Published: Sep 25, 2014
Source: Saudi Gazette

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GCC hospitality industry to sustain growth momentum

“The GCC economies are well on their way to recovery from the global economic crisis. With the recent wins in mega events like the Qatar FIFA World Cup 2022 and the Dubai World Expo 2020, the region is gearing up for an increase in tourist arrivals. Due to the forecasted increase in demand, the sector is going through capacity expansion as well as increasing investment into infrastructure. The industry is expected to sustain this growth momentum supported by the regional governments’ initiatives to grow the sector, international tourist arrivals, especially those from the Asian region, and growth in the MICE segment among other factors”, said Sameena Ahmad, Managing Director, Alpen Capital, in the GCC Hospitality Industry report.  

“The focus of GCC economies on education, healthcare, MICE activities supported by the aviation sector, have fueled the growth of the dynamic Hospitality sector. The sector will continue to grow driven by factors such as the shift in global activity from the West to the East, increase in leisure travel, growing demand for serviced apartments, shift towards budget travel and quicker construction pipeline. Given positive growth trends as reflected across occupancy levels, revenue and EBITDA margins, valuations remain attractive and hence, we expect activities across M&A and private equity funding to accelerate. The industry does face some key challenges which include, maintaining demand beyond the planned mega events, competing with newer projects/ concepts and attracting skilled labour to the region. However, we feel that the growth of the sector will be driven by supportive policy initiatives undertaken by GCC governments to enhance infrastructure; thereby positively impacting the continued investor appetite for the region and tourism”, said Sanjay Bhatia, Managing Director, Alpen Capital

The GCC hospitality industry is expected to grow at an annual rate of 9.5 per cent to $35.9 billion by 2018 compared to the $22.8 billion in 2013. Average occupancy rates are likely to be in the range of 68 per cent and 74 per cent between 2013 and 2018 while ADR is likely to average between $225 and $263 during the same period.

Saudi Arabia is expected to continue its dominance as the largest market in terms of revenues, followed by the UAE. Upcoming mega events in Qatar and UAE are expected to be the key growth drivers for the hospitality industry in these countries.

The resource-rich GCC region’s growth prospects remain favorable, supported by stable oil prices and continuous government spending, especially on infrastructure upgrade and economic diversification. GCC countries continue to maintain a pro-business environment with no or low corporate taxes, which has encouraged private sector investments including foreign investments.

GCC is set to host mega events such as 2020 World Expo in Dubai and 2022 FIFA World Cup in Qatar. These coupled with high-profile annual events such as Grand Prix in the UAE and Bahrain are expected to draw a large number of visitors.

With state-of-the-art infrastructure facilities, the MICE (Meeting, Incentives, Conferences and Exhibitions) segment has expanded significantly in the recent past. The number of international association meetings in the Middle East has more than tripled in the last 10 years.

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