Viability director Guy Wilkinson presents his research into the hotel development pipeline in the Gulf and provides some key insights into the chains that are leading the rest of the pack

As hoteliers at the sharp end of operations brace themselves for another challenging summer in many GCC locations, it may be a less than comforting thought to know that the ladies and gentlemen up at the head office responsible for development, in their wisdom, are still planning to launch an extraordinary number of new rooms in the region — just to add to the fun!

A new survey conducted by my firm Viability shows that the 2010 pipeline of confirmed new hotel rooms in the GCC is the second largest on record — and we have been doing this research for 12 years now.

We directly contacted some 80 hotel chains active in the GCC this year, of which 55 confirmed future GCC projects. The survey showed that 283 hotels with 83,604 rooms were officially planned as of May 2010, compared with 325 properties and 92,026 rooms last year, equivalent to reductions of 20% and 19% respectively. However, back in May 2008, at the peak of the real estate boom, we recorded 82,357 rooms in 295 hotels, and that in itself was a 10-year record. In other words, recession or no recession, the pipeline is still looking as strong as it ever was.

In total, 19 chains each declared more than 1000 rooms under development, compared to 23 in 2009 and 20 in 2008. Marriott topped the 2010 rankings for both hotels and rooms, with 29 properties and 9572 rooms planned bearing the Marriott, JW Marriott, Courtyard by Marriott, Renaissance and Ritz-Carton brands. In second place, Accor’s pipeline comprises 23 hotels with 6433 rooms under its Sofitel, Pullman, Novotel, Mercure and Ibis insignia. Other chains in the top 10 places reported pipelines of between 3000 and 5500 rooms.

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Impact of the downturn

Although the survey totals have remained impressively constant over the past three years, the truth is that the last two would have been much higher if the recession had not intervened. In contrast to the 83,600 confirmed hotel rooms that are going ahead, there were more than 11,000 rooms that were declared ‘on hold’ with no firm recommencement date and a further 5400 rooms that had been cancelled altogether since the 2009 rankings. Another 10,000 rooms were put on hold and 9,000 rooms cancelled outright last year, meaning that altogether, more than 35,000 potential hotel rooms have been prevented from reaching fruition since the recession set in.

The current economic conditions have also caused the number of project delays to increase significantly since last year. Almost half (48%) of the confirmed hotels that were also contained in the 2009 research have been delayed by between one and four years, compared to 38% in 2009. These delays exclude any already reported last year, meaning that a number of projects have experienced several revisions of their programmes.

The most common reasons for these delays and cancellations include developers’ inability to obtain or maintain financing due to the current debt freeze, to overly optimistic balance sheet structures, or their need to allocate available funds to more pressing ventures. Many have had to sideline the hotel projects which were in poor locations — for example, on remote green field sites, in postponed mega projects or in the secondary and over-supplied markets.

More amazing projects still to come

Whether projects left over from the glory days of the boom, or others newly conceived since times got tough, expect to see some extraordinary hotels coming up between now and 2015.

Counter-intuitive though it may seem, but there are more confirmed ‘mega hotels’ than ever. No less than 35 or 12% of the 283 projects (which for the purposes of our survey includes project phases) comprise more than 500 letting units each. The biggest of them all is Fairmont’s upcoming 2775-unit combined property next to the Haram in Makkah, comprising the Makkah Royal Clock Tower, a Fairmont Hotel (1000 rooms, opening this year); the Raffles Makkah (205 rooms, 2010) and the Swissötel Makkah (no less than 1570 rooms, opening next year). Other large Fairmonts will open on The Palm in Dubai (877 units), in Manama (750), and Abu Dhabi (746).

Seasoned market pundits will be pleased to know that the former Bavaria Suites in Dubai, now rebranded as the Gloria Hotel Media City, will finally open the first of its two buildings later this year, with 1010 units. The second, 1090-unit building is scheduled to debut in 2011.

In Dubai, Marriott fought off stiff competition to bag the management of the wonderful twin-towers property near Business Bay to be known as the JW Marriott Marquis. It will open in two phases in 2011 and 2013 respectively, with 807 units in each phase. Marriott’s Ritz-Carlton brand is mainly known for its small, exclusive properties, but in the case of Riyadh, will open a large and exclusive hotel by 2014, with 1350 units. The upcoming JW Marriott in Abu Dhabi will have 669 units (2011).

Millennium is consolidating its presence in its home town of Abu Dhabi with no less than four towering, upscale properties: the 860-room Grand Millennium Al Wahda Tower, the 725-room Grand Millennium Capital Centre, the 638-room Bab Al Qasr and the 773-unit Grand Millennium Corniche.
Other sizeable pipeline hotels include the 850-unit Jumeirah Khor Dubai Hotel & Residences at Dubai Healthcare City, the 830-unit Hilton Riyadh Hotel & Residence, the 820-room Golden Tulip Dar El Hadith in Makkah, and the 792-unit Ramada Plaza & Conference Centre, also in Makkah.