Middle East hotel sector endures challenging but encouraging year
Middle East hotels across the region reported an average increase in revenue per available room (revpar) of 5.2 percent over 2001 levels. A 5.5 percent increase in occupancy was offset by a 0.3 percent fall in average room rates, as hoteliers sought to discount rates to stimulate demand in tough trading conditions, reported Deloitte & Touche .
Still reeling from the recession of 2001 and the changing travel patterns following the events of September 11, hotel performance in the Middle East and Africa indicates that 2002 was a challenging year for the hotel industry across the region In North Africa the overall revpar declined 3.3 percent over 2001 levels. Despite a 5.1 percent increase in occupancy, average room rates fell eight percent as hoteliers discounted rates in order to stimulate demand.
According to a HotelBenchmark Survey most countries within the Middle East managed to improve revpar during 2002 with four markets reporting double-digit growth. Of the 28 markets monitored on the survey nearly 60 percent managed to improve revpar during these difficult times. Kuwait and Beirut were the region’s star performers reporting increases in revpar of over 19 percent.
Bahrain and Riyadh also reported double-digit revpar growth of 10 percent. The increase in revpar was generally driven by a growth in occupancy rather than an improvement in average rate. Hotels on Jumeirah Beach Dubai enjoyed the highest revpar in the region for a fourth year in succession at $121, up 8.5 percent. Occupancy levels have recovered to 2000 levels although the average rate is still under pressure with rates an average of seven dollarslower than those achieved in 2000.
The absence of any new additions to supply during 2002 helped support the 7.9 percent recovery in occupancy levels. Encouragingly, the five-star sector on Jumeirah Beach has consistently increased its performance in terms of revpar, despite the addition of nearly 1,100 five-star rooms in the last five years. Hotels in the city center also experienced strong demand growth during 2002 with occupancy increasing 8.7 percent. This performance was all the more encouraging given the addition of the 393-room Fairmont hotel to the market.
Hotels in Egypt came under significant pressure during 2002 with revpar falling 13.6 percent in US dollar terms. Unlike many other Middle Eastern countries the Egyptian pound is not linked to the US dollar and so exchange rate differentials hampered performance, as in local currency Egyptian hotels managed to curtail the decline in revpar to just 0.6 percent.
The performance in Egypt has not recovered since the events of September 11. Although the occupancies in most markets have been stable, the average rate in US dollar terms has declined as many hotels contracted competitive rates with the European tour operators anticipating reduced visitations in the aftermath of the attacks on the World Trade Center.
Luxor reported a 21.3 percent decline in the average rate for 2002 whilst the decline in Cairo was 20.6 percent and in Hurghada 15.1 percent. Although hotels in Sharm El-Sheikh experienced a fall in average room rate of 14.5 percent, this was offset by a 22.4 percent improvement in occupancy, so leaving the city with positive revPAR growth for the year.
"Given the tough trading conditions during 2002 - with the three major global economies spluttering and the consequences of the US corporate accounting scandals, the industry had much to focus on in the early part of the year,” said director of travel, tourism and leisure at Deloitte & Touche, Julia Felton.
“Despite an overall 10.6 percent increase in international tourism arrivals to the region during 2002, the industry had to adapt to changing demand patterns as corporate demand dwindled and was replaced by lower-rated leisure demand. This put average room rates under pressure as hoteliers sought to adjust to this shift in business mix. The first three months of 2003 have also been tough with revpar falling 22.9 percent in March as many travelers opted to defer travel plans until a resolution in Iraq was evident”. — (menareport.com)
© 2003 Mena Report (www.menareport.com)