Dubai has long been the hotel hotspot in the Gulf Cooperation Council (GCC) region, maturing into a complex and varied hospitality and tourism market. The emirate continues to expand its provision, but the focus for much of the region’s new development is shifting to nearby Qatar and the Kingdom of Saudi Arabia.
Qatar aims to increase tourism demand by growing and diversifying its leisure and cultural offering. The Qatar Tourism Authority (QTA) has announced its target to attract seven million visitors per year by 2030, as part of the Qatar National Vision 2030.
...the focus for much of the region’s new development is shifting to nearby Qatar and the Kingdom of Saudi Arabia.
Hosting global sports events is an important part of Qatar’s economy diversification, and supply targets for the 2022 FIFA World Cup are currently driving the hotel pipeline. Some 40,000 further hotel rooms are reported to be required, with 21 hotels planned for construction by 2017. Activity is centred in and around Doha.
Saudi Arabia is also placing more emphasis on tourism and hospitality. The model is less mature here, but the Kingdom is exploring its potential to develop as a destination outside of its already buoyant religious tourism. Its heritage of natural and archaeological sites could attract more visitors if travel and hospitality infrastructure were appropriately developed alongside tourist visa improvements.
Hosting global sports events is an important part of Qatar’s economy diversification...
Religious tourism is well-established, with the haj pilgrimage bringing around three per cent of Saudi GDP. The holy cities of Makkah and Madinah are currently undergoing heavy expansion and development, with Jeddah also benefiting from religious stop-over tourists in addition to its corporate visitors.
Jeddah’s growth includes the expansion of the King Abdulaziz International Airport and the King Abdullah Economic City. The capital Riyadh is the geographic and cultural hub of the country and its largest city. The government is investing in large-scale railway developments to make Riyadh a leading global transport and logistics hub, which is likely to boost the city’s tourism industry.
Domestic tourism is also a significant opportunity for Saudi Arabia. The government is committed to increasing this market to capture some of the capital spent by the large number of Saudi residents travelling abroad each year.
The upmarket hotel segment dominates the Middle East hotel landscape, and Saudi Arabia has been no exception. Diversification is now under way throughout the region, with increased interest in mid-range products.
These new offerings are needed for domestic, international and business markets, with medical and religious tourism also ripe for more price-conscious accommodation. The mid-range segment therefore looks set to provide profitable long-term investment.
The serviced apartment business model looks especially poised for growth...
The serviced apartment business model looks especially poised for growth, with its key benefit of the flexibility to change the target market profile between the long-stay and short-stay guests to suit market conditions and achieve revenue maximisation. Serviced apartments also provide accommodation more suited to families staying together within a single unit rather than multiple hotel rooms.
Although the development potential looks healthy, hospitality investors in Qatar and Saudi Arabia share challenges in developing their business cases. Occupancy rates will fluctuate, both seasonally and according to event schedules. Growth of the leisure offer will therefore be required for long-term sustainability.
Bringing new projects to market will also pose challenges. Qatar has limited time available to construct the required hotel volume by 2022, and both countries are constrained in their capacity to deliver.
Land prices are high, a problem for the mid-range segment in particular, and there are significant construction and consultancy skills shortages.
Alternative and optimised procurement strategies will help overcome challenges, through different models of consultant and contractor engagement together with early supply chain involvement. The greatest impact will be gained from a change in culture to one of best value rather than the traditional lowest price scenario.
We have a varied portfolio in the Middle East hospitality sector, including the Burj al Arab, Yas Viceroy, Ritz Carton in Dubai, Four Seasons in Abu Dhabi, Shaza hotels in Qatar and Oman, the Ramada hotel in Qatar, Park Inn hotel in Abu Dhabi, and the Ibis and Novotel hotels in Dubai. We’re currently working on the new Royal Atlantis hotel in Dubai, Vida hotel, Jeddah Gate and Doha Oasis in Qatar.