Market Report Middle East

MENA Chain Hotels Market Review - September 2017

Following a summer of mixed fortunes, which included a welcome year-on-year increase in profit per room in August, hotels in the Middle East & Africa were back to business as usual this month as GOPPAR levels sunk by 17.1% year-on-year, according to the latest worldwide poll of full-service hotels from HotStats.
Dubai, United Arab Emirates - Photo by Christoph Schulz on Unsplash
MENA Chain Hotels Market Review

Following a summer of mixed fortunes, which included a welcome year-on-year increase in profit per room in August, hotels in the Middle East & Africa were back to business as usual this month as GOPPAR levels sunk by 17.1% year-on-year, according to the latest worldwide poll of full-service hotels from HotStats. 

September typically marks a return to ‘normal’ trading conditions for hotels in the Middle East & Africa following the disruption during the summer, and with room occupancy levels this month (66.7%) well ahead of the average for the preceding three-month ‘summer’ period at 57.5%, they looked to be back on track.

However, a 10.8% decline in achieved average room rate, to $158.67, wiped out the 1.0 percentage point increase in room occupancy and meant that hotels in the region suffered a 9.5% decline in RevPAR. At $105.80, RevPAR at hotels in the Middle East & Africa was 5.5% below the year-to-date average of $111.93.

The expected resurgence in performance at hotels in the region is characteristically led by the commercial sector. However, in addition to a drop in volume, a year-on-year decline in sector rates was recorded in the corporate (-8.0%) and residential conference (-8.6%) segments this month.  

Profit & Loss Key Performance Indicators – Middle East & Africa (in USD)

September 2017 v September 2016

RevPAR: -9.5% to $105.80

TrevPAR: -6.5% to $183.06

Payroll: +2.4 pts to 29.9%

GOPPAR: -17.1% to $59.83

In addition to the drop in Rooms Revenue, hotels in the Middle East & Africa recorded a decline in Non-Rooms Revenue, which included a decrease in Food and Beverage (-1.7%) and Leisure (-7.0%) revenue on a per available room basis. As a result, TrevPAR in the region fell by 6.5% year-on-year to $183.06.

In line with the growth in volume, a 2.4-percentage point increase in Payroll levels was recorded at hotels in the Middle East & Africa, to 29.9% of total revenue. However, the rising costs further exacerbated the issue of falling revenues and as a result GOPPAR levels dropped to just $59.83.

“Despite oil prices hitting a two-year high in late September, a number of key economies across the Middle East & Africa continue to face challenges as they come to terms with the reduction in oil output due to OPEC-imposed cuts and many look to non-oil industries to stimulate growth.  

The current challenges in the oil industry have seen Saudi Arabia fall into recession in Q2 2017 with the Qatar economy also struggling. Alongside this, the political landscape in the region is facing major issues. The current challenges in the Middle East & Africa suggest the hotel market will continue to struggle in the short term,” said Pablo Alonso, CEO of HotStats. 

Profit & Loss Key Performance Indicators – Dubai (in USD)

September 2017 v September 2016

RevPAR: -13.4% to $126.25

TrevPAR: -9.9% to $232.37

Payroll: +3.2 pts to 32.2%

GOPPAR: -27.6% to $55.83

Whilst Dubai is one of the few key economies in the Middle East & Africa which is much less reliant on the oil industry, the city is facing challenges of its own, as the dynamics of the hotel market shift towards the mid-market segment and the volume of supply in the city multiplies in preparation for Expo 2020.

This month, RevPAR at hotels in Dubai fell by 13.5% year-on-year due to a decline in both room occupancy (-4.2 percentage points) and achieved average room rate (-8.7%) to $162.50, with the decline this month contributing to the 2.7% drop for year-to-date 2017.

It is surprising that the year-on-year decline has not been more severe, with more than 4,000 bedrooms added to the Dubai market in the year to Q3 2017, which have included the 414-bedroom Rixos JBR and the 238-bedroom DoubleTree by Hilton Business Bay, bringing the total number of rooms available to 82,200 bedrooms.

In addition to the drop in RevPAR, hotels in Dubai suffered declines in Non-Rooms Revenue this month, which included a drop in Food and Beverage (-4.4%) and Leisure (-17.9%) revenue on a per available room basis. The decline in revenues across all hotel departments resulted in hotels in Dubai recording a 9.9% decline in TrevPAR, to $232.37.

Escalating costs contributed to the 27.6% decline in GOPPAR at hotels in Dubai this month, which added to the 6.3% drop in this measure for year-to-date 2017 and means Dubai hotels are on course for a third consecutive year of profit decline further to the drop in 2015 (-20.5%) and 2016 (-10.1%).

“The additions to stock in the Dubai hotel market, many of which are in the mid-market segment, are inevitably diluting top line performance which is having a knock-on effect on the rest of the profit and loss.

Despite this, construction projects in the city are continuing unabated and a further 4,100 bedrooms are due to enter the market in Q4 2017, with up to 40,600 rooms being developed in the next two and a half years in the lead up to Expo 2020,” added Pablo.

In contrast to the performance across many hotel markets in the region, hotels in Kuwait were able to record an increase in top and bottom line performance levels in September, but had to work hard to do so.

This month, hotels in Kuwait were able to offset a 7.1% decline in achieved average room rate with a 5.2 percentage point increase in room occupancy levels, resulting in a 3.2% increase in RevPAR, to $110.72. The year-on-year growth in Rooms Revenue contributed to the 2.3% increase in TrevPAR.

As a result of the growth in volume, Payroll levels for hotels in Kuwait increased by 1.3 percentage points to 29.2% of total revenue. Despite the increase in costs, GOPPAR increased by 0.3% to $87.34 this month, equivalent to a profit conversion of 41.1% of total revenue.

Profit & Loss Key Performance Indicators – Kuwait (in USD)

September 2017 v September 2016

RevPAR: +3.2% to $110.72

TrevPAR: +2.3% to $212.65

Payroll: +1.3 pts to 29.2%

GOPPAR: +0.3% to $87.34 

 

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