Saudi Arabia and the United Arab Emirates continue to dominate the hotel construction market in the Middle East

Saudi Arabia and the United Arab Emirates continue to dominate the hotel market in the Middle East and Africa region, with 40,269 and 31,715 rooms under construction respectively as of December 2021.

This, however, comes at a time when the region saw a 5.5% decline in hotel construction activity in the fourth quarter compared to the same period a year earlier, according to the hospitality industry data provider. STR.

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“The global supply chain shortage has been well documented, and the construction industry is no exception. However, it is one of many factors influencing this curtailment of current development,” said Christopher Robson, Senior Director – Hotels and Tourism at CBRE (Dubai).

Along with hotels, one of the most impacted asset classes During the pandemic, STR’s regional manager for the Middle East and Africa, Philip Wooller, stressed that construction delays and project postponements were no surprise.

“The Middle East, however, has proven exceptionally resilient throughout the pandemic, driven primarily by its strong leisure and holiday markets such as Dubai, Ajman and Ras Al Khaimah,” he said.

Although the pandemic had a direct impact on the development of the hospitality industry, with supply chain, labor and cash flow issues, Robson said it had a short-term impact on the sector. .

“Long-term, it is positive to see the shift in planning increasing in the Middle East region, supported by international events and the positive increase in tourist numbers since the reopening of travel corridors,” said he declared.

STR’s Wooller pointed out that national visions, such as the much-vaunted Saudi Vision 2030, continue to prioritize and encourage tourism as a key pillar of future economic growth. “Coupled with the significant recovery in hotel performance in 2021 across the majority of regional markets, the region continues to prove fertile ground for future hotel development,” he said.

Dubai dominates the market

According to 2021 year-end data released by STR, the Middle East hospitality industry reported revenue per available room (RevPAR) at 85.6% of pre-pandemic comparable, the highest among regions of the world.

Robin Rossmann, Managing Director of STR, had said in a press release that the Middle East was the leader in opening up to international arrivals and hosting major events, such as Expo 2020, which boosted performance of hotels in Dubai.

Data from STR showed hotel rates in Dubai hit a six-year high in December 2021, recording an average daily rate (ADR) of 956 UAE dirhams and a RevPAR of 747 dirhams, with hotels operating at 78% of their capacity.

The medium to long-term outlook for hotel occupancy in the UAE and Saudi Arabia is good, according to Juwai IQI co-founder and CEO Kashif Ansari.

“Saudi Arabia is making concerted efforts to increase its role as a regional hub that attracts more business and tourist visitors. In the United Arab Emirates, an increase in tourism from neighboring countries, including Turkey, Israel and the Iran, is expected to boost the travel sector this year and next year.

He expects 2022 and 2023 to be record years for hotel openings in many markets.

“The industry will assimilate a large number of delayed projects and bring them online. The time from the start of hotel planning to the completion of construction can take years, so the trends we are seeing now reflect decisions made as early as 2018.”

As the hotel construction industry is currently feeling the impact of the pandemic, CBRE’s Robson said he is seeing improvements in the use of sustainable materials, efficiency in planning and construction processes, and the arrival of renewable energy technologies in the sector.

“In the medium to long term, this will improve operational efficiency, strengthen the region as a tourist destination and improve foreign investment opportunities,” he concluded.

(Reporting by SA Kader; Editing by Anoop Menon)

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© ZAWYA 2022

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