Event preview: AHIC
For the 12th edition of the Arabian Hotel Investment Conference (AHIC) 2016, the theme chosen is “Eye on the Future — Vision for Success”, reflecting on how the hotel investment and operating community needs to work together and create a positive future for the industry, and work through the rise and rise of room supply, oil prices, security issues, the pressure on rates, and how to tap into the new market of Iran.
CBRE Middle East head of research and consulting Mat Green says: “Amidst sustained economic headwinds over the past 18 months, many of the Middle East’s hospitality markets have experienced declining hotel revenues, as global economic uncertainty, a slowdown in the BRIC economies, US dollar strength and political instability in parts of the region have combined to negatively impact hotel performances.”
Green says, however, that in 2015, the region’s markets were fragmented, with Dubai, Abu Dhabi and Jeddah proving to be more resilient to rising challenges, whilst Muscat, Doha and Manama suffered more markedly. “Oil price shifts and the subsequent reduction in liquidity in the Saudi Arabian economy certainly had a direct impact on the performance of hotels in neighbouring Bahrain, with occupancy rates down by around 5% during 2015, which in turn also resulted in negative RevPAR growth.”
Similar negative trends are prevailing in Q1 2016, opines Green, with oil prices registering below US $30 per barrel for much of 2016. According to recent data from STR Global, Green reports, January RevPAR in Qatar and Saudi Arabia declined by 21% and 13% respectively, versus the same month last year.
He continues: “Whilst the UAE has proven to be quite resistant thus far, potential constraints within government budgets and resulting reductions in public spending could yet lead to reduced demand from the corporate hospitality segment. In addition, close to 21,000 new hotel and hotel apartment keys are expected to enter Dubai between 2016 and 2018, with Abu Dhabi anticipating around 5,000 keys during the same time period. This additional supply will undoubtedly intensify competition, which in turn could lead to further pressure on hotel revenues going forward.”
However, CBRE still expects Dubai’s hospitality sector to perform well relative to other regional markets, primarily as a result of the sustained growth in tourist arrivals. During 2015, Dubai witnessed a 7.5% increase in visitor numbers, rising from 13.2 million in 2014 to 14.1 million in 2015. “Achieving this level of growth in spite of the current conditions is testament to the strength of the market, and whilst ADRs are likely to remain pressured, occupancy performance is expected to remain quite firm,” he adds.
KEY AREAS OF INTEREST
Speaking to some of the speakers and delegates, Hotelier Middle East found commonality in quite a few of the topics they were interested in: the financial markets, Iran, occupancy and supply.
Abjar Hotels International CEO Abdellah Essonni has been attending AHIC since its first edition, and the key issues he thinks will be addressed include the recent mega mergers, supply versus demand versus sustainability, the industry’s performance key indicators and transactions, OTAs vs brand.com, the sharing economy and Iran.
Knight Frank associate partner Ali Manzoor says the impact that a strong dollar has had on the travel industry in the GCC will be discussed, along with the potential of both Iran and Africa’s hospitality industry and whether the future pipeline in the Middle East is sustainable.
“We also expect to hear about the strength of emirates other than Dubai and Abu Dhabi — Ras Al Khaimah for example has been picking up traction in the last few years and events like this are a great opportunity for developers to find out more about such markets,” he adds.
IFA Hotels Investments CEO Joe Sita tells Hotelier Middle East that AHIC this year will deal with several issues which include the lead up to Expo 2020 and the impact on occupancy, supply and investment over the next three years.
“A more immediate subject will be the recent additional supply and the effect that has had on ADR and occupancy rates. The bearing that currency fluctuations in dollar strength and rouble weakness have had on demand also are likely to come into focus.”
Marriott International president Middle East & Africa Alex Kyriakidis agrees that the economy, the geopolitical landscape and safety & security will be front and centre this year. Other conversations within this framework will include, he says, “travel patterns, new and emerging segments, industry consolidation, the future of loyalty and how we’re shaping brand advocacy, OTAs and of course, the collaborative economy”.
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OIL PRICES
The topic of oil has long been talked about in the industry, but there is a way to meet this challenge head-on. A.A. AlMoosa Enterprises LLC director Anil Bhardwaj says the macro-economic challenges in the region with the sharp drop in oil prices may very well have a significant impact on the pace and direction of development.
“Hospitality may not necessarily be adversely impacted if governments attempt to develop tourism more, both domestically and internationally in the region to create greater sources of income and employment. As an example, Dubai is releasing many tourist centric projects this year and Oman has mentioned more aggressive development of tourism,” he adds.
Sita adds to the conversation: “It is without doubt that this has and will continue to have an impact on certain directly related business tourism; however the impact on overall hotel occupancy is not extreme. The country’s leaders have implemented a strategy that shields the country substantially against such fluctuations through diversity, security and increased product offering. It is true to say that mitigating this risk by seeking markets further afield in South East Asia versus traditional Gulf visitor markets is a continuing policy.”
Essonni says: “Our hotel statistics show that FIT travel from the GCC has remained static post oil prices decline, which is a clear indication that the cuts in government spending only affected marginally individual travel patterns. Furthermore, if airlines, international and domestic, lower their fares accordingly, this will undoubtedly have a positive impact on tourism levels globally. The impact of the fall in oil prices on Dubai’s economy is insignificant due to its diversification and rather limited dependence on hydrocarbons’ proceeds.”
Marriott International was aware of several factors, including oil prices, that would see a tougher market when entering 2016. Kykriakidis adds: “We of course, continue to monitor ongoing fluctuations alongside other macroeconomic issues but we remain poised for continued growth.”
VISION FOR THE FUTURE
In the theme of the event “Eye on the Future”, Essonni says the future looks positive. He says: “In 2015, Dubai held its own against all odds. It continued to establish itself globally as a prime destination for leisure and business travellers alike.”
Manzoor also has a positive outlook. He says that while it is true that many major markets in the GCC faced depressed key performance indicators in 2015, this was more often than not reflected in the achievable rate rather than average occupancy levels. “This is indicative of the fact that hotel guests are still travelling to the GCC, but they simply have less money to spend and a lack of quality internationally branded mid-market hotels is a challenge that many markets are facing. Most markets in the GCC are already well represented in terms of luxury and upper upscale supply, but the future of the industry will likely hinge on the development of more affordable hotel accommodation.”
Sita adds that IFA’s overall sentiment to the Dubai hospitality sector is positive. “Whilst regional geopolitical events have had an influence on sentiment, the investment in infrastructure both logistical and through entertainment continues and drives tourism numbers. January 2016 saw a 6.3% year-on-year increase in airport arrivals with 2015 overall witnessing a 10.7% jump in numbers through Dubai Airport. This proves positive that Dubai continues to present a compelling proposition. New entertainment through the theme parks currently under development will only add to repeat visitors and new visitors alike.”
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Jennifer Pettinger from bench events reveals what to expect from the show
1. This year we have more plenary sessions than ever before. We’re focusing a lot more on the macro economic environment and looking at the external factors impacting the industry. When we did our advisory board meeting with key industry leaders in the region, that’s what they told us is keeping them up at night. The issues at the moment are all related to the macro-economic environment. So we’re bringing in more external industry experts than ever before.
2. For the first time we have the Chinese group, the Wanda Group, and this really marks a definite interest in the Asian market to invest in the Middle East, and that’s something we haven’t seen before.
3. We have got for the first time a group of students from the Emirates Academy of Hospitality Management putting a session together which looks at what their generation wants in hotels. This came out of the advisory board meeting, with TripAdvisor and online portals driving bookings and people’s choices. We›ve got Airbnb and Booking.com participating for the first time, as well the head of Accor’s new booking engine. This is a really interesting step by hotel companies to get into the booking space, and it will be interesting to hear what Airbnb has to say and get a sense of what their strategy is.
4. One thing we’re doing for the second time is a series of short 15 minute presentations, looking at key industry topics. Things that are more focused on new trends in the industry, innovation and the consumer viewpoint, not only for us but the audience who are investors. Building hotels is a long-term decision so you need to have feasibility studies on not only what works now but what will work in the future.
LOOK AT IRAN
IFA Hotel Investment is actively looking into the Iranian market, reports its CEO Joe Sita, who says the firm anticipates “great potential, should the recent commercial liberalisation persist”. He points out that Iran has a dearth of branded hotel and residential offers, most especially to the business tourist. “Through our partnership with Bespoke Hotels International and our existing Yotel brand we hope to enter the market forcefully. Our company also sees great potential through its facilities and staff housing ventures, given that support services with high quality operational practices and experience are in short supply,” he explains.
A.A. AlMoosa Enterprises LLC director Anil Bhardwaj advises caution: “Whilst hotel operators, particularly European, are rushing to Iran for the first mover advantage, hotel investors will adopt a more cautious role to better measure the impact of recent international agreements impacting Iran.”
FIVE sessions to try:
With five major themes/topics in focus this year at AHIC, Hotelier Middle East brings you its pick of the top five sessions not to miss in order to keep your finger firmly on the pulse of the region.
1. Session: Roundtable Discussions
When: Tuesday, April 26 2016, 4-5pm
Round table ‘brainstorming sessions’ with fellow attendees, with topics including a focus on Bahrain and Ras Al Khaimah, dual-branded projects, MICE in the UAE, current and future lending climate, and cyber security and hotel security.
2. Session: Eye on the Future
When: Wednesday, April 27 2016, 10.45am-11.30am
Global and regional perspectives on travel & tourism with newly released data and 10 year forecasts; an examination of the long-term trends which are driving growth and the challenges facing the sector.
3. Session: All About The Oil – What Is The Outlook For Oil Prices And Saudi Arabia?
When: Thursday, April 28 2016, 2.30-3pm
What is the impact on tourism investment and flows?
4. Session: Development Pipeline and Future Sentiment
When: Thursday, April 28 2016, 3.20pm-3.50pm
Given the region’s geopolitical, social and financial circumstances, with oil prices back to the level they were 10 years ago, is there enough funding to ensure the completion of the current development pipeline? What does this mean for future project volume?
5. Session: Eye on Iran
When: Thursday, April 28 2016, 3.50-4.20pm
How big an opportunity is this? Where are the opportunities in terms of product and locations within the country? How secure is it from a foreign investment point of view; how hard is inbound / outbound money movement?