to boost this segment too, and in May 2018, the UAE Cabinet approved a decision to refund VAT to organisers of MICE. The MICE sector contributes nearly US$0.65 billion (AED2.39 billion) to the national economy annually, and the revenue is expected to increase to US$1.39 billion (AED5.1 billion) by 2020.
Source Markets and Segments
In 2017, key source markets in Sharjah were Russia and China with visitors registering a significant year-on-year growth. Russian visitors tallied to 266,086 in 2017, which Hewett points out is a “remarkable 137% growth” on the previous year. “The rebound of the Russian market was facilitated by the appreciation of the rouble against the dollar as well as the introduction of visa-on-arrival for Russian tourists in January 2017,” Hewett explains.
Hotels in Sharjah also saw a total of 120,356 Chinese inbound tourists in 2017 which represented a 71.5% increase compared to 2016. The increase, Hewett notes, was a concentrated effort by the SCTDA which brought about the initiatives to facilitate the growth.
“Growth was nurtured by the introduction of the 30-day visa-on-arrival scheme in late-2016, the opening of a SCDTA representative office in China, the addition of a Chinese language website to Sharjah’s tourism portal as well as the attendance at several tourism fairs in major cities across the country, such as Guangzhou and Chengdu,” Hewett relays.
Last year, GCC residents visiting Sharjah accounted for 34% of all occupied hotel establishments rooms, while from Europe, 468,000 people visited Sharjah, reflecting a 36% year-on-year growth, Hewett says.
Swiss-Belhotel International’s Kapoor says Sharjah’s overall source markets is reflected in her hotel as well. “GCC nationals have been the most steady when it comes to nationalities. However, Russia and CIS markets are coming back after a dip few years ago. Lately we have also seen a significant interest shown by the Chinese market in the emirate. Both group and FIT are faring well in terms of segments and online bookings play an important role now-a-days and will increase further in the near future,” she adds.
Kasch, on the other hand, says Centro Sharjah’s majority guests comprised local UAE residents and was closely followed by visitors from around the GCC.
Developments and Attractions
Sharjah’s connectivity has long been one of the key issues, Hewett says has impacted “the overall growth in the emirate’s hospitality and tourism industry”. To address the issues, Sharjah’s government has proposed to revamp Sharjah International Airport and build a new passenger terminal which will be part of an US$0.41 billion (AED 1.5 billion) expansion project that will be implemented in multiple phases.
The project is expected to be fully operational by 2021 and is set to increase the airport’s capacity to 25 million passengers annually. A number of airlines, Hewett adds, have already expressed interest in establishing or expanding their routes via Sharjah’s airport to complement the expansive project.
In Q1 of 2018, many travellers have also opted to fly via Sharjah International Airport as an alternative to Dubai International Airport’s “sustained growth in aircraft movement”, Hewett explains. This has led to a 5.1% year-on-year increase in passenger traffic during the fiscal period.
The SCTDA gave the official tourism website, VisitSharjah.com, a makeover in an attempt to spread the awareness of the emirate’s presence and proximity to its giant tourism competitor, Dubai.
“The website is set to increase travellers’ awareness of Sharjah’s tourism offering and enable them to customise their travel itineraries based on their budget and areas of interest. The new integrated platform also allows hotel, restaurant and activity operators to market their products and services and establish direct communication with visitors to enhance their overall experience,” explains Hewett.
As for attractions, besides massive eco-tourism projects, Sharjah in 2018 has already inaugurated the Rain Room — a permanent installation providing an immersive experience of continuous rainfall. By year end, Funoon District, a food, art and entertainment location with more than 20 F&B offerings, is set to open at Al Majaz amphitheatre.
By the end of 2020, Sharjah plans to open many family-focused leisure destinations such as The Sharjah Beach development project, Phase II of Seih Al Bardi Wildlife Safari Park, Heart of Sharjah Cultural Heritage Site and a number of shopping centres with Tilal Mall planned to be the emirate’s largest retail destination upon completion.
Besides leisure attractions, as mentioned earlier, Sharjah is strategically building the reputation as a cultural heritage destination and capitalising on it.
“One of the four main pillars embedded in the Sharjah Tourism Vision 2021 is based around promoting the emirate’s cultural and heritage attractions. Having already acquired the titles of the ‘Capital of Arab Culture’ in 1998, the ‘Capital of Islamic Culture’ in 2014 and the ‘Capital of Arab Tourism’ already indicates a recognition of the significance of the emirate’s cultural and historical heritage,” Hewett points out.
Some of the efforts to build the image includes the largest historical restoration project in the region — the Heart of Sharjah project. Expected to be completed by 2025, it will feature restored traditional houses, souqs, museums and the Sharjah Centre for Cultural Communication. The government is also working to restore the archaeological sites of Mleiha, the Al Khan fishing village, Al Mahatta airport and former Al Mirqab military camp.
2018 Market, Performance and Challenges
In 2018, Sharjah’s supply is set to grow by an additional 647 keys with the addition of four properties, namely: five-star Al Bait Hotel in the Heart of Sharjah with 53 keys; Four Points by Sheraton in Rifa’a with 225 keys, Aloft Sharjah in Al Majaz development with 270 keys, and Time Hotel Apartments Sharjah, which will offer 99 keys.
Hilton area vice president of operations, Arabian Peninsula & Turkey, William Costley says the hotel company has two hotels in the pipeline in the emirate: DoubleTree by Hilton Sharjah Waterfront Hotel & Suites with 254 suites and serviced apartments which is expected to open in 2020 and the 200-key DoubleTree by Hilton Sharjah Tilal Mall.
The openings, Costley says, will cater to the growing tourists as the emirate works to accomplish its 2021 vision goals. “We foresee burgeoning demand from tourists. The Emirate is also home to a number of major global events such as the Sharjah International Book Fair and international test cricket matches,” Costley adds.
Emaar Hospitality Group, through its partnership with Arada, a joint venture between KBW investments and Basma Group, have come together to launch three new hotels as well as serviced residences in Sharjah’s Aljada.
The hotels include Emaar’s premium brands Address Hotel + Resorts and Vida Hotels & Resorts, and mid-scale brand Rove Hotels.
Emaar has also partnered with the Sharjah Investment and Development Authority (Shurooq) and has signed a management agreement to operate a lifestyle boutique hotel, Vida Al Qasba Sharjah in the heart of Al Qasba.
But despite the steep growth in tourist arrivals and luxury hotel supply, Hewett notes that hotel inventory is likely to put a downward pressure on occupancy and revenue figures in the short term until the new supply is fully absorbed by the market. He also adds that there will be additional downward pressure on key performance indicators which might affect the five-star hotel segment and “pose a challenge on how to maintain market share and differentiate from the new product and facility offering”.
Based on 2017 performance, Kapoor says she’s hopeful about 2018: “As per latest reports from Collier and STR, Q1 2018 has seen an increase in RevPAR all over Sharjah, which is a positive sign. Occupancy has increased more, however, the rate has also shown an increase of 1%-2% when compared to Q1 2017. We are hoping for the remaining of the year to maintain the upswing.”
Kasch predicts a slight upswing in occupancy levels and believes the average daily rate will perform better than it did in 2017. But he admits that oversupply in Sharjah could pose a problem.
“Oversupply is a challenge we face in Sharjah. The increase in the number of hotels has had an impact on the rates. The lowering of rates in our neighbouring emirate Dubai has as well shown impact by eating in our share of the market,” Kasch explains.
Kapoor agrees that comparisons with neighbouring Dubai puts pressure on Sharjah to stand out as an independent emirate with unique offerings.
“Challenges are there in all markets, such as the usual increasing supplies. However, the biggest challenge that hoteliers in Sharjah face is the comparison with Dubai hotel rates, especially for groups. If Dubai hotels drop prices, Sharjah hotels are expected to drop; however, this notion of Sharjah being pegged on Dubai, has to change,” she contends.
“Sharjah is a different market and known for its culture and heritage. The tourism authority is doing a lot in terms of events at Amphitheatre and at Expo centre and we are seeing a slight shift in outlook now,” Kapoor concludes.