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Fifth Arabian Hotel Investment Conference 2009

Hotel conference reinforces bright future of hospitality sector

Relative to the rest of the world, the Middle East hotel industry is riding the global downturn well and can look forward to resumed growth within two years, according to top hotel executives at the Fifth Arabian Hotel Investment Conference.

Co-organiser Jonathan Worsley said the mood of the conference reflected a cautious optimism that, while not ignoring the challenges of the current situation of falling revenues and occupancies, looked forward to a renewed momentum as consumer and investor confidence recovered over the next 18 months.

"With more than 700 delegates from 45 countries, the conference looked in depth not only at current market conditions, but potential for the future. And what we saw was a unanimous agreement that the Middle East would remain a prime region for hotel development, that expansion would continue in cities such as Dubai and be mirrored in neighboring destinations such as Abu Dhabi and Doha. The concluding message is that while the short-term outlook looks challenging, overall expectations from the region remained high," he said.

"Our inaugural session on Saudi Arabia reflected the fact that the kingdom is a prime location for all types of hotel development – from resorts and heritage hotels to agro-projects and low-cost properties – while other speakers covered topics from spa development and green strategies through to new brands, tips for survival, mixed-use projects, budget hotels, structuring deals and hotel management agreements.

"However, what was significant was the networking opportunities AHIC gave to operators, investors, owners and other industry executives who, more than at any time in the recent past, need to work together to forge a strategy for development and operation in the current scenario."

Underlining the structural strength of the region, Dr Henry Azzam, CEO Middle East and North Africa, Deutsche Bank said that the Middle East was not at the epicentre of the crisis and was influenced by what was happening elsewhere. He added that strong and expansionary government fiscal policies in the region have compensated for factors such as falling oil revenues and a lack of confidence in the private sector: "This has resulted in positive growth for economies such as the UAE, Bahrain and Oman while Qatar is still expecting double-digit growth rates," he said.

Concurrent with infrastructure and economic growth, hotel markets in key cities around the Middle East are still seen as offering positive returns, according to the Jones Lang LaSalle’s April Investor Sentiment Survey, said Global CEO, Arthur de Haast: "The view of those surveyed was that cities such as Doha, Abu Dhabi and Riyadh would recover from the current downturn within a year, with Dubai coming back within two years – although the UAE was still the most attractive market for investors," he said, adding that the decline in property values everywhere was expected to recover by 2011.

Another byproduct of the global economic crisis was that postponement of many hotel projects would streamline the introduction of new rooms in to the regional market and help modify fluctuations between supply and demand: "We now have a reduced risk of oversupply, as well as a shift to demand for mid market and limited service properties," Arthur added.

While potential for the future was seen as undiminished, if delayed, current hotel performances gave another cause for optimism, according to Marvin Rust, Global Managing Partner Hospitality for Deloitte. "The Middle East is still expected to be the top performing market worldwide during 2009, although double digit growth seen in previous years will slow to around two per cent," he said.

"Dubai still leads the worldwide table for revPAR (revenue per available room) at more than US$200, even though this figure was down 12.9 per cent in the first quarter of 2009."

Regionally, he pointed out that, while rates were down in Dubai and Egypt, other cities such as Jeddah, Beirut and Abu Dhabi continued to perform well.

For major brand hotel operators such as Taj, the GCC still remained one of its prime targets for development. Raymond Bickson, Managing Director and CEO of Taj Hotels said the group was committed to its pipeline development in the region: "The feeling I get here is one of optimism where the emphasis is on long-term growth," he said.

"We will open on Palm Jumeirah next year as I think it is as important to be in Dubai as to be in cities such as New York – and other developments include two resorts in Abu Dhabi, one in Ras Al Khaimah, two properties in Doha including a golf resort and projects in Al Ain and Oman."

Other groups committing to the region included IHG, whose President EMEA Kirk Kinsell said the group had 37 properties under development, a rise of 50 per cent over its current portfolio of 72, and Rotana, with 12 hotels opening this year and an additional 30 under development.

Starwood, too, has 20 hotels in the pipeline, according to Chief Development Officer Simon Turner who said among new signings for the group were Four Points hotels in Dubai and Dhahran, a Luxury Collection resort in Ajman and the debut of its new aloft brand to Abu Dhabi this November, followed by Riyadh.

For all delegates, the downturn has served to focus attention on the fundamentals of hotel operations, with a consensus that costs had to be curtailed, service and brand protected, and every avenue used to attract and retain custom.

"Real practical solutions were on the table, from using the Internet to inject flexibility in to rate management to extending the reach of loyalty schemes for reward and recognition promotions," said Jonathan Worsley.

The Arabian Hotel Investment Conference ran from May 2-4, 2009 at Dubai’s Madinat Jumeirah Convention Centre and was jointly organised by Bench Events and MEED.

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