Mixed fortunes in the Middle East

STR Global managing director Elizabeth Randell says that quarterly hotel performance data reveals market peculiarities in four key destinations: Abu Dhabi, Dubai, Jeddah and Musc

Different Middle Eastern hotel markets are showing distinct performance trends according to the recent quarterly data from STR Global, the leading provider of market information to the world’s hotel industry.

Investors and operators across the region need to be aware of these patterns that are provided by access to reliable and timely market information. The quarterly data is derived from daily data sampled by STR Global. With a database of performance figures on more than 872 hotels in the Middle East and Africa region, we are the ‘go to’ resource when it comes to better understanding this market.

When considering the four key local markets of Abu Dhabi, Dubai, Jeddah and Muscat, the change in year-on-year revenue per available room (revPAR) — the key measurement of yield on hotel guest rooms — reveals a very mixed picture.

Jeddah illustrates its own market peculiarities, related to its proximity to Mecca and Medina, which have essentially allowed hoteliers to trade with a lesser influence from the global recession. The year-on-year change in revPAR for Jeddah holds steady until Q4 09 and then does not dip nearly as dramatically as the other markets. Muscat on the other hand shows negative changes in revPAR for all five quarters analysed. With occupancies pulling back from a low of 34% in Q3 09 to 65% in Q1 10, demand in Muscat is improving but average room rates are still under pressure.

The change in year-on-year revPAR in Abu Dhabi is on a slide, influenced by the additional 4400 new hotel rooms that opened there last year. The surge of openings came towards the end of 2009 with more than 3900 rooms, mainly on Yas Island, opening in the fourth quarter of 2009 alone.

Dubai has also seen significant growth in its room stock but trends in the opposite way from Abu Dhabi. Year-on-year changes in revPAR show a dramatic improvement with Q1 10 only down 1.4% on Q1 09.

Whilst revPAR for all four markets has been declining, in global terms they traded at reasonable levels in the first quarter of 2010. The figures were as follows: Abu Dhabi, US $151; Dubai $199; Jeddah $121; and Muscat, $175.

Drilling down into daily data

The daily data collected by STR Global allows an examination of business and leisure performance based on an analysis of weekday (WD) and weekend (WE) results. Do these different target audiences show different tendencies? Data for weekends in this Middle Eastern review is calculated on the nights of Thursday and Friday. However, any such analysis is clouded by the impact of the good proportion of non-local leisure travellers, especially those in transit at Abu Dhabi and Dubai with their international gateway airports, for whom the weekend is more likely to be Friday and Saturday.

Furthermore, anecdotal evidence indicates that many hotels see business guests also working either side of weekends when travelling to the Middle East. With these issues in mind two patterns emerge.

Firstly, weekday and weekend revPAR performance trend in the same way and secondly, the pattern is equally mixed across the chosen destinations.

This first trend is clearly seen in the change in year-on-year revPAR trending consistently downwards for both weekdays and weekends in Abu Dhabi. Jeddah once again has a fairly neutral performance with some slippage in weekend revPAR performance in Q4 09. Both these destinations show a turn for the better in the last few months but neither has performed as consistently as Dubai.

The change in Dubai’s revPAR in 2009/10 compared to 2008/09 shows a positive upward trend at both weekdays and weekends. Interestingly, Dubai is the only destination sampled to show a consistently lower change in revPAR at weekends compared to weekdays — an indication of the growing importance of the leisure market in this particular destination.

What is clear from this brief analysis of the chosen Middle Eastern markets is that each is different, exhibiting unique relationships between occupancy and ADR in general and at both weekdays and weekends. The complexities of this simple analysis demonstrate just how important market information is to help maximise the yield on every room to every target audience.