Middle East delivers strongest hotel growth in Q1

The Middle East reported the strongest increases in hotel performance during the first quarter of 2014, according to STR Global.

Strong underlying fundamentals in the Middle East will fuel growth for the foreseeable future, according to a presentation from STR Global’s managing director Elizabeth Winkle.

“The really positive note is that across every region demand is outpacing supply,” she said. “The Middle East certainly leads the way with over 9% year-over-year demand increases even with the most significant supply increases.”

During the first three months of the year, the Middle East reported a supply increase of nearly 6%, above that of Asia (nearly 4%) and Central and South America (approximately 2.5%).

If all the rooms in the region’s pipeline were to open, supply would increase 40%, Winkle said.

The Middle East saw occupancy increase 3.3% to 75.1% during the first quarter while average daily rate increased 2.2% to US $220; and revenue per available room increased 5.6% to US $165, Winkle added.

“Any market that’s operating in excess of 60% is a market that’s performing very well,” she said. “ADRs are some of the strongest around the world, many in excess of US $200,” which is a reflection of an existing supply skewed toward the upper end of the market.

“We are still seeing a smaller pipeline across the lower tiers for the region,” she said. “This is certainly an opportunity to build up that lower tier in the midscale and economy segment.”

In Abu Dhabi, Winkle said hotels were seeing "very strong occupancy growth of about 10%" but ADR declines of more than 9% were witness in Q1 as a result of new supply.

The future outlook is bright, she said, adding: “Going forward we would expect stronger performance coming out of Abu Dhabi.”

On Dubai, Winkle said: “Dubai… is performing extremely well. We’re sitting on occupancies in excess of 88%. We’re seeing a lift in rate as well. Dubai is a market where we see a great deal of Western European source markets."

During the first quarter, Dubai’s occupancy held relatively flat with a 0.7% decrease to 88%; its ADR was up 7.5% to $284.88; and its RevPAR increased 6.7% to $250.72.

Winkle said Riyadh hotels were seeing a bit of pressure of rates. Although occupancy in the Saudi city rose during the first quarter by 5.6%; ADR was down 7.3%; and RevPAR was down 2.1%.