Saudi Arabia identified as a primary growth market
Rotana’s Selim El Zyr, ADNH’s Saif Al Hajeri and Action Hotels’ HE Sheikh Mubarak Abdullah Al Mubarak Al Sabah assess regional investment opportunities ahead of the Arabian Hotel Investment Conference
The Kingdom of Saudi Arabia is the one GCC country that holds definite appeal and untapped potential for hotel investors, according to regional industry experts.
When asked to identify the ‘hottest’ location for hotel investment in the Middle East, Rotana president and CEO Selim El Zyr, Abu Dhabi National Hotels (ADNH) chairman Saif Mohamed Al Hajeri and Action Hotels chairman HE Sheikh Mubarak Abdullah Al Mubarak Al Sabah all noted KSA.
Al Hajeri said: “Despite the saturation in the hospitality market, specifically in the GCC states the one country that remains attractive is the Saudi market, and in particular the Holy places of Mecca and Medina. In these two cities opportunities for investment remain attractive in the short, medium and long term — especially in the three- and four-star segment as well as serviced apartment categories.
“Given the investment in infrastructure in the Saudi kingdom in terms of airports and future railway lines linking Mecca and Medina, I would forecast that the demand for hotel accommodation will remain very strong in years to come,” he added.
El Zyr said that there was a “huge untapped potential for leisure tourism in Saudi Arabia”.
“Besides the millions who come on Hajj and Umrah pilgrimages, to attract more leisure tourists, the Saudi government is undertaking significant reform and investment in large projects, such as publicly financed training programmes and public-private development partnerships to boost tourism,” said El Zyr.
And to attract more tourists, diversification of hotels would be necessary, he added.
“Mid-range and budget accommodation offers attractive options as Saudi Arabia looks to target mass tourism. The emergence of mid-range and low-cost hotels has become one of the hottest trends within travel accommodation, introducing an essential diversity into the hotel category,” said El Zyr.
HE Mubarak Al Sabah said that the changing marketplace from five-star dominated demand to a wider market created scope for mid-range hotels.
“There are new hubs that have great potential and we have carefully identified those locations where we believe mid-market hotels will be successful. This potential is evident in the Saudi market, for example,” he asserted.
El Zyr also identified Bahrain and Abu Dhabi as two other “hot spots” for investment.
“Moving to Bahrain, the country provides a free, open and transparent environment for businesses and has a globally competitive, value-creation story which focuses on sustainability, skills and good governance,” commented El Zyr.
“Bahrain is the most mature, well-established business hub with the largest financial institutions in the Gulf. With a track record of nearly 40 years, Bahrain is still the financial services leader in the entire region. But from an operator point of view and as a management company, Rotana sees a lot of opportunities in Bahrain.
“We will primarily be focusing on the corporate and MICE markets, however, the leisure market will not be neglected,” he added.
Meanwhile, Abu Dhabi — where Rotana opened its flagship hotel Beach Rotana in 1993 — was “a strong contender for the “sun and sand” tourism sector”, said El Zyr.
Al Hajeri pointed to other countries in the “Middle East at large” where the potential for investment in the hospitality sector remained particularly strong — namely Iraq, Algeria and Libya.
This echoed the sentiments laid out by Meed content director Sean Brierley and Horwath HTL managing partner Philippe Doizelet, in lat year’s November issue of Hotelier Investor.
Al Hajeri said: “Unfortunately for both Libya and Algeria the laws governing land ownership and the restrictions on foreign exchange transfer have made potential investors shy away but this will change with time.
“Iraq on the other hand offers a huge potential for both religious tourism in the cities of Najaf and Karbala and for business in the capital Baghdad and in the northern city of Irbil.”
He added that “one should not overlook the ‘old’ Middle East as a destination”.
“Lebanon, Jordan and upcoming Syria represent historical tourism destinations beyond religious tourism with a potential for investment due to population increases and recent developments in governing laws,” said Al Hajeri.
With the above opportunities in mind, HE Mubarak Al Sabah said that “hotel real estate investment remains very strong in the region”.
“The Middle East, while common in some characteristics is diverse and each country has its own strategies and priorities for investment and travel.
“In general, I do not feel that markets in the region are saturated,” said HE Mubarak Al Sabah. “It is much rather about growth and market movement rather than saturation. There are many cases of untapped markets and the demand for quality accommodation at a reasonable cost remains strong.”
However Al Hajeri urged caution in terms of future investment.
“Generally speaking, I would consider that most if not all of the GCC states have an ample supply of hotel rooms in all the categories — whether for now or in the medium term,” he asserted.
“Any investor considering a potential project in a GCC state would need to carefully weigh up all the options and ensure to deliver a cost effective project with first class facilities in order to attract customers.”
The three gentlemen are speaking at one of the Arabian Hotel Investment Conference (AHIC) panel sessions on May 2, where they will be discussing this topic in more detail — specifically in terms of the opportunities to target the regional Arab travel market.
Visit www.arabianconference.com to view the full programme for the event.
ACTION HOTELS OPENINGS
In the region, Action Hotels will launch nine new properties to join the three already open in Salmiya, Kuwait (2008), Muscat, Oman (2009) and Amman, Jordan (2009), by the year 2012, revealed HE Mubarak Al Sabah.
“This year, Sharq, Kuwait and Manama, the capital of Bahrain, will see two Ibis flags join the mid-scale lodging offering with a 160-room hotel and 304-room mixed-accommodation tower, respectively,” he said.
“Meanwhile in international markets, Action Hotels also developed the Ibis Glen Waverly in Melbourne, Australia (2007), and confirms the imminent signing of a 250-room Novotel in Brisbane (2011). We are ahead of the race,” said Al Sabah.
Overall, by 2012, Action Hotels will deliver a portfolio of 14 mid-scale hotels, asserted Al Sabah, flying the Ibis, Novotel, Holiday Inn and Staybridge flags, in partnership with the global hotel operators Accor and IHG.
ADNH PIPELINE
Having opened three hotels last year, with regard to upcoming ADNH-owned properties, Al Hajeri said: “Currently under construction are the 569-room Grand Canal Abu Dhabi, a Venetian-themed resort hotel with an accompanying retail and entertainment complex between the two bridges in Abu Dhabi scheduled for completion late this year, and the luxe class 314-room Park Hyatt Abu Dhabi Hotel and Villas on Saadiyat Island Hotel due for completion in early 2011, making it the very first hotel to operate on this beautiful island soon to become the cultural hub of Abu Dhabi”.
He added that more announcements would be made “soon”.
UPCOMING ROTANAS
For the next four years, Rotana will open 10 hotels per year. El Zyr said: “The plan is right. The strategy is there. The execution and know-how are there. The objective is clear. Rotana is positive that as long as the company is able to manage growth in an efficient way, then there is the scope to take up further properties”.
The second quarter of 2010 will see the opening of Rotana’s first resort in Dubai Amwaj Rotana and Centro Barsha, Rotana’s first property to open in Dubai under the brand Centro Hotels by Rotana.
Further openings in 2010 include: Fujairah Arjaan by Rotana; Centro Sharjah Airport; Khalidiya Palace Rayhaan by Rotana in Abu Dhabi; Oryx Rotana in Doha; City Centre Rotana in Doha; and Erbil Rotana in Iraq.