Middle East hotel sector endures challenging but encouraging year

An increase in regional hotel occupancy in 2002 was offset by a fall in room rates as hoteliers sought to discount to stimulate demand

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By  Shilpa Mathai Published  May 15, 2003

In 2002, Middle East hotels have reported an average increase in revenue per available room (revpar) of 5.2% over 2001 levels. A 5.5% increase in occupancy was offset by a 0.3% fall in average room rates, as hoteliers sought to discount rates to stimulate demand in tough trading conditions, reported Deloitte & Touche.

Still reeling from the recession of 2001 and changing travel patterns
following the events of September 11, hotel performance in the Middle East and Africa indicates that 2002 was a challenging year for the hotel industry across the region. In North Africa, the overall revpar declined 3.3% over 2001 levels. Despite a 5.1% increase in occupancy, average room rates fell 8% as hoteliers discounted rates in order to stimulate demand.

According to a HotelBenchmark Survey most countries within the Middle East managed to improve revpar during 2002, with four markets reporting double-digit growth. Of the 28 markets monitored in the survey, nearly 60% managed to improve revpar during these difficult times. Kuwait and Beirut were the region’s star performers, reporting increases in revpar of over 19%.

Bahrain and Riyadh also reported double-digit revpar growth of 10%. The increase in revpar was generally driven by a growth in occupancy rather than an improvement in average rate. Hotels in Dubai’s Jumeirah area enjoyed the highest revpar in the region for a fourth year in succession at $121, up 8.5%.

Occupancy levels across the region have recovered to 2000’s bumper levels, although the average room rate is still seven dollars lower than those achieved in 2000.

Encouragingly, the five star sector in Jumeirah increased its performance in terms of revpar, despite the addition of nearly 1,100 five-star rooms in the last five years. Hotels in the city centre also experienced strong demand growth during 2002 with occupancy increasing 8.7%. This performance was all the more encouraging given the addition of the 393 room Fairmont hotel to the market.

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