The outlook for hospitality markets looks rather challenging for the year ahead, following a performance hit in January, according to a new report.
EY’s Hotel Benchmark Survey found that all Middle East and North Africa markets recorded a decrease in RevPar last month compared to January 2015, with the exception of Manama, Cairo and Mecca.
“Hospitality markets across MENA witnessed a less than ideal performance in 2015, compared to 2014. While occupancy rates increased across some markets in 2015 such as Cairo, Madina, Muscat and Ras Al Khaimah, revenue per available room across most MENA markets was lower compared to 2014,” said MENA head of transaction real estate Yousef Wahbah.
The firm stated that it would be difficult for hotels to maintain their 2015 levels, with a minimal decline in RevPar expected this year.
“Several factors point to a flat or negative performance in 2016, including reduced economic growth due to lower oil prices, less liquidity in the region, reduced visitors from Europe, Russia and China due to currency fluctuations and the uncertain macroeconomic conditions.
“While there have been no major delays or cancellations in terms of mega projects, we may see this happening in the second half of the year if economic conditions do not improve,” it said.
In the report, Dubai’s beach hotels and properties in Jeddah were found to have the highest yields in the region, recording average rates of $311 and $214 a night respectively.
Hotels in Dubai and Abu Dhabi maintained the highest occupancy rates in the region at 80 per cent, followed by Ras Al Khaimah at 75 per cent, competing with the likes of London, New York and Tokyo.
The firm said demand for Dubai’s beach hotels had always outstripped demand and this is expected to continue, but there would be more competition from three and four star properties across the emirate.
“Hotel owners as now seeing three and four star hotels as a worthwhile investment alternative to five-star hotels,” it said.
The same trend was seen in Saudi Arabia where EY said there were opportunities for budget hotels to cater for the 40 per cent of people that travel across the country by land rather than air.
It said performance in Riyadh and Jeddah was steady last year but could be impacted by the country’s growing budget deficit.