HotStats MENA Chain Hotels Market Review – May 2014

July 1, 2014 11:43 am

Hotels in Doha experienced exceptional growth in occupancy during the month of May, according to the latest HotStats survey of full service hotels in five MENA cities commented on by TRI Hospitality Consulting Middle East.

Average occupancy at four and five star hotels in the city reached 76.7%, rising 11.2 percentage points compared to the same period last year. Despite a decline in average room rates (ARR) of 4.1% to $222.19, the growth in demand drove revenue per available room (RevPAR) up 12.2% to $170.48. Coupled with increased performance in the rooms department, the 15.6% rise in total revenue per available room (TRevPAR) was supported by double-digit growth in F&B revenues which comprised 47.5% of total revenues. Strong top-line performance in conjunction with the 2.1 percentage point drop in payroll costs boosted profitability levels by 23.1% during the month to $184.78.

“Historically, Doha’s occupancy levels have ranged from 67-68% in May, however, this year occupancies are pushing 77%. This level has not been experienced in the past three years, and exceeds performance levels witnessed during peak periods of demand. Hoteliers were able to capitalise on developments in the events and airline industries to increase overall yields. Growth was seen in the MICE segment where the country’s largest ICT event, QITCOM 2014, attracted 11,000 visitors. Additionally, Qatar Airways accelerated the expansion of its network from the end of April through May, with the addition of four international routes,” commented Peter Goddard, Managing Director of TRI Hospitality Consulting in Dubai.

Average rates in Dubai are driven by MICE and leisure segments
Dubai’s hotel industry benefited from solid leisure demand coupled with several high-profile international events during the month of May. The city maintained strong occupancies of 82.2%, marginally lower than the previous year by 0.9 percentage points. However, average rates increased 4.6% to $301.09, boosting RevPAR 3.5% to $247.61. High demand drove growth in F&B and conferencing revenues, which supported the 4.1% rise in TRevPAR to $464.14. In turn, profitability grew 5.8% reaching $208.15, the highest amongst the five MENA markets surveyed by HotStats.

“Hoteliers yielded the highest growth in average rates from the MICE segment, where ARR increased 18.4% on the back of strong demand. The International Design Exhibition, Beauty World Middle East, Arabian Travel Market and Dubai Airport Show collectively drew 70,000 attendees and allowed hoteliers to command a premium within the MICE segment. Dubai also continued to see strong demand from leisure visitors who provide a solid demand base for the city’s four and five star hotels. As one of the highest yielding segments, an 11.3% increase in ARR within the leisure segment drove average rate growth across the market,” commented Peter Goddard.

Profits in Cairo are constrained by reduced rooms revenue
In contrast, Cairo reported mixed results as occupancy continued to fall despite a rise in average rates. Hotels in the capital reported occupancies of 44.4% and ARR of $111.27, which suppressed RevPAR at $49.40, lower by 4.0% compared to the same month of the previous year. Increased leisure and conferencing demand led to the 9.0% rise in food revenues that supported a 3.4% growth in TRevPAR. Profitability levels continued to be constrained by high operating expenses, particularly the 1.7 percentage point rise in payroll costs which left gross operating profit per available room (GOPPAR) down by 6.1% from the previous year to $42.55.

“Hotel performance in Cairo continues to be challenged by protests and clashes in various districts within the city. Our May data further reiterates the overall reduction in occupancies and profitability witnessed in the previous two years. Although performance levels for the month are slightly higher than those witnessed year to date, major market movements will be difficult to gauge until the impact of the Presidential elections are realised,” commented Peter Goddard.

Riyadh maintains strong performance on the back of corporate demand
Riyadh hotels witnessed an increase in demand in May, as occupancies rose 9.8 percentage points to 68.6%. Despite a 3.4% drop in ARR to $246.84, the market managed to increase RevPAR by 12.6%. With rooms revenues comprising the bulk of total revenues at a contribution of 58.4%, the marginal decline in other operating departments did little to impact TRevPAR which increased 12.1% to $290.30. A reduction in operating costs lifted GOPPAR to $148.06.

“Riyadh demonstrated positive performance during the month, as the corporate segment continued to provide a solid occupancy base. Although May typically sees occupancy levels subside due to lower corporate demand, the market remained active with the hosting of several exhibitions, seminars and conferences in various sectors. Despite the decline in average rates, lower operating expenses coupled with strong occupancies have funnelled directly through to the profitability of the hotels, with bottom-line profits increasing by 17.8%,” commented Peter Goddard.

Corporate demand in Kuwait begins to slow
Hotels in Kuwait remained afloat in May despite reporting mixed performance, as occupancy reached 52.3%. A 3.3 percentage points decline in occupancies was absorbed by an 8.4% rise in ARR to $ 276.42 that boosted RevPAR up 2.0% to $144.48. Although corporate demand slowed by 1.9 percentage points, the city’s hosting of several smaller regional events benefited the MICE segment which saw improvements in demand. Despite lower F&B consumption, meeting room revenues more than doubled and helped raise GOPPAR by 9.6% to $159.77.

“The drop in occupancy levels of hotels in Kuwait for May indicates the start of the annual summer slowdown when corporate activity reduces before the summer holidays. Historically, occupancy falls to levels below 40% during the summer months as corporate demand recedes. Most Kuwait hotels are advantaged by the rate agreement that is particularly beneficial during these periods of low demand because it protects average rates from falling below the threshold and helps hotels maintain profitability,” said Goddard.