HVS's Middle East Hotel Survey for 2010 covers 259 hotels totalling 68,888 rooms; the number of participating hotels has increased 85% on last year's survey (or a 74% increase in the total number of rooms).

Our sample this year includes branded four-star and five-star hotels, but we have excluded super-luxury hotels as these could skew the results of this survey.

This year, we have included for the first time some additional submarkets, notably in the UAE, Kingdom of Saudi Arabia and Egypt. These submarkets are analysed under the relevant market area.

Using HVS's extensive database of hotel operating results for the Middle East, developed with continuous support from all the major hotel companies present in the region, we report occupancy, average rate and RevPAR (revenue per available room) for each market.

OVERALL TRENDS

With the exception of Beirut, all markets experienced a decline in occupancy. Occupancy among quality hotels decreased by six percentage points to 69% in 2009. This can be attributed largely to the global economic conditions as well as the opening of a number of new hotels in various cities in 2009. Some 14,000 hotel rooms entered the region during 2009, of which 43% was in the UAE market: 27% in Dubai, 15% in Abu Dhabi and 1% in the other emirates.

Beirut's hotel market had a different story to tell; occupancy levels increased by 13 percentage points from 57% in 2008 to 70% in 2009, primarily on account of political stability, a relatively low number of hotel rooms and a growing number of visitors.

Despite the drop in occupancy, average daily room rate (or average rate) for the region increased by 3%, from US$185 in 2008 to US$191 in 2009. The markets that were worst hit were Dubai (-29%), Bahrain (-21%), Doha (-14%), Amman (-13%) and Hurghada (-10%).

The resultant RevPAR for the region posted a 7% decrease to US$130 in 2009, compared to an 18% increase in 2008.

Despite the above market corrections, the Middle East remains the fastest-growing region in terms of tourism arrivals. We note that while the pace of growth has slowed, the region continues to account for less than 5% of the total number of global tourist arrivals, which reflects strong potential for likely future growth in this area.

Growth in tourism in the region is mainly driven by intra-regional visitation. With the exception of Dubai, Arab visitors account for the majority of tourist travellers in the region. The higher disposable income when compared to other parts in the world and liquidity generated by high oil prices are primary drivers for visitation. Tourist arrivals from the Americas and Europe are dominated by corporate travellers who increasingly look at the opportunities arising in the region from the diversification and privatisation programmes, albeit that foreign companies have adopted a ‘step back' attitude throughout 2009.

Our general outlook for the hotel industry in 2010 and 2011 remains conservative, especially in light of the 50,000 hotel rooms that will enter the market over the next two to three years and all the signs pointing to a slow recovery in the key source markets for certain cities. The global economic downturn is a cause of much uncertainty; the immediate effect on hotel activity is a shrinkage in booking windows (much less business on the books, making it difficult to forecast results even in the short term) and a shortening of the length of stay in all segments.

In previous editions of this publication we have warned that a market correction is likely to happen in most of the cities, specifically those in the GCC, resulting in lower occupancy levels and decreases in average rate. As these markets recover and new supply is absorbed into the respective markets, we consider that reasonable occupancy levels will hover around the 68% to 73% bracket for most of the cities.

On the other hand, the current economic downturn has benefits for those developers with liquidity reserves: construction materials are cheaper, qualified labour is plentiful, and the promise of finalising new developments just in time to take advantage of the economic recovery is very appealing.

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