Market Update: Bahrain

Following a recent spate of violence slated “the deadliest attack against security forces since protests began in 2011”, the hospitality industry maintains it is business as usual in the Kingdom of Bahrain

"Listen guys we’re going to go full speed ahead, we don’t care about anything else” – this is the message that Domain Bahrain’s managing director Patrick De Groot is pushing out, and it seemingly encapsulates the attitude of a whole kingdom.

Bahrain, made up of 33 islands in the Persian Gulf, recently marked the 10th anniversary of Gulf Air sponsored Formula 1, The Bahrain Grand Prix amid the threat of more hostility as spates of violence continued three years after the first protests broke out during the 2011 Arab Spring.

In the same year, the event was cancelled and hotel occupancy dropped to 33%, a figure that has been gradually creeping up and reached 43% at yearend 2013.

The 2014 Formula 1 race, which was held at night for the first time ever to attract additional publicity, came just one month after what Bill Law of BBC News describes as “the deadliest attack against the security forces since unrest began three years ago”.

Law refers to a bomb explosion which took place on March 3 2014, killing three policemen. The officers died when trying to disperse rioters in the village of Dath, west of the capital Manama. Thirteen police officers have now perished since protests began, another of which was killed this year on February 14, the third anniversary of the unrest.

According to human rights activists, more than 80 civilians have also been killed; however, the Bahraini government says this figure is lower.

According to TRI Hospitality Consulting senior consultant, Christopher Hewett, the months of February and March tend to be the “hotbeds” of violence since they fall in line with the anniversaries of the events. “It just happens to be close to Formula 1 which always does attract forms of protest and activity," Hewett explains.

Despite the seeming stalemate of danger in Bahrain, the hospitality industry was positive that this year’s Formula 1 would be a success, with De Groot, who manages the home-grown boutique hotel Domain Bahrain, which opened earlier this year, commenting: “I think the lead up to this year’s event seems a lot bigger and more positive so I’m very hopeful that we’re going to have a fantastic event this year.”

Mark Willis, area vice president of Carlson Rezidor, agrees: “I’m looking forward to a great Formula 1 and hope there are no negative incidences associated with it”. Willis said he is confident that business in Bahrain will go on as usual and is looking forward to the opening of the group’s second Bahrain hotel next year.

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The 207-room Park Inn by Radisson Hotel, Bahrain, one of 11 properties in the Kingdom’s two-year pipeline, will add a mid-market offering alongside the luxury Diplomat Radisson Blu.

“Bahrain is a very diverse market so the hotel is going to attract a wide range of short and medium stay business people to the property,” Willis comments. “I also think it will go down well with local residents, attracting a lot of business to the food & beverage outlets”.

Pulling in customers to F&B facilities is crucial during periods of unrest according to Colliers Head of Hotels (MENA region), Filippo Sona, who comments: “Although hotels might have low occupancies and so theoretically have less guests, people tend to spend more in F&B outlets because they are safe places to be.”

De Groot agrees, adding: “If you can’t achieve the occupancy numbers then as a hotel you have several other options at your disposal to generate revenue.”

Having begun discussions with the owners of the Domain Bahrain in July 2011 after the troubles started, De Groot claims that the concept was “a social club with a boutique hotel inhabiting the building rather than the other way around”.

He explains: “50% of our keys are suites and the rest are rooms, which is much higher than you typically find in luxury hotels which are normally 15-20% max. The ratio of space allocated to F&B is much higher with a total of nine social spaces in the building, further emphasising the club aspect of the Domain.”

Rahim Abu Omar, general manager of 45-year-old Bahrain establishment, The Gulf Hotel, similarly admits that food and beverage is a major focus for the property, with around 60% of revenue generated by F&B. Omar explains the 16 outlets of the “destination hotel” are “important to the social scene of Bahrainis” and that yet another will open this summer.

Diversifying food and beverage offering is just one opportunity for Bahraini businesses to maintain and perhaps grow their market share according to Sona, however.

He adds that this period of unrest provides a good opportunity to think about refurbishments, especially for aging hotels, adding that this could extend to an eventual “relaunch of the whole Bahrain tourism scene, and growth for those hotels that are repositioning themselves”.

Gulf Hotel is one property which is doing so, with Omar revealing that this summer the oldest of the three hotel towers will close for a three-month renovation, and a refurbishment to the hotel apartment buildings will be done gradually over two years because “demand is high” and Omar wants to limit disturbance to guests. “This shows the confidence we have in the industry,” he adds.

Grasping the kingdom’s natural market share is also going to be of key importance.

“Saudis are going to be the backbone of tourism within Bahrain for many years to come,” says Hewett. He explains that the key success factor will be diversifying Bahrain's leisure offering to really attract Saudi nationals, and that this can be done by “harnessing the cultural and natural environments which already exist”.

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Hewett highlights a range of government initiatives already underway that will contribute to the development of Bahrain’s leisure offering including the $2.5bn master waterfront development, Bahrain Bay, covering 43 hectares of reclaimed land, slightly north of Manama’s central business district. The development, 50% of which is due to be completed this year, is set to become a 24-hour downtown hub.

De Groot agrees that driving leisure tourism will be essential to developing Bahrain’s tourism industry, with the corporate segment representing roughly 70% of market share at the moment, and leisure and best available rate guests making up the remaining 30%. He adds that the Kingdom has a number of USPs that need to be drawn together under a “singular vision”.

Along with other hoteliers, tour operators and travel agents, De Groot is part of ‘The Bahrain Forum’, a group which has recently produced a suggestion paper to present to the Bahrain Secretary of Tourism outlining what should be done to improve the industry. It is hoped that this will lead to the implementation of a unified strategy.

“What Bahrain needs is a brand and a slogan that will become a driver for Bahrain as a whole,” asserts De Groot, who adds that the Kingdom is missing a body such as Dubai’s DTCM to market the destination.

“Bahrain has lost a lot of its credibility in recent years – it used to be the centre of The Gulf,” he adds. However, De Groot points out that there is one thing that Bahrain will never lose, and that’s location. “We’re still the gateway to the Eastern Province and there’s still phenomenal potential for Bahrain and we hope to get better at capturing it as a business.”

In fact, 60% of business comes from across the causeway that links the Eastern Province with Bahrain, including 95% of all Saudi Arabian business – which itself represents almost 50% of the overall source market.

De Groot hopes to achieve around 40% occupancy in 2014, having only opened in full force earlier in the year. “I expect the rest of the market to hit 15% above that; 55% - 60% should be achievable,” he adds. Omar, similarly positive expects occupancy to increase on last year, having already seen 10% growth in the first 10 weeks.

However, Sona argues that it is unlikely that Bahrain will see double digit increases in 2014 since occupancy has now achieved “a certain level”. He explains: “I think 2014 will see average room rate grow at a figure below 5% and occupancy at perhaps 3% and this will be fuelled by the GCC community.”

Sona highlights the March attack as a setback to the industry, saying it has been “a big hit to hotel companies”. He explains that sporadic incidents are always a knock to confidence levels: “Despite efforts, here we go again,” he comments. “Hoteliers have to start re-thinking how they will take on this year, which started on a positive note.”

De Groot agrees, adding there is nothing that businesses can do but look for ways of diversifying market share and above all, stay positive: “We can’t take away the issue but I think that’s not for us as businesses to resolve,” he comments. “As businesess we have to look forward and try and make things right.”