Arabia poised to welcome budget hotels

Arabia continues to remain a favorite among investors and operators in the tourism and hospitality sector, in particular those in the budget segment, according to Jonathan Worsley, co-organizer of the Arabian Hotel Investment Conference. Worsley said that industry figures show that the region is still considered a hot spot, although 10 and 20 percent of the 500-plus planned hotel projects in GCC have been put on hold.

“Recent numbers issued by Jones Lang LaSalle estimates that 680,000 new hotel rooms will enter the market next year in the greater Middle East and North Africa region (MENA) – compared to an original prediction of more than 800,000. It seems that many are jumping on the budget hotel bandwagon that is sweeping through the GCC.

“Indeed, the case for low-cost hotels and the buoyant entry of new brands into the region is high among the key topics under discussion during the three-day event (May 2-4),” he said.

Worsley suggested that budget hotels are set to revolutionize the scale of choice for the consumer and open up new market categories for business and leisure travel.

He noted that Emirates and Whitbread Hotels have entered into a joint venture, with the Premier Inn brand and plan to operate three hotels in Dubai later this year.

Darroch Crawford, managing director of Premier Inn, said that the launch had been well received. “The limited-service hotel sector presents the best opportunity in the hospitality sector in these times as even more individuals, and certainly most businesses, look for value for money. We are offering guaranteed consistency at a low price that will be in big demand.

“Lower operating costs allow budget hotels to make excellent returns, even at modest occupancy levels. There are good investment opportunities, particularly as land and construction costs are returning to more realistic levels. The best opportunities lie in GCC capital cities where the limited-service sector currently has little or no representation.”

Crawford’s view is echoed by Sami A Ansari, CEO of Ishraq Gulf Real Estate, the developer behind Holiday Inn Express. Ansari said that his hotels in Dubai have outperformed the market occupancy average in the city by as much as 15 percent in the past four months.

“Budget hotels have historically been shown to be recession resilient. The model continues to generate targeted profits for investors, as they operate on much lower margins than their full service rivals,” he said.

“We will continue our development of the Holiday Inn Express brand in the region at full speed. We are opening of our fourth property near Dubai airport this summer. Construction is at full speed in Bahrain, Abu Dhabi, Muscat, Fujairah, and Doha.”

Other low-cost brands announced for the region include Hilton’s Garden Inn in Saudi Arabia, easyHotels in Dubai, and Rotana’s Centro in Dubai and Abu Dhabi.

“Despite the spread of budget and mid-market hotels, top names are still being attracted to the region to plant their flag,” said Worsley. “We have seen names such as W debut in Doha. Radisson’s Missoni will open one of its first two hotels in Kuwait and has recently announced a second resort in Oman, while Langham and Taj both have projects in Doha.

“Meanwhile, Abu Dhabi will have Anantara, Angsana, Conrad, Dusit, Rocco Forte, Hard Rock, Le Bristol, Oberoi, Regent, St. Regis, Westin, Wyndham, yotel. and Hilton’s new brand Denizen to name a few.”

Another new player, The Address Hotels & Resorts from Emaar, is looking both in the GCC and in North Africa in its initial expansion phase. According to CEO, Marc Dardenne, brand distinction will be an imperative for survival for all existing and new players in the hospitality sector.

Dardenne said, “The key challenge for any new entrant is the ability to create a unique brand differentiated by positioning the property correctly in a crowded market,” he said.

“The region has varied drivers including leisure and business tourism. The MICE sector will contribute immensely in the coming months. All new players must identify their niche and create properties that are focused on specific sectors.”

He said the hospitality sector in the Middle East was emerging from a state of flux and is carving a strong identity but warned that service standards need to be redefined.

In addition, the 2009 conference includes a half-day summit on Saudi Arabia. The Arabian Hotel Investment Conference is organized by Bench Events and MEED Events. Details can be found on www.arabianconference.com .

Industry Bites
The hospitality sector has scaled back its Middle East ambitions with planned construction down 10 percent since the financial crisis hit and more declines ahead, according to a new report by Lodging Econometrics.

A new report from Business 24/7 claims that around 20 percent of hotel room supply in the MENA region, particularly the GCC, proposed for completion by 2010 will not be ready.

The delay rate for projects earmarked for completion by 2015 could be as high as 40 percent, according to an industry report by global hotel investment services firm Jones Lang LaSalle Hotel.