HVS International has released the latest edition of its annual review of the 16 key Middle East hotel markets. The report confirms the huge growth in both demand and supply taking place across the…
HVS International has released the latest edition of its annual review of the 16 key Middle East hotel markets. The report confirms the huge growth in both demand and supply taking place across the region and – for the first time – highlights the relative values of hotels.
The strong trading performance of hotel markets in the Middle East in 2004 was followed in 2005 by skyrocketing double-digit growth.
Co-author Elie Younes, a director of HVS International, put this down mainly to growth in average room rates, in line with HVS International’s projections in last year’s survey.
We estimate that hotel gross operating profit (GOP) grew on average by 24% in 2005. Regional GOPPAR (GOP per available room) improved from US$62 in 2004 to US$76 in 2005, he commented.
According to HVS director Bernard Forster, who co-wrote the report, in 2005, the strong liquidity and appetite for investment were reflected in a yield compression in the hotel real estate capital markets in the region.
Our HVI (hotel valuation index) shows that the average regional hotel value per room stood at around US$230,000 as of January 2006. The top performer was Dubai, achieving an investment value of US$450,000 per room, he commented.
We expect the current volume of investment in proposed hotel assets to be approximately US$15 billion – more than 60,000 hotel rooms are currently under construction in the region, concluded Younes.
The report notes some of the main transactions and large developments that took place in the region in 2005 and early 2006, including the acquisition of Yotel (the design-led budget brand) by IFA Hotels and Resorts, the IPO (initial public offering) of Kingdom Hotel Investments, the establishment of the Armani brand (and fund) as well as the inauguration of Nakheel Hotels and Resorts. 2006 will be the year of creative branding and developments in the region, conclude the consultants.
Both Younes and Forster remain confident that the general outlook for the hotel industry in the Middle East for 2006 and 2007 remains positive in all aspects (operating performance, investment returns, and private and public capital investment in the industry).
They did, however, inject a note of caution among the sea of optimism in that some markets are likely to experience a correction (simple economic gravity) in their trading performance over the next three years.
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
