Behind the curtain of… hotel management

The Gulf Cooperation Council is a huge market for hotel operators. How has the industry fared in the last year?

For hotel brands the GCC remains the focus region for growth as the fundamentals remain strong. Both average daily rates and occupancies were far stronger than other regions. However the region also saw a significant increase in supply by 39 per cent against an increase in demand of 9 per cent, which is lower only compared to Asia. In the short term, operators may need to assess the market, which may see fluctuations in demand. Qatar remains the only exception driven by preparations for the FIFA World Cup.

Among regional operators, several seem to focus on the luxury segment. Is that changing?

There has been a drive by tourism authorities and governments to reverse the pyramid and shift the distribution to lower segments. While international brands continue to announce openings in the luxury segment, the regional operators are the ones to watch. There have been a number of announcements for hotels particularly in the economy and mid-market.

The slump in the global economy has impacted tourism. Have regional operators felt an impact?

The sudden and dramatic fall in the oil price has certainly had an impact on the number of visitors travelling to the GCC and 2015 was a year of uncertainty. The region has seen a slowdown in the number of high spending tourists from Russia as well as Ukraine – a large feeder market. The devaluation of the euro against the dollar has also made travel to the Middle East very expensive.

What are the main challenges that hoteliers face?

The business model in the Middle East has always been driven by high occupancies. Over time, as supply begins to catch up with demand, there will need to be a change in strategy. The current model is only sustainable if the tourism numbers continue to grow at the same pace. Each city in the region has its own demand and supply factors and is at a different stage of the growth cycle.

Lastly, where is the industry headed?

Looking ahead it will be important for the industry to reinvent itself. India and China will be the new markets driving tourism numbers and hotel brands need to be ready to cater to their needs, which will be different to the traditional European and Russian markets.