As a result of the historically low oil price, geopolitical instability and weak global economic recovery, the regional economic growth decelerated in 2015, nonetheless, the MENA remains one of the fastest growing regions worldwide.

Introduction

In 2015 the Middle East and North Africa continued to witness turmoil and instability, with conflicts in Syria, Libya, Iraq and Yemen causing extensive damage.

The perceived lack of safety across the region was further enhanced by terrorist attacks, of which some targeting tourists in places like Tunisia, Kuwait and Egypt. Challenges were faced also by politically stable countries such as the Golf Cooperation Council countries, on the back of falling oil prices and undiversified economies. 

As a result of the historically low oil price, geopolitical instability and weak global economic recovery, the regional economic growth in 2015 decelerated, with the GDP expanding only by 2.6%, the lowest growth rate reported since the 2009 financial crisis. With the oil price forecast to average at around USD 50-70 up to 2020, economic prospects for the region remain somber for 2016, with analysts adjusting downwards the growth forecast in the short to medium term.

As such, growth for 2016 has been revised for the fourth consecutive month down to 2.6%. The impact of the falling oil price has been considerable for the oil-dependent economies, triggering subsidy cuts, cancellation of key infrastructure projects, and downward revisions of government budgets.

With the effects of the oil price migrating also into the non-hydrocarbon sector, the governments are urged to seek alternatives in balancing their budgets. As such, GCC countries are currently working on a plan to introduce a 5% value added tax in 2018.

In light of these challenges, the question remains: how was travel and tourism impacted and what were 2015 regional performance results?

The Middle East Hotel Survey 2016 strives to constitute a reference guide by offering a brief analysis of the overall economic performance of the region, with particular focus on the tourism industry. Our tourism analysis is based on data originating from more than 611 internationally branded hotels in the region, representing roughly 150,000 rooms. Drawing upon resources in the hotel industry, the survey covers a total of 42 cities in 13 countries, and spans over a history of 20 years.

Moreover, the current edition includes a brief performance analysis of KPIs pertaining to major cities i in the region. It is essential to note however that the analysis is strictly based on data from established hotels pertaining to 18 participating international hotel chains.

Therefore, the performance of the branded hotel market is likely to differ moderately from the performance of the destination as a whole, which typically includes both branded and independently operated properties across all asset classes. 

In recognition of the need to better understand the operational performance differences across major regional destinations, HVS provides in this year’s publication an indicative total revenue breakdown pertaining to a typical upscale property for each destination.

Moreover, in a scenario where majority of the regional markets witnessed a decline in 2015, we have included a Gross Operating Profit analysis pertaining to a number of selected key destinations.

Middle East in Figures

• 54 million â€" tourist arrivals in the Middle East in 2015
• 78 million â€" passenger movements at Dubai International Airport in 2015
• 355 million â€" national and resident population of the Middle East
• USD 143,532 â€" GDP per capita of Qatar, the highest in the world
• 24th worldwide â€" UAE’s rank in the Travel & Tourism Competitiveness Index
• USD165 billionâ€" investment worth of projects in GCC in 2015
• USD140 billionâ€" investment worth of projects in GCC forecast for 2016
• USD194 billion â€" regional tourism total contribution to GDP in 2015
• USD328 billion â€" regional tourism forecast total contribution to GDP by 2026
• 5.9 million â€" jobs sustained by the tourism and travel sector in 2015
• USD41.8 billion â€" travel and tourism investment in 2015

A Macroeconomic Perspective

In spite of the regional volatility and weak oil prices witnessed in 2015, the Middle East and North Africa (MENA) remains one of the fastest growing regions worldwide.

It is necessary to note however, that growth forecast is predominantly on account of an exceptional growth expected to be reported by Iran, following the reintegration of the country to the global economy, as a result of economic sanctions being lifted.

This prospect has already triggered a series of foreign investments in the country. However, the growth outlook remains subject to a series of factors including regional conflict, a continued decline in oil prices, slow global economic recovery, as well as Iran reporting a lower than forecasted economic growth.

Read the full report here.

About Cristina A Zegrea
Cristina Zegrea is Associate Director with HVS Dubai Office. After practicing law, Cristina redirected her focus to hospitality sales & marketing. Performing in various managerial roles for multiple established international hotel chains, Cristina developed a solid foundation and in-depth understanding of hotel demand, rate positioning strategies and hotel operations.

While at HVS, Cristina has conducted multiple highest and best use feasibility studies, valuations, operator searches, operational assessments and strategic advice assignments throughout the Middle East and North Africa. For more information contact,czegrea@hvs.com  

About Hala Matar Choufany
Hala Matar Choufany is the Managing Partner of HVS Dubai and is responsible for the firm's valuation and consulting work in the Middle East and Africa. She has worked on several mixed use developments and conducted numerous valuations, feasibility studies, operator searches, operational assessments, strategy advice in Europe, the Middle East, Africa and Asia. Hala has in-depth expertise in regional hotel markets and a broad exposure to international markets and maintains excellent contacts with developers, owners, operators, investment institutions and government entities.

Before joining HVS International, Hala had several years of operational and managerial hotel industry experience. Hala is an official Member of the Royal Institution of Chartered Surveyors (MRICS) and also holds an MPhil from Leeds University U.K., an MBA in Finance and Strategy from IMHI (Essec-Cornell) University, Paris, France. For more information contact, hchoufany@hvs.com

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