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MENA hotel investment is booming with UAE

Category:Industry Key Words:MENA hotel investment,MENA hotel,UAE hotel Time:2017-11-14 11:17

 

  The Middle East hotel investment market has been expanding rapidly with no signs of slowing down. As of August, the Middle East construction pipeline totaled 583 hotel projects under contract, according to STR—a majority of which are slated for 2020-openings. The UAE and Saudi Arabia both claim the most active hotel construction areas in the region, with 40,020 guestrooms in 89 projects in Saudi Arabia's pipeline and 35,050 in 121 projects in the UAE's.

  BMI Research reported the UAE has been working to increase tourism earnings by 51 percent from 2016 as the country rushes to accommodate the 25 million visitors targeted for Expo 2020 Dubai and generate $44 million from international tourism by 2020. The UAE has taken the lead in driving growth in the MENA region with its massive developments and projects, including Bluewaters Island and Expo 2020 Dubai. The region's construction market, which BMI Research and PwC named the world's fastest growing, now totals $4 trillion. According to Dmg Events Middle East, its active hospitality projects are currently valued at $71.6 billion as of early September.

  In response, further investment has poured in, especially in Dubai. The emirate's hotels recorded RevPAR at $209 in a EY Middle East Hotel Benchmark Survey report following its new goal to expand tourism numbers through various avenues, including incentives, leisure attractions, a range of hotel offerings and relaxed visa policies. These have led major players in hospitality, including investors and operators like Marriott International, Kempinski and Carlson Rezidor, to take on the MENA as a focus region for expansion. Rotana announced its MENA expansion plans last week with the addition of 14 hotels to its construction pipeline. The group has signed three Rotana hotels each for both Dubai and Saudi Arabia, which are scheduled to open Q4 2018.

  Saudi Arabia's goals for economic diversification and rising tourist numbers have transformed the Kingdom into a hotbed of development, especially due to the goals set for Saudi Vision 2030. According to STR, Saudi Arabia currently has the highest number of hotel guestrooms under construction in the entire MENA region, with most of the development concentrated in the highly attractive holy cities Madinah and Makkah. One of Makkah's projects, the 10,000-guestroom Abraj Kudai, is slated to be the largest hotel in the city once it launches at the end of the year. Meanwhile, Marriott's hotel construction pipeline in the Kingdom alone has already reached more than 10,000 guestrooms in 30 projects.

  This success is shared across the luxury and mid-scale hotel sectors. While the MENA's luxury sector has 12,571 guestrooms under construction, the rapidly expanding mid-market stock is constantly offering new opportunities to owners and operators. Its upper mid-scale hotel inventory currently totals 17,914 guestrooms while the region has 15,991 mid-scale hotel guestrooms. The MENA's mid-scale stock is set to grow by 2,897 guestrooms under construction. According to Robin Rossman, MD at STR, at AHIC 2017 the supply of mid-scale hotels is forecast to meet the total number of luxury hotels by 2021. Jonathon Worsley, STR board director and AHIC co-founder, added at the conference, “Testament to the potential for the mid-market in the Middle East is the launch of US-based hotelier Choice Hotels International in the UAE and Saudi Arabia, with a pipeline of seven signed hotels already and many more to come.” Hilton also set plans for expansion within the region's mid-scale sector. The group will launch two more large Hampton Inns in Makkah and one in Dubai, enhancing the MENA's mid-scale supply.

  Now, with the implementation of VAT on Jan. 1, 2018, the future of Middle East hotel investment is unclear. According to a poll from Hotelier Middle East based on AHIC advisory board submissions, 47 percent predicted the new VAT would affect investment decisions and 20 percent were unsure. Meanwhile, one-third forecast the new VAT would have no affect. 

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