MENA hospitality sector to slowdown due to low oil prices

March 26, 2015 12:04 pm

MENA hospitality sector is expected to face a slowdown during 2015 if oil prices plunge further, according to EY’s Middle East Hotel Benchmark Survey Report.

The hospitality market witnessed a steady growth in terms of key performance indicators during 2014.

Yousef Wahbah, MENA head of transaction real estate at EY says: “If occupancy rates are to remain the same or decrease, the extra supply that is slated to enter the MENA hospitality market in 2015, coupled with unstable oil price, may have an effect on the industry’s growth rates over the coming year.”

He adds: “Conditions may not be as vibrant as they were in 2014. There were over 4,000 keys expected to be delivered to the Dubai market in 2015. However, we see the hotel developments’ construction pace slowing with delays in the scheduled opening dates of the hotels. In terms of transactions, the hospitality sector could see a drop in the number of deals, given the uncertainty in the market.”

“The next six to nine months will be a critical period for the industry to monitor whether the price of oil stabilises and the effect this will have on the number of hospitality transactions and developments in the region,” Wahbah says.

In terms of occupancy in 2014, UAE emerged as the top performer in the MENA region, maintaining a high average of 79 per cent in Dubai and Abu Dhabi.

RevPAR experienced a slight decrease in the two emirates when compared to 2013, due to the large number of rooms that have entered the market in 2014.

In the wider MENA region, Cairo, Manama, Doha and the major cities in Saudi Arabia witnessed a marked increase in RevPAR. Occupancy in Cairo increased from 26 per cent to 35 per cent in 2014 and witnessed a significant increase in RevPAR by 53.1 per cent due to higher average room rates by 15 per cent compared to 2013.

RevPAR in Manama also increased by 21.1 per cent during 2014 compared to the previous year. Although the average daily rates of the rooms remained relatively constant between 2013 and 2014, the RevPAR in the city witnessed a recovery driven by the increase in occupancy.

The report reveals that three major cities – Madina, Riyadh and Jeddah – witnessed an increase in their RevPAR in 2014 by 7.3 per cent, 11.2 per cent and 6.8 per cent respectively, compared to 2013.

The Saudi cities are expected to have new hotel projects based on the strong performance seen across the kingdom’s hotels.

The year 2014 was a good one for Doha, as the city witnessed a seven per cent increase in the occupancy rate resulting in an increase in RevPAR of 13.4 per cent. Doha maintained a high occupancy rate of 70 per cent, one of the highest across the MENA region, says the report.


By AMEinfo Staff
AMEinfo staff members report business news and views from across the Middle East and North Africa region, and analyse global events impacting the region today.