Arabia/Dubai hotel industry – sinking or floating in recession?

Is the oil-rich Middle East jumping on the bandwagon the US is currently on?

Though it may be comforting to read a recent hotel survey showing a total of 61 hotel developments worth $8.8 billion are due for completion between now and the end of 2010 across the Arabian Gulf despite the global economic downturn, it’s always good to check in with experts.

According to this latest survey released March 14, 2009, things are indeed looking up with five major hotels reaching completion this year in Saudi Arabia, followed by seven more in 2010. Qatar will see five new hotels completing this year and two in 2010. Bahrain has one to be delivered in 2009 and four in 2010. Spending on new hotels is at its highest over the two years in the UAE, accounting for $6.1 billion of the combined $8.8 billion. “These are challenging times for everyone but these latest figures show that hotel suppliers continue to have an expanding market in the Middle East,” said Maggie Moore, director of The Hotel Show in Dubai.

A vast bulk of the new hotel developments are in the United Arab Emirates with 22 this year and a further 13 due for completion in 2010, disclosed the survey by project research and database company Proleads. “With thousands of new hotel rooms coming on stream over the next two years, the hospitality industry will need to focus on standards and value for money for customers,” said Moore, adding, “There will certainly be downward pressure on hotel rates in the short term, but one has to remember that hotels in the GCC region recorded some of the highest average rates in the world last year.”

In the meantime, the Middle East is still expected to continue investing in tourism infrastructure, including hotel developments, for long term growth and sustainability.

The impact of the global slowdown on real estate investment and development markets regionally and internationally in Arabia will be covered extensively at the Cityscape Abu Dhabi later this April. Attendance numbers are apparently down by 20,000 participants skipping 2009’s event, confirmed earlier news.

“The global financial crisis has cast a shadow over the real estate industry worldwide with investors cautious,” said Kosta Petrov, conference director of Cityscape Abu Dhabi…. “[we] expect to reinforce consumer confidence in the property sector and hopefully provide an impetus to the revival of the real estate development sector,” said Abid Junaid, the executive director of ETA Star Property Developers, a giant Dubai-based developer group.

“There is little doubt that the regional hospitality industry has moved into unchartered territory. Being no strangers to periodic downturns the region’s hospitality professionals will be looking for the opportunities that these challenging times may well present,” said Moore, whose Hotel Show opens in May. She added, “We are, quite naturally perhaps, already seeing a greater emphasis being placed throughout the industry on finding ways to improve margins and maximize revenue opportunity – particularly with an eye to eventual recovery. Hoteliers will no doubt be on the look out for products and services which offer greater efficiency at lower cost.”

Dubai may no longer keep staying at the helm, should business continue to down-spiral in the emirate. According to Claude Attalla, managing director, North Course LRES, the real estate market continues to lay-off professionals in flocks. Shopping-obsessed tourists have left, especially those on a mission to buy real estate in the $4 million range for condos.

“A few months ago, a big developer in Dubai was still talking about his properties. Three months into the year today, he has disappeared including his wishful thinking that the other side of the fence (Dubai) is much greener. Several real estate properties have dropped in price by over 50 percent. And yet we have seen the full extent of the global financial crisis,” he said at the ARDA 2009 convention held in Orlando recently.

Dubai and other states remain vulnerable to the market correction. “If only the events have been swayed, analysts forecast Dubai’s fortune market crash seeks a 6-year property growth recovery. Some in the construction market have walked away from their planned projects. It remains to be seen how much have been reclaimed from the desert by developers and foreign investors when all plans vanish. My expectations: an average of 50 percent replacement in Dubai property values will appear,” Attala said, adding that companies continue to repatriate foreign workers in record number.

Why did this happen? “Apart from the slowdown in the world, from experience in the region, the lack of research and transparency has built up to this. Research is more important than ever. In the case of Dubai, I find that research in future growth and development is key to recovery,” added Attala, whose actual base is Dubai.