GCC tourism industry on track to hit $37b

Dubai is likely to witness an addition of nearly 57,000 rooms in hotel and serviced apartments.

Notwithstanding the current slowdown on the back of depressed oil market scenario and currency fluctuations in Europe and Russia, the GCC hospitality market is expected to almost hit $37 billion in four years, a new report by Alpen Capital said.
At a compound annual growth rate of 7.6 per cent, the region's tourism industry is on track on hit $36.7 billion in 2020 from an estimated $25.4 billion in 2015 despite a slowdown in 2016, said the report.
In the long-term, aided by upcoming events, robust fundamentals and government efforts, the hospitality sector is anticipated to recover on the back of sustained rise in tourist arrivals and a robust pipeline of hotels and serviced apartments, analysts at Alpen said.
"Backed by an active tourism market, the GCC hospitality industry remains firm on its growth trajectory. Though drop in oil prices and currency depreciation is currently affecting demand, the sector's long-term outlook remains strong," said Sameena Ahmad, managing director of Alpen Capital (ME).
Government measures to bolster tourism activities in the region like encouraging private sector investments, building new attractions, expanding airport capacity, and increasing international promotion campaigns are providing impetus to the growth of the hospitality sector in the region, she said.
A thriving segment of meetings, incentives, conferences, and exhibitions (MICE), spate of technological advancements, and brisk development of midscale hotel properties are amongst the key factors elevating the appeal of the GCC hospitality sector, she said.
Sanjay Bhatia, managing director of Alpen Capital, said the region is witnessing a significant growth in hotel properties, despite the region's macroeconomic challenges. "Several international hotel chains have established significant presence in the region to capture a slice of the tourism industry. Massive infrastructure developments and hotel projects are underway to meet the demands of the tourist inflow expected into the region for the upcoming mega events such as Expo 2020 in Dubai and 2022 FIFA World Cup in Qatar. The hospitality industry continues to present interesting opportunities to investors. We expect consolidation and M&A activity in the hospitality sector to accelerate given attractive valuations," said Bhatia.
While the key operating metrics of the hospitality sector is expected to remain under pressure in the short-term, mainly in the UAE and Qatar, is likely to rebound in the long-term supported by growing demand, Said the report.
During the forecast period, occupancy rates at hotels and serviced apartments are anticipated to grow by three percentage points (ppts) to 70 per cent and Average Daily Rate (ADR) is likely to increase at a 1.4 per cent annualised rate during the period.
As a result, the aggregate Revenue Per Available Room (RevPAR) of hotels and serviced apartments in the GCC is projected to grow at a CAGR of 2.3 per cent to $133 by 2020, said the report.
The hospitality markets of Qatar and the UAE are expected to demonstrate the fastest annualised growth of over 10 per cent until 2020, owing mainly to tourism-related developments ahead of landmark events to be held in these countries. Bahrain is likely to deliver growth in line with the regional average backed by tourism promotion activities and recovery in oil prices. Rest of the GCC nations are likely to register growth in the range of five per cent to six per cent, below the regional average.
During the forecast period, the total room supply in the GCC is expected to grow at a 4.0 per cent CAGR, slower than 5.7 per cent expansion in international tourist arrivals.
The GCC region holds one of the largest hotel development pipelines in the world. Driven by the bright prospects of the tourism industry and government support, international hotel chains as well as domestic players have laid down robust hotel and serviced apartment development plans.
Dubai is likely to witness an addition of nearly 57,000 rooms in hotel and serviced apartments in the five years to 2020, whereas Saudi Arabia has a pipeline of over 47,000 rooms. Addition of such massive capacity is expected to extensively scale up the region's hospitality sector. Large-scale international events, upcoming tourist attractions, and a growing MICE market are likely to accelerate tourist arrivals to the GCC region. International tourist arrivals to the GCC are anticipated to grow by 5.7 per cent annually in the next four years to 2020, Alpen report said.
- isacjohn@khaleejtimes.com
 

Issac John

issacjohn@khaleejtimes.com