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Hotel Industry Boom Provides Robust Momentum to Realty Market

The Gulf hospitality sector has been growing by leaps and bounds over the past years, displaying tremendous potential to draw foreign investments and expertise to the Gulf economy.

In a weekly report that focused on the hotel sector in the Gulf region and the factors responsible for growth in the hotel and realty sectors, Al Mazaya Holding stated the considerable achievements made by the hospitality industry in the Gulf over the past few years. The growth has tapped an innovative set of products responsive to the geography and climatic conditions of the region.

The hotel sector is an integral part of the real estate industry and both of them have many factors in common responsible for growth – in other words, real estate and hotel investments as inseparable. In essence, hotel projects are real estate investments that differ from conventional building and construction investments only in terms of quality, facades and decorative finishes.

The report added that the hotel sector gives an immense momentum to local and foreign investments in the Gulf States. Thus, this encourages GCC countries to develop integrated real estate strategies and feasibility studies to leverage their economic sectors and performance, thanks to the impressive successes achieved by both the completed and ongoing real estate projects.

The report noted that the hotel sector is resilient and buoyant enough to survive the current economic pressures and challenges due to its ability to create innovative products that increase the sector’s overall attractiveness and help push up hotel occupancy rates all year round. The promotional plans and activities developed by the Gulf nations in their major economic platforms, primarily the hospitality, energy and health sectors, play a major role in sustaining the occupancy rates and strengthening the efficiency of the sector.

In addition, the long-term developmental strategies being devised by the region’s countries all over the past decades contribute greatly to boosting competitiveness at the hotel sector, especially because all the GCC States have common objectives in this regard, only varying in the way and mechanism these strategies are being implemented to attract capital, investments and international interest in the hotel sector.

High Occupancy Rates

The report highlighted the marked growth in the hotel sector in the UAE in terms of the volume of projects and investments. Recent statistics underlined the UAE realty sector’s ability to draw large volumes of customers and foreign investments. This is due to the integrated promotional plans and activities organised all year round that have had a strong impact on maximising investments and revenues.

The hotel occupancy rates in Dubai during 2016 ranged around 80% – 85 %, thanks to the increasing number of business and leisure travelers arriving in the emirate as well as the constant promotional activities organised all year round. In Qatar, the hotel occupancy rates reached 85% during the current year. In Bahrain, during holiday seasons, the occupancy rates hit a record of 90%, which is the same rate achieved by Oman. In Saudi Arabia, the occupancy rate is around 70%.

New Hotel Investments

The perceived attractiveness enjoyed by the hotel industry in the region has led to tangible growth in direct investments channeled to this sector. As a result, this has proved to be a major economic catalyst for diversification plans and increasing GDP growth in GCC States. On this score, statistics revealed that the number of hotel projects currently under construction in Dubai exceeds 67 and are valued at approximately AED 65 billion. These projects are due to be completed by 2020.

The number of hotels under construction in Qatar is more than 105 – upon completion, these constructions are expected to add over 21000 rooms. In Bahrain, five hotels are now being constructed by foreign companies at an estimated value of more than $1 billion. In Saudi Arabia, there are around 79 hotel projects under construction that are expected to add 35,000 hotel rooms upon completion. In Oman, the hospitality industry investments are valued at $3.3 billion.

High Dividends

The report also highlighted the positive impact of the hotel industry’s growth on the economic diversification plans adopted by the region’s countries, despite the besetting economic challenges. In this regard, the report noted that Saudi Arabia received 19 million tourist flights during 2016, with the total tourist expenditure reaching a record of SR 90 billion, which is equivalent to 3.5% of the KSA’s GDP.

The report added that the hotel sector in Dubai will bring in financial returns as high as AED 25 billion by the end of the current year, compared to AED 23.9 billion last year, which will help keep the sector’s annual growth rate at 5% until 2020. In Bahrain, the hotel sector is bringing in increasing returns and its contribution to the GDP is expected to exceed $1 billion by 2020. Oman is planning to attract around five million visitors by launching investments valued at OMR 19 billion, therefore increasing the hotel sector’s contribution to 11% of the GDP over the next few years.

Promotion Plans

The report indicated that continued growth in the hotel sector requires constant promotional plans and diverse investments to strengthen the economic sector and decrease the budget deficit suffered by the region’s countries as a result of the faltering oil returns. The report made it clear that the conference, business, religious and recuperative types of tourism should play a major role in consolidating the hotel sector and consequently, the economy at large.

The report concluded by underlining the necessity of expanding hotel investments in the region in order to draw more world-standard local, regional and international investments capable of meeting and catering to diverse tastes. In this regard, the report highlighted the fact that the hotel sector in the region still suffers the least pain in terms of debt problems. This is in comparison with other projects that are under construction and those funded by banks and other funding institutions, a fact that positively outlines the future of the sector’s ability to attract more local and foreign capital.