A guest blog from Kay Carstens, a frequent contributor to our print magazines:
Terrorism downturns faced by U.S. hotels, airlines, tradeshow organizers, and others depending on convention-goers and business travelers since September 11, 2001, don’t hamper business in the Middle East. In Kuwait, the UAE, Syria, Oman, Bahrain, Saudi Arabia, and Egypt, the MICE (meetings, incentives, conventions, and expositions) business is exploding. Tradeshow attendance and booth rental were up by 17 to 25 percent in 2002 and 2003. International visitor numbers are up 10 percent, helped by loosened entry restrictions. Kuwait, for example, in March, revised regulations so that visitors from North America, Western Europe, SE Asia, Australia and New Zealand can now obtain entry visas on arrival as opposed to applying for them weeks in advance. Does this sound like the opposite of what’s happening here?
During 2003, hoteliers in the Middle East turned the war in Iraq and Western economic malaise into an impressive profit performance, according to figures from a Deloitte survey. Steeper growth in the first quarter of 2004 portends greater profits this year. Fueled by an increase in intra-regional travel as many people chose to boycott destinations in North America and Europe, Middle East hotels pushed rates upwards, making it the only region to report 2003 growth in average room rates.
Hotels in Kuwait starred with a 75 percent jump in profitability, helped by 55 percent occupancy increase from the military and journalists covering the Iraq war. Outside of Kuwait, despite the 10 percent more international visitors, occupancy was static at 63 percent, but a 5.3 percent growth in room rates helped drive up profits across the region. Significant cost savings came in decreased annual energy costs per room, from US$2,212 to US$2,081. (The Middle East Annual Profitability Survey 2004 is available online at www.HotelBenchmark.com).
Hotel Chains, Operators, Investors Want in on the Action
Chain hotels are burning up the lines building as large a presence as possible in major Middle East markets. Recent announcements describe major expansion across the region. Fairmont is making swift progress on the incentive-quality Fairmont Cairo, Nile City; the Fairmont Palm Hotel & Resort in Dubai; and the Fairmont Abu Dhabi Resort & Villas, all scheduled to open in 2006. Accor, the global French hotel company, has five new hotels underway in Saudi Arabia; a 120-unit suites hotel is near completion in Bahrain; 1,500 new rooms are due to come online in Dubai, and negotiations are ongoing for new projects in Kuwait, Syria, and Qatar. Le Meridien Hotels & Resorts has taken over management of the 1,320-room Le Meridien Mecca Tower project, the largest hotel in the Gulf. It is also planning to open Le Meridien Riyadh in 2005. Hilton International, which operates 18 hotels in Egypt, eight in the UAE, three in Saudi Arabia and one each in Bahrain, Oman, and Kuwait is building 10 more Middle East hotels.
Overall, the expansions will give Accor the biggest room count and probably the greatest Middle East presence of the international hotel chains. The company has capitalized on France’s neutral Middle East stance and its opposition to U.S. policy in Iraq and Palestine to seek favorable treatment for its expansion proposals. The Saudi royal family is aligning with the French hotel group, so Accor will manage new properties being developed on behalf of the House of Saud.
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