The relatively strong performance of Business hotels in the Middle East - especially Lebanon and Saudi Arabia - compared to the rest of the world during the downturn is one of the major trends that have been seen so far in the region's hospitality sector in 2009.
Business hotels in the region have not been immune to the affects of global financial crisis, but they have fared well compared to the rest of the world, according to an analysis of STR Global data of hotel performances in the region by Deloitte.
Through the first ten months of this year, revenue per available room, a key industry benchmark, has fallen 18.1% across the region to $123.33 compared to the corresponding period in 2008. However, the region's RevPAR figure ranks significantly higher when compared to other regions in the world, says Rob O'Hanlon, Tourism, Hospitality and Leisure Partner at Deloitte in the Middle East.
Similarly, hotel occupancy in the Middle East during the 10-month period ending in October 2009 stood at 61.5%, which was higher than that recorded in the Asia Pacific region (59.8%) and in the Americas (56.9%).
'It's been tough on a global basis and the region has taken its share of the pain, but benchmarked against Europe and the Americas, the Middle East is still in very comfortable territory,' O'Hanlon said. 'While the recent numbers might in some instances be lower than previous periods, the reality is that the base is incredibly high.'
The best illustration of this is the fact that even though Dubai's average daily room rate has fallen 23.8% through the first ten months of this year to $228.87, it is still the second highest rate in the world.
Project slowdown
Still, the drop in occupancy and revenue numbers is causing hotel companies to reassess their plans for the region. A new report by Lodging Econometrics, a US-based hotel real estate research company, found that the number of hotel projects planned in the Middle East declined by 17% in the third quarter of 2009.
Overall, the decade-long growth in the Middle East pipeline peaked in Q2 2008 and has declined in each of the last five quarters, the report added.
'These numbers seem logical, as we've got a lot more action going on than anywhere else, so it's more likely that businesses will look to put some things on pause while they assess the medium or long-term impact,' O'Hanlon said.
'That pausing or re-examining is a healthy business practice. I like to see people recognize that the world around them is changing and either make a conscious decision to move ahead with their plans or modify them.'
Concerns of hotel oversupply remain highest in Dubai, where there are 105 projects and 41,233 rooms in the pipeline, with 65% of the projects classed as 'under construction', the report noted.
'Yes the new supply will play a role in Dubai's future, but equally important is what is happening in the world economy to the extent that businessmen get on planes to make deals and companies make decisions that will impact positively on hotel occupancies, such as encouraging their employees to take part in regional conferences,' O'Hanlon said.
Lebanon, Saudi buck slowdown
Two countries in the region that have suffered no ill effects from the global downturn in the hospitality industry so far this year are Lebanon and Saudi Arabia. Beirut witnessed occupancy of 69.9% during the 10-month period ended October 2009, reflecting an increase of 36.6% from the corresponding period in 2008, according to STR Global. RevPAR in the city was recorded at $141.24 in the first ten months of this year, an increase of 74.5% from the same period in 2008
Lebanon's growth can be attributed to the 'peace dividend', O'Hanlon said, as newfound confidence in the country's security situation has spurred the Lebanese diaspora to return to their homeland on holiday in record numbers.
In Saudi, Jeddah's hotel occupancy during the 10-month period ended October 2009 was amongst the highest in the region at 71%, while its RevPAR of $126.20 reflected an increase of 13.1% when compared to the corresponding period in 2008
The growth in the kingdom can be attributed in part to the increased level of business activity in the country and the decision by the government to develop more economic hubs. 'The ministry of tourism also provided an additional boost by encouraging domestic tourism more than ever before. As people start to travel within their borders, suddenly you have a lot more demand for Business hotels,' he said.
Despite the region's relatively strong performance during the downturn, it remains difficult to predict what the future holds in the coming months and years. 'I think that a lot more economic data needs to come through on a consistent basis before one can say we are being pointed in a certain direction. It's too soon to tell,' O'Hanlon said.
