mena tourism and hospitality – q3 2014 | aranca special reports

MENA Tourism and

Hospitality Report

Theme: Green Tourism

Q3 2014

aranca.com

Table Table of Contents

01. MENA Tourism Synopsis .............................................................................................. 1

02. Hospitality Market Update ........................................................................................ 2

03. Kuwait Tourism Industry .............................................................................................. 6

04. Theme: Green Tourism ............................................................................................... 8

MENA Tourism and Hospitality Report – Q3 2014 1

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01 MENA Tourism Synopsis The number of tourist arrivals in MENA’s tourism industry is projected to grow 4.4%

to 149 million by 2030, resulting in an increased share in the global tourism industry

MENA TOURISM & HOSPITALITY

According to the United Nations’ World Tourism Organization (UNWTO) Tourism Report 2014, the

number of international arrivals to the Middle East is forecast to more than double from 61

million in 2010 to 149 million by 2030. Consequently, the Middle East’s share in international

tourism is expected to grow from 6% in 2010 to 8% in 2030.

In Q3 2014, the performance of the hospitality sector in the MENA region improved.

Occupancy rates gradually increased from 49.3% in July to 65.5% in September 2014. However,

ADR decreased from $156.54 in July to $145.12 in September. Despite the decline in ADR, robust

growth in occupancy levels caused RevPAR to expand from $77.15 in July to $94.99 in

September 2014. Specifically, hospitality indicators rose substantially in Egypt, driven by

improvement in security and the social environment. This enabled the hospitality market to

regain confidence, boosted by the enhanced environment for the country’s tourism industry.

In October 2014, the UAE’s General Civil Aviation Authority (GCAA) signed an open skies

agreement with the Government of Sierra Leone to allow an indefinite number of designated

airlines to perform scheduled air services between the two countries. This agreement is

anticipated to boost trade, tourism, and investment between the UAE and Africa. The UAE

already has air services agreements with 164 countries, including 87 open skies agreements.

In October 2014, Oman launched cruise season 2014–15 with the arrival of the Seabourn

Odyssey at Muscat. The country is expected to receive 300,000 cruise tourists and 134 port calls

during the next eight months.

The Government of Dubai plans to become a leading global medical tourism hub, targeting

500,000 tourists a year and revenue of Dh2.6 billion by 2020.

The Saudi Commission for Tourism and Antiquities (SCTA) collaborated with farm owners in the

Riyadh province and granted them agro-tourism membership licenses, to develop the sub-

segment in the Kingdom. This niche tourism theme is forecast to boost the tourism sector by

transforming sustainable farming into a source of revenue and employment generation.


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02 Hospitality Market Update12 The hotel industry in the Middle East & Africa (MEA) reported positive performance in

Q3 2014. Despite ADR declining from $156.54 in July to $145.12 in September, steady

growth in occupancy rates from 49.3% in July to 65.5% in September caused RevPAR

to increase from $77.15 in July to $94.99 in September 2014

OCCUPANCY RATE

PERFORMANCE IN JULY

In July 2014, visitor demand in Cairo (Egypt) increased, boosting occupancy rates by 12.5 pps1

to 29.3% compared with the same period last year. Although occupancy levels were below

those in 2013, growth in performance levels during previous months is a positive sign and

indicates the market is scheduled to achieve performance levels exceeding those in 2013.

Occupancy Doha (Qatar) improved by 5.5 pps2 to 47.6%, driven by increased regional leisure

tourist demand.

Abu Dhabi (UAE)’s overall occupancy levels stood strong at 50.3%2 in July 2014, boosted by

robust regional visitor demand.

Occupancy rates in Riyadh (KSA) fell slightly by 0.3 pps2 in July 2014. The month of Ramadan

has historically resulted in substantially lower levels of demand and July was no exception, with

the overall market achieving an average occupancy of 38.3%. In contrast, Makkah and

Medina (KSA) witnessed an influx of travelers during Ramadan, with more than 20%1

occupancy growth in both markets.

Dubai (UAE)’s occupancy levels declined 4.6 pps2 to 50.3% in July 2014. Hotels in Dubai were

impacted by the collective effect of the annual deceleration in summer and the occurrence

of Ramadan throughout the month.

Occupancy rates in Amman (Jordan) decreased 8.7 pps1 to 34.4%, reporting the largest

decline the occupancy metric in the region.

PERFORMANCE IN AUGUST

In August 2014, Cairo (Egypt) reported the largest increase in occupancy rates of 37.8 pps1 to

58.8%, driven a rise in hotel demand. Hotels in Cairo welcomed the largest number of guests in

August than in any other period since the protests in the country intensified.

1 STR Global Data, Middle East/Africa Hotel Sector Performance for July, August, September 2014 2 HotStats MENA Chain Hotels Review (Only Four and Five Star Hotels)


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Riyadh (KSA) experienced the second largest growth in occupancy rates of 12.5 pps1 to 48.3%

in August 2014. The conclusion of Ramadan led to resumption of corporate activity, which

improved demand in the city. Furthermore, several local and regional conferences and events

resulted in an increase in corporate tourist inflows.

Demand in Jeddah’s hotel market increased, with occupancy rates growing 6.8 pps2 to 77.0%.

Jeddah’s popularity as a premier leisure destination in the Kingdom continues to drive strong

levels of domestic leisure travelers to the city, especially during the Eid Al Fitr holiday and

summer school holidays.

Hotels in Kuwait experienced weakening market conditions, as occupancy declined by 1.5

pps2 to 35.6% in August 2014. Due to the absence of any distinct leisure or retail attractions in

Kuwait, hotels struggled to capture a suitable share in the leisure segment from domestic and

regional markets during the summer holidays. The lack of diversification of Kuwait’s leisure

attractions significantly impacts the market during the summer months as corporate activity

slows and residents travel abroad to other destinations in the region and globally.

Occupancy in Doha (Qatar) increased 13.3 pps2 to 59.9%, largely due to the influx of leisure

travelers, who benefitted from the remaining summer and Eid holidays that extended into

August for certain GCC nations. This trend is positive for the realization of the National Tourism

Strategy 2030, which aims to diversify its demand base to include a greater proportion of

regional travelers through the development of cultural assets and family-based leisure

attractions.

Abu Dhabi (UAE)’s hotel market continued to improve performance levels as occupancy rose

7.5 pps2 to 71.3%. The culmination of Ramadan and Eid Holidays in the beginning of August

enabled hotels in Abu Dhabi to attract a robust number of regional travelers to the city’s

entertainment and shopping attractions. Furthermore, the Tourism and Cultural Authority

(TCA)’s proactive approach to promote the destination in emerging markets, particularly

China, resulted in a 189% increase in room nights purchased by Chinese visitors in the first six

months of 2014 vis-à-vis the same period in 2013.

PERFORMANCE IN SEPTEMBER

Occupancy in Sharm El Sheikh (Egypt) increased the most, by 43.5 pps2 to 77.7%, in September

2014. Efforts undertaken by prominent travel associations and tour operators to attract visitors

to the Red Sea destination boosted occupancy rates.

In September 2014, Cairo (Egypt)’s occupancy rates expanded 26.8 pps1 to 51.8%.

Improvement in security and the social environment helped the market regain confidence.

Occupancy rates in Abu Dhabi (UAE) increased 6.6 pps2 to 76.6%. The upward trajectory in

occupancy rates is forecast to continue during the next couple of months as the city prepares

for high season, with notable events such as the Formula 1 Abu Dhabi Grand Prix and the

opening of the much-anticipated Yas Mall scheduled in November.

Jeddah (KSA)’s occupancy rates rose 2.3 pps2 to 85.9%, predominantly driven by the lack of

new hotels entering the city and increased proliferation of demand particularly in the

corporate and conferencing segments. Demand is anticipated to remain strong as numerous

infrastructure and mixed-use projects are under development in the city.

Occupancy levels in Dubai (UAE) increased 2.1 pps2 to 78.2% in September 2014 as the market

returned to business after the summer.


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AVERAGE DAILY RATE (ADR)

PERFORMANCE IN JULY

In July 2014, Jeddah (KSA) was the region’s only market to report a double-digit increase in

ADR (up 12.5%1 to $286.28). Abu Dhabi (UAE) followed, with 5.1% growth to $114.10 due to a

shift in hoteliers’ yield strategies in response to robust overall occupancy levels. Average rates

in Abu Dhabi’s market have declined steadily since August 2011; however, this trend has

started to reverse, with hotels’ ADRs gradually rising during the first five months of 2014, fuelled

by strong regional visitor demand. This is expected to continue through 2014, especially as

hoteliers prepare for peak season.

ADRs in Dubai (UAE) increased 1.1%2 to $202.94 in July 2014.

Cairo (Egypt)’s hotel market experienced an increase of 1.0%2 to $114.85, with the new political

situation providing market stability.

Hotels in Doha (Qatar) recorded a marginal increase of 0.7%2 in ADR to $201.56 in July 2014.

ADRs in Riyadh (KSA) decreased the most by 4.8%1 to $207.05 in July 2014.


In August 2014, Cairo (Egypt)’s ADR grew the most by 8.6%1 to $108.29. Political stability

boosted demand, enabling hoteliers to adopt more progressive pricing strategies. The Ministry

of Tourism’s promotional campaign, launched in July to attract tourists to the country,

benefitted hotels and is expected to improve tourism demand in the coming months.

ADRs Jeddah (KSA) rose 8.4%2 to $296.64 in August 2014, driven by increased demand.

Doha (Qatar) registered a decline of 3.0%2 in ADR to $215.61 in August 2014. Furthermore,

Kuwait’s ADRs decrease 3.8%2 to $261.54. The lack of diversification in Kuwait’s leisure

attractions adversely impacted the market during the summer months.

ADRs in Dubai (UAE) decreased 5.6%1 to $181.83 in August 2014. Eid celebrations shifted from

August to July this year, causing Dubai hotels to experience a decline in hotel performance in

August 2014.


In September 2014, four markets recorded ADR increases exceeding 10%. ADRs in Sharm El

Sheikh (Egypt) expanded the most, by 18.2%2 to $50.39 in September 2014, whereas those in

Cairo (Egypt) improved 12.7%1 to $107.86. The relative stability in Egypt in recent months was

reflected in the performance of hotel markets across the country.

Jeddah (KSA)’s ADRs advanced 14.7%1 to $269.52 in September 2014. The city continues to

lead as one of the region’s high-growth hospitality markets, with robust gains in performance

levels.

ADRs in Muscat (Oman) improved 11.8%1 to $205.72 in September 2014.

Dubai (UAE) reported a rare decline in ADR of 3.2%2 to $231.36 during the month, whereas

Riyadh (KSA)’s ADRs fell to $236.33 in September due to increased competition in the industry.


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REVENUE PER AVAILABLE ROOM (REVPAR)

PERFORMANCE IN JULY

Two markets experienced RevPAR growth exceeding 15.0% in July 2014. Cairo (Egypt)’s RevPAR

increased 82.6%1 to $30.57, driven by improved occupancy rates, coupled with a rise in ADR.

RevPAR in Manama (Bahrain) advanced 20.1%1 to $72.94 in July 2014.

Amman (Jordan)’s RevPAR declined 21.4%1 in July 2014 to $54.86, posting the largest decrease

in the region, primarily impacted by lower occupancy rates.


In August 2014, four markets reported RevPAR growth of more than 20.0%. Cairo (Egypt)’s

RevPAR increased by $42.81 to $63.65, whereas that of Riyadh (KSA) rose 28.7%1 to $103.45,

driven by higher occupancy rates, coupled with stronger ADR.

RevPAR in Manama (Bahrain) sustained stable growth over the previous month, increasing

24.1%1 to $110.52, whereas Jeddah (KSA)’s RevPAR improved 21.2%1 to $206.23, driven by

higher occupancy rates and ADR in August 2014.


The continued recovery in Egypt’s political scenario resulted in increased occupancy rates and

stronger ADR. The improved performance levels helped Sharm El Sheikh record the largest

RevPAR growth of $24.62 to $39.15 vis-à-vis the same period last year. Cairo’s RevPAR also rose

by $31.91 to $55.82 during September 2014.

RevPAR in Jeddah (KSA) and Abu Dhabi (UAE) increase 21.9%1 and 14.0%2 to $216.34 and

$98.76, respectively, driven higher occupancy rates and ADR.

Doha (Qatar)’s RevPAR increased 12.2%1 to $127.50 in September 2014.

Despite a decline in ADR level, RevPAR in Riyadh (KSA) increased 7.6%2 over 2013 to $163.45, as

Riyadh hotels returned to business after the summer months.

RevPAR in Dubai (UAE) decreased 0.5%2 to $180.88, driven by lower ADRs in September 2014.

Table 1: Statistics in key MENA countries3

Occupancy ADR Q-o-Q change

Country Jul–Sep 2014 Jul–Sep 2013 Jul–Sep 2014 Jul–Sep 2013

Occupancy

(pps) ADR (%)

Egypt 57.5% 32.6% EGP514.3 EGP429.3 24.9 19.8%

Saudi Arabia 59.9% 51.1% SAR946.4 SAR916.7 8.7 3.2%

UAE 63.5% 63.7% AED567.2 AED578.6 (0.3) (2.0%)

3 STR Global Data, Middle East/Africa Hotel Sector Performance for July, August, September 2014, Aranca

Analysis

Denotes increase in parameter Denotes decrease in parameter


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03 Kuwait Tourism Industry4 Kuwait’s tourism industry is witnessing a significant increase, with international

tourist arrivals projected to reach 0.4 million by 2024. Transport infrastructure

developments and fast-tracked tourism projects are expected to position Kuwait as a

tourist destination.

International tourist arrivals to increase to 440,000 by 2024: In 2014, Kuwait’s travel and

tourism industry ranked 70th worldwide, in terms of absolute contribution to GDP. The

World Travel & Tourism Council (WTTC) forecasts the number of international tourists

visiting Kuwait to reach 440,000 by 2024 from 270,000 in 2014, with revenues expanding

at a CAGR of 4.0% to KWD236.6 million during 2014–24.

Direct contribution to GDP to reach KWD882.7 million by 2024: The travel and tourism

industry’s direct contribution to GDP is projected to increase at a CAGR of 6.3% to

KWD1,482 million (1.8% of GDP) by 2024 from KWD758.3 (1.5% of GDP) in 2014.

Leisure tourism comprises major share: In 2014, inbound and domestic tourists spent

KWD1,350.4 million on travel & tourism. Leisure tourism contributed the majority (77% or

KWD1,040.2 million) to spending, whereas business travel accounted for the remainder

(23% or KWD310.2 million).

Leisure spending to grow faster than business spending: Leisure travel spending is

anticipated to increase 12.2% y-o-y to KWD1,167.2 million in 2014 and subsequently rise

at a CAGR of 6.5% to KWD2,194.1 million by 2024. In contrast, spending on business

travel is anticipated to grow 8.9% y-o-y to KWD337.7 million in 2014 and expand at a

slower CAGR of 5.4% to KWD574.1 million by 2024.

Investment in travel & tourism industry to improve 5.6% in 2014–24: Capital investments

in travel & tourism are estimated to grow 17.3% y-o-y to KWD192.4 million in 2014.

During 2014–24, investments would expand at a CAGR of 5.6% to KWD330.9 million.

Infrastructure development to stimulate growth: The Government has developed a

long-term national plan to attract tourists and investments to the tourism sector.

o An amount of $13 billion was allocated to transport infrastructure.

4 WTTC and Desk Research


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o A new airport terminal, scheduled to be completed in 2016, is expected to

triple the airport’s annual capacity to 20 million passengers.

o The under-construction Kuwait Metro System, spanning 160 kms (69 stations),

and the Kuwait National Rail Road System, an integrated rail network covering

511 kms, are also forecast to enable Kuwait to better facilitate domestic and

regional travel.

Saudi Arabia, key to tourism sector: Saudi Arabia’s easy access to Kuwait makes it a

key source market for the country’s travel and tourism industry. Both countries share a

symbiotic partnership; Saudis prefer to visit Kuwait for short holidays and Kuwaitis travel

to KSA for Hajj and Umrah. Furthermore, KSA is Kuwait’s major business partner and visa

requirements between the countries were eliminated to facilitate tourism flows.

Tourism projects fast-tracked on top priority: As part of the five-year tourism

development plan, Kuwait’s Government aims to attract one million tourists annually

by 2015.

o Tourism development specialists, such as the Kuwait Touristic Enterprises

Company (TEC), are launching various entertainment and sports projects

worth $460 million.

o The supply of rooms is forecast to increase by almost a third, with nearly 10,000

new rooms scheduled to be available by 2015.

o Several four and five star resorts are set to open by 2015, including projects

under the InterContinental Hotel Group and the Jumeirah Messilah Beach

Hotel and Spa.

o The Government plans to develop Failaka Island and Boubyan Island into

leisure tourism destinations as priority projects.

Kuwait International Fair, 2014-15: The Kuwait International Fair (KIF), the country’s

largest and most established exhibition centre, held from October 2014 to October

2015, is staging 44 events (27 specialist trade exhibitions and 17 consumer shows) and is

set to boost the tourism sector. Events range from mega events in the construction

industry (Big 5 Kuwait and CityScape) to consumer events (The International Shopping

Exhibition and Family Expo) and trade shows (The Kuwait International Property Show,

Kuwait Oil Company Annual Exhibition, the 13th International Gold and Jewellery

Exhibition and Kuwait Travel Market).


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04 Theme: Green Tourism5 Green tourism in the Middle East is increasingly gaining importance as more

countries become eco-conscious. The UAE is the region’s eco-tourism hub; however,

other countries, such as Egypt and Jordan, are gradually moving toward eco-tourism

Eco-travelers constitute over 1/10th of leisure tourists in the Middle East: Green tourism

or Eco-tourism is low-impact tourism that involves traveling into natural environments

that responsibly protect the area’s nature and culture. According to an ecotourism

survey conducted by Market Vision, a Dubai-based tourism research specialist, eco-

travelers account for more than one-tenth of the Middle East’s leisure travelling

population in 2013. Eco tourism is gaining prominence in the Middle East and has

significant potential for growth as more tourists are becoming eco-conscious.

UAE, the preferred destination for eco-tourism: The environment and tourism sectors are

two of the emirate’s four key sectors identified as major growth areas.

o UAE leads the eco-tourism initiative in the MENA region and is implementing

various eco-tourism projects, such as Kalba Eco-tourism project, the Sir Bu Nuair

Island project, Al Jabal Resort, The Chedi Khorfakkan, and Al Majaz Waterfront.

Furthermore, Abu Dhabi’s latest attraction is eco-boat cruises, also known as

Eco Donuts.

o The UAE Green Festival, the first international event of its kind in the emirate, is

aimed at highlighting the importance of preserving the environment and

developing sustainable green practices. The festival, in accordance with UAE

Vision 2021, took place from March 16 to April 16, 2014. It comprised several

initiatives such as green hotels, green restaurants, and various events,

including an eco-friendly fashion show, the Green Auto Show, and the Green

Jobs Fair.

o The Dubai Department of Tourism and Commerce Marketing (DTCM)

launched the ‘Think Green’ initiative to promote the concept of green

economy in the emirate through seminars and workshops and improve service

standards in the green tourism industry. Through this initiative, the DTCM

successfully reduced the level of carbon-dioxide emissions generated by the

tourism industry by 20% in 2012. Dubai currently has more than 576 green

5 Desk Research


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teams in hotels and more than 1,500 tourism industry professionals trained

under this program.

Green tourism in Egypt: Egypt currently spends EGP 100 billion per annum (~20% of its

overall budget) on energy subsidies. The Egyptian Minister of Tourism signed a protocol

with the Egyptian Hotels Association and the Solar Energy Development Association in

May 2013, effective one year after signing the protocol, to provide 100,000 Red Sea

hotel rooms with solar energy for five years, to reduce the consumption of non-

renewable energy. This initiative is forecast to result in a 30% reduction in hotels’

electricity bills and save the country EGP 164 million in energy subsidies. Furthermore,

the Tourism Minister plans to expand the green initiative along the Nile to combat

pollution to the river.

El Gouna, MENA’s first carbon neutral city: El Gouna, a resort city on Egypt’s Red Sea

Riviera, is set to become MENA’s first carbon neutral city. This project is an initiative

taken by the government to achieve a significant breakthrough in green tourism,

enhance Egypt’s global image, and attract tourism projects. El Gouna is already titled

Egypt’s most environment-friendly vacation destination and was chosen as the

location for the Green Star Hotel Initiative (GSHI). Priority projects include conservation

of natural resources, such as clean beaches and marine life, which support the

nation’s eco-tourism market.

Eco-tourism in Jordan: The Royal Society for the Conservation of Nature and USAID

bolstered the increase in ecotourism in Jordan and currently oversee 10 protected

eco-tourism sites. Revenue from eco-tourism increased 10% y-o-y to JD831,336 in 2012.

There is substantial future potential and the industry is forecast to generate 50,000 jobs

in the next 10 years.

Eco-tourism in Bahrain: Manama was declared the Asian Capital of Tourism 2014 and

has been the Capital of Asian Culture for the last three successive years. The Bahrain

Ministry of Culture initiated a Tourism Strategy 2015–18, which necessitates an

‘experience-led’ approach to drive eco-tourism. Eco-tourism activities include cultural

attractions, such pearl diving explorations, coupled with nature trails and stays at eco-

lodges. Furthermore, the ministry aims to position the Hawar Islands, a unique eco-

system that draws thousands of tourists annually, as an eco-tourism destination.

Eco-tourism in Oman: The Regional Office for West Asia is working with the Sultanate of

Oman’s Ministry of Tourism to strengthen the ecotourism sector. Two coastal areas

were selected as eco-tourism sites: Bandar al Khayran and Wadi Darbat. Turtle and

whale watching and desert camping are the major attractions of this eco-tourism

initiative.

Green tourism in Saudi Arabia: According to the World Tourism Organization, desert

tourism is the newest frontier in eco-tourism. The Saudi Commission for Tourism and

Antiquities (SCTA) aims to transform Saudi deserts into eco-tourism areas. Furthermore,

a Saudi native woman has created various green tours and was licensed in 2014 to

operate tours in Makkah, Jeddah, and Taif for eight years.


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This material is exclusive property of Aranca. The information, opinions, estimates,

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