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Hospitality market to remain robust
February 2017 5703

Strong market fundamentals and attractive investment opportunities will drive regional growth and profits this year. Hotel investors, owners, consultants and operators alike share a positive outlook for the Middle East hospitality industry in 2017, it has emerged from the feedback of hospitality leaders ahead of Arabian Hotel Investment Conference (AHIC). The experts acknowledged that while aspects of both development and operations were challenging in 2016, the market remains robust with investment potential.

Olivier Granet, chief operating officer HotelServices Middle-East and Africa, a speaker at Arabian Hotel Investment Conference (AHIC), commented: 'Despite the oil price, the spotlight on elections globally and otherwise volatile regional conditions, our key partners in the region still identify in present market conditions attractive opportunities to invest. Investors may be cautious with their real estate investments in light of RevPAR contractions across certain markets in the region, however, many markets in the region are just beginning to mature and still represent attractive investments across many asset classes.'

Hamad Abdulla Al Mulla, chief executive officer, Katara Hospitality, platinum sponsor of AHIC 2017, said that 2016 'will be remembered as a challenging year for hospitality investors as a mix of global geopolitical and economic issues has resulted in a more cautious approach towards investment decisions.'

Looking forward, he added: 'The Middle East hotel market remains a vibrant and exciting one for investors. The region’s fundamentals are strong, making it an attractive investment destination. In Qatar for example, the outlook for the hotel industry is especially promising. According to the Ministry of Economy and Commerce, in 2015, income from tourists amounted to QR18.3 billion ($5 billion), nine-times the QR2.1 billion ($576 million) recorded in 2010, demonstrating the clear opportunity for proven investors like Katara Hospitality in the region.'

Joe Sita, CEO, IFA Hotel Investments, added: 'I would agree that 2016 has been a more challenging year particularly with respect to rates. Occupancy has remained robust in prime areas, however, supply dynamics have led to an element of price competition that was previously absent from the market. Notwithstanding this, we still feel that, most specifically in Dubai, the market remains robust and continues to generate higher yield than competitor arenas. We therefore still see further investment in this sector in the medium term.'

One of the hotel markets viewed as being particularly robust is Ras Al Khaimah (RAK), which reported a 14 per cent year-on-year increase in RevPar between June and August 2016 compared to the same period in 2015, and an increase of 15.9 per cent in occupancy during the same period, according to Ras Al Khaimah Tourism Development Authority.

Another market with potential for further growth is Bahrain, reported Jerad Bacher, executive director, Tourism and Leisure at the Bahrain Economic Development Board. 'In Bahrain, we have seen somewhat less volatility in hotel performance mainly due to a lower inventory of supply paired with a consistent volume of demand. We expect market stability to continue in 2017 with moderate supply growth and continued advancement in demand. We have a strong pipeline of new inventory coming into Bahrain over the next five years; however, the products that are in development will be demand simulators and have an aggregated inventory that the market can withstand.'


Last month, Intercontinental Hotels Group (IHG) launched its 2017 Trends Report – The Uncompromising Customer: Addressing the Paradoxes of the ‘Age of I’ – at the World Economic Forum (WEF) in Davos, Switzerland. The report highlights the uncompromising nature of today’s customer who increasingly expect brands to deliver experiences that satisfy contradictory needs.

Richard Solomons, chief executive officer, IHG, commented: 'Technology has changed the way we behave in our daily lives. This has had a direct, and fundamental, impact on business. Global brands need to address the complex, sometimes opposing needs of today’s customers in order to fulfil their expectations.'

IHG’s research identifies four paradoxes that are driving the decisions customers make in a landscape constantly changing through advances in technology. In this environment, customers do not want either/or solutions: they want the best of both worlds where the best trade-off is no trade-off. The four paradoxes are:

• The paradox of separate but connected: Seeking a constant belonging with people, brands and places, while also seeking individuality and the desire to communicate uniqueness of self

• The paradox of abundant rarity: A desire for luxury to be both scarce and available

• The paradox of seeking a better me and a better we: Seeking personal self-improvement, while seeking public, civic or global improvement

• Do it myself and do it for me in my way: A desire to be in control while not being the controller


'In today’s fast-paced world, emerging consumer trends can quickly go beyond a niche, early-adopter group and impact a large portion of consumers and travellers, across regions, styles and inclinations,' said Richard Wiegmann, managing director and chief commercial officer, Sabre Hospitality Solutions, Europe, Middle East and Africa. 'Hotel brands that learn, understand and can innovate around these emerging trends will strengthen their customer relationships by providing experiences that go above and beyond what guests expect. This is the first step for hoteliers to stay up-to-date with changing consumer needs and provide true hospitality.'

A study released by Sabre, in collaboration with TrendWatching, has revealed new consumer shopping and buying trends emerging among European and Middle Eastern consumers that could present new opportunities for hotels in 2017.

The four trends are: the desire for status and recognition; taking pride in locality and embracing local products and services; the appetite for timely, relevant and actionable information exchange to solicit more personalised services; and post-demographic consumerism, beyond what the society says consumers are or should be.

Staff Report


Best practices by IHG

IHG has identified six best practices through which brands can create experiences that strengthen customer relationships and grow brand loyalty.

They are:

1. Aim for integration rather than balance: Balancing conflicting customer needs is not enough; a better holistic experience needs to be created through the integration of these opposing needs

2. Use needs-driven occasion-based segmentation for superior business management: Segmentation is not solely a marketing tool, but needs to be a core part of a company’s thinking

3. Communicate with conversation: Brands must listen to customers to understand their needs and communicate with them in a way that makes the experience more meaningful to them as individuals

4. Manage the brand’s multi-dimensionality:  A brand must include relevant and differentiating features as well as functional, emotional and social benefits. The combination of these builds a distinctive brand character

5. Develop ambidextrous brand-business teams: A brand needs teams that include divergent thinkers, with individual strengths and passions, who can also work in an integrated manner to create the cohesive initiatives that drive brand success

6. Address the paradox of brand control: Businesses must not give up control of the brand to the external world, yet they must allow the consumers have their say and help influence the brand’s reputation .

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