Private investment in the tourism sector, new attractions and expanding airport capacity are among the factors driving firm growth in the GCC region’s hotel industry.
Investment banking advisory firm Alpen Capital said in a report that the hospitality industry in the Gulf Cooperation Council (GCC) region remained on a firm long-term growth trajectory despite a drop in oil prices and depreciation in currency, which is temporarily slowing demand.
The market will grow by 7.6% from an estimated $25.4bn in 2015 to $36.7bn in 2020, despite a slowdown in 2016, it said.
The report added that a thriving market of exhibitions and conferences as well as the brisk development of midscale hotel properties were among the key factors elevating the appeal of the GCC hospitality sector.
Sameena Ahmad, managing director at Alpen Capital (Middle East), said: “The GCC is witnessing a significant growth in hotel properties, despite the region’s macroeconomic challenges. Several international hotel chains have established significant presence in the region to capture a slice of the burgeoning tourism industry.”
She added that massive infrastructure developments and hotel projects had been launched to meet demand for upcoming mega events such as Expo 2020 in Dubai and the 2022 FIFA World Cup in Qatar.
Alpen said it expected consolidation and M&A activity in the hospitality sector to accelerate given attractive valuations.
It also expects the sector to remain under pressure in the short-term, mainly in the UAE and Qatar, but to rebound in the long-term, supported by growing demand.
Between now and 2020 occupancy rates at hotels and serviced apartments are anticipated to grow by 3% to 70%. Revenue per available room (RevPAR) of hotels and serviced apartments in the GCC is projected to grow by 2.3% to $133 by 2020.
From 2015 to 2020 markets in Qatar and the UAE are expected to grow fastest, at more than 10%. Bahrain is likely to see average growth whereas the rest of the GCC nations are expected growth to be between 5% and 6%.
Total room supply in the region is expected to grow by 4% annually, while international tourist arrivals are expected to grow by 5.7%.
The report noted several trends in the region, notably the growth of midmarket hotels for a growing middle-class population, the increase in branded hotel apartments and the growth of wellness tourism and Shariah-compliant tourism.