New report predicts strong growth for GCC hotel sector
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A new report published by Alpen Capital predicts hotel room revenues in the GCC will rise 11% year on year to be worth $27 billion annually by 2015. The report also predicts Saudi Arabia and the UAE will remain the region’s biggest markets, accounting for an 89% share of all revenues.”Our report studies the hospitality sector in the GCC with a focus on the hotel industry room availability and room revenues, its growth, performance and outlook for next few years,” said Sameena Ahmad, MD of Alpen Capital. “Our outlook for the hospitality industry remains positive as the industry bears a strong correlation with the healthy GDP growth projected for the region and there are several strong growth drivers for the industry.” “The GCC hospitality industry has several investment merits as the travel and tourism industry is slowly grabbing the attention of potential investors,” said Sanjay Vig, MD of Alpen Capital. “The growth in the sector is catalysed by several government initiatives in infrastructure projects, bids for global sports events, commitment to diversifying the economy and initiative to stimulate the private sector.” In the report, Alpen Capital also projects optimistic and pessimistic scenarios for the room revenues based on different levels of room supply and tourist arrivals.The report estimates that the GCC Hospitality Industry performance as measured by annualized Revenue Per Available room (RevPAR) will stabilise at around $173 during 2012 to 2015. Average Daily rate (ADR) for the region will firm up to $257, while occupancy rates will be around 67% for the same period. It is important to note that ADR and RevPAR in GCC are highest amongst global sub-regions. The GCC Hospitality industry is currently trading at a P/E of 15x average which makes it very attractive in comparison to its global peers. Alpen Capital has projected the outlook of the GCC Hospitality Industry based on supply and demand side factors. The supply side factors include, the total number of rooms expected to be added in the next four to five years and those under development. In terms of hotel rooms supply pipeline, Saudi Arabia leads the way with 61% of the pipeline, followed by UAE with 29%. However in terms of rooms under construction UAE leads with 62% as of 2010 followed by Saudi Arabia at 16%. The demand estimate is based on forecasts of increase in tourist arrivals and leisure & business spending for international and regional visitors. The growing importance of sports tourism with many sporting events such as the Dubai Desert Classic, Formula 1 Grand Prix being hosted in the region as well as Qatar winning the bid to host the 2022 World Cup will have a positive impact on the industry. Events based tourism as well as niche tourism offerings such as cultural & heritage tourism, and diving and wild-life oriented tourism will also help in promoting the industry. One of the main factors impacting the industry is the wave of political unrest and uncertainty across parts of the GCC region as well as the larger MENA region, which may negatively impact tourist arrivals. Several other factors such as oversupply of hotel rooms, high employee turnover, rising cost of construction as well as availability of project financing are some of the other challenges for the industry.
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