Middle East Hotels Face Challenge In Increasing RevPar- Report

Hotel operators in the Middle East are expected to face an uphill struggle in the coming years to increase their revenue per room (RevPar), according to a new report.

In response to the 2008 market crash revenue per room and average room rate in the Middle East plummeted as operators lowered their prices to improve occupancy.

However, while occupancy has grown steadily, revenue per room has yet to reach pre 2008 levels, according to PwC’s Middle East Hotels Forecast.

“2014 to 2015 is going to be really a challenge now with raising the price again. Once you drop price it is difficult to bring it back up because you’ve immediately built an expectation,” said Nicolas Mayer, director of lodging and tourism at PwC.

Increased supply coming into the market is also set to intensify the problem, particularly with a push to bring in lower tier hotels in cities, including Dubai.

“Obviously if you’ve got increased supply coming onto the market, to try and then keep your occupancies and your RevPar up is a big challenge,” said Alison Cashmore, director, regional hospitality and leisure assurance lead PwC Dubai.

PwC said mega events like the Qatar 2022 World Cup and Dubai Expo 2020 had the potential to reinvigorate the hotel sector, but maintaining occupancy levels post-event would prove challenging.

“The problem is you’re basically building for a peak capacity and many people are concerned whether post these mega events or even in the build-up you’re going to have a decent occupancy with them,” said Mayer.

Another issue stemming from increasing supply will be labour requirements.

PwC estimates that the additional 100,000 to 140,000 rooms required in the region in the coming years will need an additional 100,000 qualified hotel staff

“With all the traction that the region has that’s a difficult amount to mobilise in such a short time, and that’s going to have an affect on prices,” said Mayer.

The firm forecasts total RevPar growth in 2014 and 2015 of 6.5 per cent in Dubai, 6.6 per cent in Muscat, and 4.7 per cent in Abu Dhabi.

RevPar growth is forecast to increase in Doha, from 5.2 per cent in 2014 to 5.4 per cent in 2015.

While in the Saudi cities of Jeddah and Riyadh it is set to slow down, from 4.1 per cent and 3.5 per cent growth respectively in 2014 to 4 per cent and 3.4 per cent.