2018 hospitality forecast: Closing In

2018 hospitality forecast: Closing In
Published: 25 January 2018 - 5:10 a.m.
By: Devina Divecha

Source Markets

Colliers International director, head of hotels (MENA) Filippo Sona reveals that from a total number viewpoint, India remains one of the strongest inbound source market for the GCC with overall tourist numbers forecasted to reach levels above the six million by year end 2017. He comments: “With the pace of the growth of the inbound Indian market, these numbers are likely to be above nine million by the end of 2021.”

China, he adds, is not yet a major source market for the inbound GCC tourist market but is fast catching up and in cases such as Dubai, Sona reveals, the growth is double digit year on year. “From a spending point of view however, the domestic market, Europe and North America remain the source markets which spend more in hotels with total revenues per available room 35-37% higher than the volume markets. For the years to come, this trend will continue to characterise the tourism numbers and dynamics of the GCC market and therefore establishments need to prepare to cater for this tourism diversity,” Sona notes.

Speaking about the properties in his portfolio, The Rezidor Hotel Group area senior vice president, Middle East, Turkey and Africa Tim Cordon reveals that overall, the operator’s top source markets for the GCC continued to be the United Kingdom, United States, Saudi Arabia, India and Russia/CIS.

Echoing Sona’s predictions for the region, Cordon adds: “For 2018, we see the traditional markets of the UK and US continue to play a dominant role; however, India, China and Russia/CIS will definitely play a bigger role in tourist inflows to our hotels as a result of the regional tourism authorities’ efforts in promoting regional destinations and as a result of the streamlined visa processes in some markets.”

The UK was Jumeirah Group’s top source market in 2017, followed by guests from within the GCC. Jumeirah Group chief commercial officer Alison Broadhead comments that the locally founded operator maintained its UK visitor numbers despite an industry prediction that travel from the UK to Dubai would be significantly down due to Brexit and economic uncertainty. “We anticipate that the UK will remain our number one source market in 2018,” she adds.

From a revenue perspective, Broadhead comments, the group’s top market is still Russia and saw substantial growth in 2017. Broadhead continues: “The visa free initiative is definitely helping Chinese business and visitors from German speaking markets also showed double-digit growth.”

Looking at a regional market which has seen impressive growth in the last year, Hilton vice president of operations, Saudi Arabia and Levant Kamel Ajami says domestic travel within Saudi Arabia was its biggest source market, with this set to continue through in 2018 — with both the GCC and Asian markets important for the country as well. “Domestic travel within Saudi Arabia is bolstered by government initiatives such as ‘Live Saudi Arabia’, a marketing campaign run by the Saudi Commission for Tourism and National Heritage (SCTH) that encourages citizens to explore their country and discover its archaeological sites, beaches, monuments and other fascinating attractions,” Ajami reveals. These seem to be working, says Ajami, with the 2017 Euromonitor International Tourism Forecast report showing record levels of domestic travel within the Kingdom, with predictions that 40% more domestic vacations will be taken in 2020 than just five years earlier.

Most hoteliers are in agreement that China, India, Russia/CIS, and GCC tourists will continue to lead the charge well in to 2018. Jumeirah Group’s Broadhead comments: “Opportunities will continue a rise from increased numbers of visitors from Russia and China, improving economies in key source markets.”

Challenges in the year ahead

Supply growth and drop in average room rates — and RevPAR — seem to be concerns that are not going away.

Colliers’ Sona asserts that hoteliers will need to prepare for a “total shift from a revenue driven economy to a cost driven economy”. He predicts that average room rates will be static for hotels in better locations and challenging for those in secondary locations. “Volume, translated in occupancy will remain strong with Q4 2018 showing a higher growth in occupancy percentage when compared with the same period this year. This will be particularly the case for UAE hotels,” he adds.

Mekouar adds: “At an industry level, the risk is to develop and build new hotels based on the historical RevPAR performances. Given the strong supply story this market is witnessing, and which is likely to continue in the lead up to 2020, RevPAR may face downward pressure.”

Cordon says: “The incoming hotel supply across the region will intensify competition in some markets resulting in more pressure on average room rates. The challenges for hoteliers will be in revenue management and keeping rates in line with the market and also with the brand positioning.”

He also takes a slightly different viewpoint of the same concern — that it isn’t altogether about revenue, but brand identity. He says: “With an increasing number of new hotel brands coming into the market, both regionally and globally, the challenge for hotel groups is to clearly define what each brand stands for and to deliver the brand consistency that every strong brand is recognised for. Furthermore, the cultural diversity of the global consumer adds another dimension of complexity in delivering the brand experience to consumers with varying needs and expectations.”

Broadhead notes that one of the challenges that stands out is the sheer volume of new inventory in Dubai.


Click here to add your comment

Please add your comment below
Your email address will not be published