Middle East Hotel Market Update

Paul Doherty
The Middle East hotel sector continues to support major events such as IAAF World Athletics Championships 2019 and Expo 2020, as well as national transformation programmes such as Vision 2030 in Saudi Arabia and Economic Vision 2030 in Abu Dhabi.

Throughout the region, economic diversification is moving swiftly, opening up opportunities in the hospitality and tourism industry. Visitor profiles are broadening, with the region now becoming a mainstream holiday destination: Dubai, for example, is attracting increasingly diverse groups of tourists, with a 41 per cent increase in Chinese tourists since 2017[1].

We have now started to see supply at different price points, a welcome addition to the established upmarket hospitality sector. The midscale sector remains an opportunity for investors, owners and operators, and already there is evidence of volume: in Dubai, for instance, the total number of rooms in the midscale and below categories (11,000)3, added to the number of standard hotel apartments, is now higher than the number of 5-star rooms.[2]

The market for renovation, refurbishment and retrofitting is also strong, as owners and operators seek to optimise revenue, maintain a competitive market position and reflect recent brand developments. This is indicated by a raft of new brand announcements by large chains such as IHG (Voco), Hilton (Signia or Motto) and Accor (Mama Shelter), all aimed at the conversion or ‘experience’ market. 

In addition to aesthetic and positioning considerations, the experience now sought in a hotel has shifted, with many of the traditional spaces, such as lobbies, becoming more flexible, both in their use and in their ability to generate revenue. To achieve this, technology updates, as well as considerations relating to building codes, fire regulations, disability and other regulatory/statutory requirements, may be necessary.

However, many of the region’s hotels now need more than a facelift. The major refurbishment driver right now is infrastructure refurbishment, with the MEP[ES1]  often needing complete overhaul as older hotel stock reaches the tipping point where effective maintenance is no longer possible. This introduces engineering complexity, requiring informed decision-making and careful planning to minimise disruption and loss of revenue.

Whatever the scope of refurbishment works, the decision on whether to keep the hotel open needs thorough exploration. Revenue modelling, comparing open versus closed, will give a clear view of the potential outcomes, including the costs relating to staff and supply arrangements.

Our team has developed proven strategies for managing construction projects in this live hotel environment. Early engagement with all stakeholders is key, to achieve a mutual understanding of the strategic and operational pressures. Surveying the project and understanding the building conditions will enable development of the most suitable design. The design itself should take account of the need for construction in a live environment, or in a very condensed closed period.

Clear design aims should be clarified at the project outset. Our team promotes collaborative working and the use of innovative virtual reality technology, which provides a mock-up of the rooms, allowing design to be developed with reduced risk. The technology incorporates specification and cost information, giving clients a very visual understanding of the options.

Most clients will prefer the hotel to remain open, but where the scope of works is extensive and complex it may be better to shut down—as in the case of the refurbishment of the 20-year-old Jumeirah Beach Hotel, one of our recently-completed refurbishment projects.

The current trend is towards design & build rather than traditional procurement routes. This has the advantage of an earlier contractor appointment, but brings its own challenges around client decision-making, accuracy and defining Employer’s Requirements at an early stage.

While the UAE continues its healthy level of market activity, future new build growth is shifting to Saudi Arabia. The kingdom is actively pursuing establishment of a significant hospitality and tourism sector as an anchor of its Vision 2030 Plan. This is an exciting time in the kingdom, with progressive development of the Red Sea destinations (ultra-luxury), and the continued development of Riyadh (largely business), Jeddah (business and luxury) and the religious tourism centre of Makkah and Madinah—and there remains significant hospitality opportunity across the different hotel scales.

Faithful+Gould has partnered with some of the Middle East’s most well-known hospitality and leisure clients. We have worked on some of the region’s most prestigious hospitality and leisure projects, from initial concept through to completion, operation and subsequent refurbishment. Our multi-disciplinary service has evolved over the years and is adding value to a range of commissions in the region, minimising disruption and maximising revenue.


[1] ADAPT to the Hospitality and Tourism Industry in the Middle East, PwC.

[2] Accommodating the Future: Dubai Hotel Sector Beyond 2020, KPMG

3  STR AM:PM Database – Supply & Pipeline for Midscale & Economy Hotels

 [ES1]Note to digital team:

Mechanical, electrical and plumbing.

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