Middle East hotels to struggle

Hotels across the Middle East saw significant performance declines in 2017. At the same time, STR reported that Africa’s hotels achieved significant growth across all key performance metrics.

Middle East

Occupancy in the overall region dropped 1.1 percent to 65 percent. ADR declined 4.5 percent to $164.33 as RevPAR dropped 5.6 percent to $106.89 in response.

Kuwait, in particular, saw shaky results this past year, as ADR dropped 4.7 percent to KWD62.17 for the third consecutive year. December 2017 was the first month of the year to see year-over-year growth in ADR, which increased 8.3 percent, since July 2016. December was also the fourth month the country saw an increase in ADR since early 2015. Kuwait did see a strong 5.6-percent growth in occupancy to 58.0 percent and a 3.7-percent increase in RevPAR to KWD35.23 last year despite the ADR declines. These performance levels rose mainly in response to the 12.7-percent rise in market demand, which continues to grow following the country’s economic pitfalls from falling oil prices.

Occupancy in the UAE only increased 0.5 percent to 75.1 percent last year—not enough to get ADR and RevPAR rising. ADR came in at AED599.58 after a 3.8-percent decrease while RevPAR dropped 3.3 percent to AED450.04.

STR analysts said that supply growth continues to shift the scales in Dubai’s ADR, especially as the emirate bulks up on new hotel projects ahead of the 2020 World Expo. The market, which the upscale sector has historically dominated, is showing a surge in the midscale hotel sector growth. These new mid-scale additions have driven the rise in market demand, as Dubai’s market continues to accommodate a wider price range of travelers. The emirate is also expanding its range of tourist attractions to stimulate growth in market demand and, in turn, driving hotel demand.

Meanwhile, Abu Dhabi is following a similar trend at a smaller scale due to its smaller market size. New cultural attractions include the Louvre Abu Dhabi, which opened in November 2017, and additional museums along with its new hotel development projects. STR predicts that both rising oil prices and sustained growth in the non-oil sector will drive economic expansion in the emirate this year, allowing the economy to rebound from relatively low performance levels in the past 12 months.