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GCC hospitality industry set for steady growth, says Alpen Capital

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Alpen Capital, an investment banking advisory firm, announced the publication of its report on the GCC Hospitality Industry. The report presents a synopsis of the demand-supply dynamics and key performance indicators of the hospitality industry across the GCC countries. The report also covers recent trends, growth drivers, and challenges in the industry.

 

“The GCC hospitality industry, which has been under pressure in recent years is expected to gain positive momentum on account of recovery in oil prices, upcoming mega-events, increased tourist inflow, positive regulatory initiatives and increased government spending/investments towards the hospitality and tourism sector,” says Sameena Ahmad, Managing Director, Alpen Capital (ME) Limited.

“The GCC hospitality sector is going through a phase of transition. The industry is gearing up for the huge influx of tourists for mega-events. The hospitality industry continues to present interesting opportunities for investors. We expect activities across M&A and private equity funding to accelerate in the coming years,” says Sanjay Bhatia, Managing Director, Alpen Capital (ME) Limited.

According to Alpen Capital, the GCC hospitality market is expected to grow at a 7.2% CAGR from an estimated US$ 22.9 billion in 2017 to US$ 32.5 billion in 2022. Upcoming mega events and government initiatives to boost tourism are the primary drivers behind this growth.

Growth in hospitality sector revenue of individual GCC countries is expected to range from 6.0% to 12.0%. Both UAE and Qatar are expected to witness high revenue growth on account of significant investment activities in the tourism and hospitality sector for the upcoming Expo 2020 and FIFA World Cup 2022. Bahrain and Oman are also expected to grow at a rate higher than the GCC average.

Key operating metrics of the sector, which have been under pressure in the recent past are expected to show a slow but steady recovery supported by the boost in demand. Economic growth and government initiatives leading to increase in tourist arrivals is expected to support growth in occupancy and room rates. Average GCC occupancy is expected to increase from 62% in 2017 to 68% in 2022. ADR is expected to increase at a CAGR of 1.1% to $161 in 2022 whereas the RevPAR is expected to increase at a CAGR of 2.9% to $109 in 2022.

Growth Drivers

GCC countries are expected to witness an improvement in economic performance on account of recovery in oil prices leading to improved sentiment and increase in government spending.

GCC countries have well-defined strategies to develop themselves as preferred travel destinations. They are making significant investments into the development of tourism and hospitality infrastructure including airport expansions to increase the handling capacity of anticipated visitor inflow. This is supported by regional air carriers offering attractive offers and discounts along with exclusive memberships in order to boost tourism activity in the region.

Dubai’s World Expo 2020 and Qatar’s FIFA World Cup 2022 are expected to attract a significant inflow of visitors into the countries thereby boosting hospitality and tourism industry. These events command a significant supply of hotel rooms to meet the anticipated demand. GCC has a number of infrastructure and hotel projects scheduled to open through 2022 to accommodate the future tourist inflow.

In addition to events, the leisure attractions continue to be a major demand driver for the GCC hospitality industry with over 2,000 projects worth USD 200 bn in the pipeline. GCC MICE market is expected to also play its role in attracting visitors for its conferences and events.

Challenges

The GCC countries face competition from each other and also from established tourist destinations. However, increased investments by the GCC countries’ governments in the tourism sectors along with additional initiatives such as easing of visa norms, and a suite of attractive tourist destinations is expected to drive the demand for tourism across the region.

The mid-market hotels are expected to give stiff competition to luxury hotels by offering rooms with basic yet suitable amenities at lower ADRs. Lately, Airbnb has seen early adoption in the GCC hospitality market in 2017 and is expected to penetrate the market further posing a threat to luxury and mid-market hotels.

Geopolitical concerns continue to exist in the GCC region with Qatar facing a trade and travel blockade. Additionally, any geopolitical or economic issues in the source markets could also impact the hospitality sector.

Trends

The GCC hospitality is expected to witness increased market penetration by the mid-market hotel segment through 2022. In addition, the industry is expected to also see increased adoption of Airbnb-type renting models.

Mobile applications, smart technology and IoT have caused a disruption in the hospitality market. With every piece of information such as hotel amenities to hotel reviews being available at the fingertip of the consumer, each competitor is trying to differentiate itself in the market to grab the customer’s mindshare and the market share.

GCC hospitality industry is going through a phase of transition. With the expected economic recovery of the region, upcoming mega-events and the range of initiatives taken by the regional governments to boost tourism, the outlook for the sector remains promising.

 

Source: https://ameinfo.com/transport-and-tourism/tourism/gcc-hospitality-industry-set-for-steady-growth-says-alpen-capital/

 

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