The summer is in full flow, which is a good time to reflect on the hospitality industry. Even better, I can use my own travels as an example of the resilience of travel and how it’s impacted hotel performance.
I live in Bangkok with my family—a city that is now bursting at the seams with tourists. For our summer holiday, we made our way to Athens and the Greek Islands, where two things were similarly hot: room rates and the climate!
From there, we jetted off to New York City, where taking in the sights will cost you: The cheapest decent room available in the city was well over $250 USD with luxury hotels easily pushing north of $1,000 USD easy for a standard room. Not to mention, I was there during the premieres of “Barbie” and “Oppenheimer”—I swear that the city was turning pink everywhere I looked.
After the Big Apple, we popped up to Toronto and relaxed in the beautiful Canadian summer where our hotel was once again full, but this time with a major conference on top of a few leisure travelers.
The last leg on our Emirates route was a five-day pit-stop in Dubai to recover from jet lag and work on our tan before visiting family in the Levant. I had anticipated Dubai would be a ghost town; that is what is expected in the GCC (Gulf Countries Council) in summer. I was incorrect.
The airport had a buzz to it; roads were busy; beach clubs on The Palm were pumping; and our hotel was offering free drinks at the bar should we choose to forgo daily housekeeping service. The latter had to do with their environmental policy, but I was told that demand picked up so much that the property was not able to manage the load with their remaining housekeeping crew. It was all quite extraordinary considering the temperature was pushing 45 degrees Celsius and the humidity running close to 95%.
Dubai is not alone. Many other emirates in the UAE were experiencing a positive summer and, of course, places like Jordan, Lebanon and Egypt typically have their best months between June and September because of tourists and returning expats visiting family during school holidays. A three-hour flight from Qatar to Beirut in August would easily cost the equivalent of a 15-hour trip to South America with the same airline and the same class; supply and demand in its full glory.
HOT PERFORMANCE
Hotels in the summer have been packed: How has the Middle East done YTD? I’ll focus on three key markets from these six countries: KSA (Kingdom of Saudi Arabia), UAE (United Arab Emirates) and Qatar.
Many people think that the UAE is Dubai and do not understand that it is actually made up of seven distinct emirates, with the capital state being Abu Dhabi. Here is a surprise: Abu Dhabi is almost twice the size of Dubai by land, but Dubai has well over six times the hotel rooms inventory of Abu Dhabi.
The hotel sector YTD has been on par with last year, which is quite remarkable, given how impressive 2022 was and how many experts considered that year to be unmatchable, as it was the first full-rebound, post-COVID year. Meanwhile, multiple global destinations still struggled to rally and capture share, but the UAE showcased resilience and strong demand across all segments and revenue streams, achieving a rooms gross operating profit margin of more than 81% and a total GOP margin of 44.5%, according to HotStats data.
Saudi Arabia’s hotel supply is over triple that of Dubai, making it by far the most significant indicator for hotel performance across the whole of the GCC. One might think that Dubai, with its theme parks, free-flowing hard beverages, entertainment venues and more would overmatch the KSA in terms of hotel performance, but it’s not the case. In every significant metric over the first full half of the year, The Kingdom has been consistently beating the UAE by some margin.
Mohamed Bin Salman, the Crown Prince of Saudi and its de-facto current leader, has pledged $1 trillion USD of investment inside the Kingdom to deliver it as a global tourism destination by 2030. This is a serious marker and they are moving toward it with alacrity: incredible developments, major festivals and conferences, sporting events and much more.
Lastly, Qatar, which is a small, but rich nation that has in the past five years boosted its hotel inventory many times over to be able to host the last World Cup. It now offers more than 30,000 hotel rooms. It was widely speculated that this was a disaster waiting to happen as there would not be sufficient demand to sustain all this supply and, to some extent, it has not been easy sailing, but it has not been all doom and gloom, either. With total GOP margins running at just over 27% and rooms GOP at over 75%, Qatar’s hotels are finding their place and are well positioned for this year and beyond
Overall, the Middle East has been rocking and rolling in 2023 and, most importantly, profitability has been consistent and growing. With significant investment and a clear focus on growing tourism, the future is hot.
Story contributed by Tareq Bagaeen, senior consultant, HotStats.
