A Vision to 2020 Project Update - Hotel Outlook 2020 June 3rd 2007 Project Overview This is the first update from the groundbreaking Global Futures and Foresight (GFF) Study on the Future of Travel and Tourism in the Middle East covering 13 countries. The study is taking a ‘futures’ perspective on the trends and drivers shaping travel and tourism in the region to 2020 and beyond. The research draws on a range of methods to explore potential scenarios, challenges and opportunities for travel and tourism in the region and provide practical advice on how players in the sector can factor these insights into their planning. The study has three main deliverables – the Pathfinder Report launched on May 1st 2007, a full study report to be launched in November 2007 and a response from the region to be launched in summer 2008. This update analyses some of the most recent key hotel project developments announced since completing the research for the Pathfinder Report. On the following pages we explore some of the most significant developments, examine variations in construction cost per hotel room, discuss the emerging challenges of overcapacity and resourcing and highlight key environmental developments and challenges for the region. Finally, we present five key strategic challenges for the sector. Key Findings of the Pathfinder Report The May 2007 report looked at travel and tourism plans in Bahrain, Egypt, Iran, Jordan Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syria, Turkey, the UAE and Yemen. The report identified that, in the period to 2020, based on GFF’s analysis of current developments, announcements and official estimates (1): Upwards of US$3 trillion is to be invested in leisure and tourism and the supporting infrastructure. By 2020 the Region planned to build over 200 new hotels Those hotels would add 100,000 additional rooms Visitor numbers are forecast to grow to 150M The World Travel and Tourism Council had estimated that the region would need an additional 1.5 million jobs in the sector over the next ten years Airport capacity would be added for 300M extra passengers The Region’s aircraft fleet would increase by over 150% by 2025 In the next ten years: All of the countries in the study are expected to see at least a small rise in the tourism revenue per national citizen. Lebanon’s was forecast to almost double from US$1,130 to US$2,120, Bahrain was forecast to rise from US$5,900 to US$9,300 and Qatar was expecting the highest absolute revenues with a rise from US$6,320 to US$11,300. All except Yemen were also expecting at least a small rise in the ratio of visitors to national citizens. The highest ratios are expected in Qatar - forecast to rise from 1.35 to 2.43, the UAE – rising from 1.94 to 3.28 and Bahrain – increasing from 10.02 to 14.55. While most countries were forecast to have relatively small improvements on their return on investment (ROI) in the sector and Bahrain, Egypt, Oman and Yemen were all forecast to experience slight declines New Announcements Since completing the research for the GFF Pathfinder report, several announcements have been made which highlight the accelerating ambition of players across the region, key amongst these being: Projects - Plans to construct an additional 600 new hotels were announced Capacity - Those new hotels will provide over 650,000 extra hotel rooms Investment - New US$390Bn+ of new investment is planned in these hotels and the developments they form part of. This includes US$11Bn for the Samamous 7 star development in Iran. Resources - Between 500,000 and 1 million extra staff will be required just for these new projects – suggesting the WTTC estimates of 1.5 Million extra staff may need to be increased Participants - Over 30 different developers, investors and operators have announced plans for new projects in the last month Construction Costs - Average construction costs vary from US$100,000 per room for the Al Qasimi and Orient Towers developments in Dubai through to US$2.3M per room at the Ayla Oasis in Jordan Environment and Resources - Concerns about the environmental impact are rising – particularly over the level of construction waste, pollution and energy and water efficiency and availability. Major Developments Perhaps the most striking factor is the sheer scale, ambition and planned speed of construction for these new developments. Key examples include: The announcement from the Saudi Supreme Commission for Tourism that planned developments on the Red Sea will add a staggering 557,000 rooms, creating 413,000 jobs, of which 165,000 direct jobs are expected in the first five years. The projects are expected to attract US$40Bn in investment and generate US$2.6Bn annual revenue. (2) Tatweer’s extension of the Bawadi development in Dubai from 31 hotels with 29,000 rooms to 51 hotels offering 60,000 rooms. This brings the total project value to over US$54Bn. (3) The construction of three 7 star hotels in Iran including the Samamous in Ramsar's Sefid Tameshk region which will have an in-room simultaneous language interpretation system for officials and political figures so that “the entire world's heads of state can reside at the hotel at the same time”. The private sector is investing US$11Bn (100 trillion Rials) to develop the hotel which will take five years to build and a further year to equip.(4) Emaar’s US$1.74Bn Marassi tourist resort development with 3000 rooms on a site spanning 1,544 acres at Sidi Abdel Rahman in Egypt. (5) The 9.5million square metre Salalah leisure complex in Dhofar Oman, which will complete by 2010 and include an 18-hole golf course, a marina, several hotels, restaurants, 550 villas and 600 apartments as well as retail outlets. (6) The US$3Bn Desert Islands eco-tourism complex in Abu Dhabi consisting of eight islands and an onshore ‘gate’. The complex is expected to generate over US$320M annual tourism revenues and create around 6500 jobs. (7) The launch of a range of budget hotels from operators such as Coral’s ‘Ecos’, Istithmar and easyHotel. Construction Costs per Room The table below highlights the wide variation in constructions costs per room for a selection of recently announced projects where the costs and number of rooms were published. The figures vary from US$100,000 per room for the Al Qasimi and Orient Towers developments in Dubai through to US$2M or more per room for Jordan’s Ayla Oasis and Oman’s Salalah. The vast majority of these projects sit in a range from US$200,000 to US$900,000.
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