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THE negative impact of the global financial crisis on the travel and tourism industry including rapidly falling occupancy rates and revenues may have led to the cancellation of thousands of hotel projects in the GCC.
But as quickly as it was hit, the regional hospitality industry expects to bounce back next year itself, and is already going ahead with the construction of 306 hotels worth more than $140 billion.
Cash flow into hotel projects is expected to be approximately $30 billion in 2010, marginally up from 2009's estimates of $28 billion.
The UAE accounts for a majority - 62 per cent - of the planned 893 projects in the GCC, followed by Saudi Arabia at 17 per cent.
However, the economic slowdown has resulted in the cancellation of about 6,500 rooms in the UAE alone this year.
And about five per cent of the 893 planned hotel projects have been cancelled, according to Proleads data, while 14 per cent projects are on hold, 15 per cent in design stages, eight per cent planned and nine per cent completed.
"The active cash flow for hotels under process this year in the UAE alone is estimated to have dropped this year. However, the industry is then projected to restore its ability to replace cash flow by late 2010 with more flowing into the industry than out of it by 2011," says Emil Rademeyer, director of Proleads.
"We expect the stabilisation of the market in 2010 and growth beyond in 2011 in spite of the global recession," says Rademeyer.
"Visitors will continue to come to the GCC and more hotels will be needed from 2010 going forward," adds Rademeyer.
Research suggests that to meet demand 893 hotels would be needed by 2013, based on an average 250-room hotel, taking approximately 2.6 years to complete.
Meanwhile, a report produced quarterly by Deloitte, the business advisory firm, has found that revenue per available room (revPAR) in the Middle East region dropped by 12.9 per cent to $142 during Q1 2009, driven by a nine per cent fall in occupancy levels. However, this decline is not as extreme as in other world regions and the Middle East continues to be the best performing region achieving the highest occupancy, average room rates and revPAR.
The average occupancy of hotels in the UAE is to be currently set at 50 per cent, whereas prior to the slowdown, the region saw an increase to 75-80 per cent occupancy, which remained stable; demonstrating that supply met demand.
Analysts have warned there could be an even sharper decrease over summer, predicting occupancy could fall below 50 per cent.
Despite falling revPAR across the region there are still some notable success stories. Beirut, for instance, blessed with increasing political stability, continues to achieve the strongest revPAR increases in the Middle East, up 157.6 per cent to $110 during the first quarter of 2009. Abu Dhabi took fourth position behind Beirut, Makkah and Jeddah in terms of revPAR growth, up 16.8 per cent driven by average room rate growth of 24.3 per cent. Hoteliers in the emirate have achieved the highest levels of occupancy, average room rates and revPAR in the Middle East.
While Makkah hotels posted a 32.7 per cent growth in revPAR in the first quarter of 2009, hotels in Jeddah saw an increase of 30.3 per cent in the same period to rank within the top three best-performing hotel markets in the region.
Pulling down the regional average is Dubai, which experienced the fastest revPAR declines in the Middle East, down 36 per cent to $203. The emirate is experiencing an increase in supply when demand from source markets in recession has decreased.
Dubai hotels and hotel apartments had a 14 per cent fall in revenues in the first quarter of this year compared with the same quarter last year, DTCM figures show.
Revenues fell to Dh3.66 billion ($997 million) in the first three months of this year from Dh4.26 billion in the first quarter of last year.
The number of guest nights at Dubai's hotels and hotel apartments fell 12 per cent in the first quarter to 5.344 million, from 6.067 million last year.
Hotels in Bahrain showed an occupancy rate of 70.8 per cent in the first quarter with a revPAR of 167.
Looking ahead, Rob O'Hanlon, Tourism, Hotel and Leisure partner at Deloitte Middle East, adds: "There are several factors that will help ensure a brighter, long term future for the Middle East including its geographical position, mix of source markets, growing importance as an aviation hub and the size of investments in the region. In the meantime, it will be a fine balance between maintaining the standards of quality travellers expect in the Middle East, but at a lower cost; offering greater value while maintaining profitability; and keeping control of budgets while laying the foundations for the future."
