Dubai – “ASWAQ”
The Middle East travel industry is expected to witness many opportunities which come with great challenges this year, according to a recent study by Insignia, a Dubai-based brand enrichment company.
The study discloses opportunities for boutique hotels, independent operators, lifestyle accommodations and peer-to-peer models, like Airbnb, as the region is oversupplied with luxury hotels.
Other trends forecasted in the coming year include a focus on the untapped destination of Iran, growing demand for home-grown experiences, the rejuvenation of Dubai’s historic districts, the sourcing of sustainable talent, the need for local hospitality schools, and a boost in merger and acquisition activities, allowing hoteliers to tap into new visitor segments and markets.
Insignia Worldwide chief executive officer, Gaurav Sinha said, “As a leading authority in brand creation for travel, hospitality and destination brands, we are privileged to be at the frontline of brand innovation within this vibrant sector.”
The study revealed that the pipeline of under-contract hotels in the region is expected to jump 30 per cent, while room supply will witness a 50 per cent rise. The Middle East stands the strongest pipeline growth percentage of all subcontinents, with 501 hotels totaling 144,321 rooms under contract. While Dubai leads among the five global pipeline cities in terms of rooms under contract with 39,323 rooms, followed by New York at 31,314 rooms, Makkah at 29,866 rooms, Sanya (China) 19,942, and Houston, Texas (USA) 17,905 rooms.
Hotel supply in 2016 is set to surpass demand and exacerbate the continuing economic and geopolitical challenges by reducing hotel rates and creating huge competition among hoteliers. Only the creative, confident and agile companies can survive in the trying times ahead.
The Middle East has been through a number of geopolitical and economic challenges over the past 18 months, creating disruption to feeder markets and adding further pressure to a year of terror attacks, currency fluctuations and the lowest oil prices the world has ever seen in over a decade. Despite these lingering issues, the tourism industry has a positive outlook especially with the fruition of major infrastructure projects, such as new theme parks, convention centres, theatres and airport expansions, which are predicted to bring an influx of visitors towards the last quarter from all sectors, particularly the MICE and family segments.
The report said that the Middle East is maturing in certain markets, especially Dubai and Abu Dhabi, whereby hoteliers and developers need to get used to a cool-down as the oversupply of accommodation and an influx of mid-market hotels will cause rates to go down.
As the region continues to struggle in the absence of a local talent pool, hoteliers in particular will be forced to consider other options which may include seeking valuable tie-ups for a stronger position in a more competitive marketplace. Merger and acquisition activities will continue amid the high-profile hotelier deals, such as FRHI’s buy-over by AccorHotels at the end of 2015. The big three Gulf airlines, Emirates, Etihad and Qatar Airways, will continue to explore partnership opportunities with European and Asian airlines.
Mobile also continues to evolve with exciting developments already taking place in the mobile payment space, and the Facebook Messenger now allowing businesses to transact with customers similar to the way of peer-to-peer models.
Low cost airlines are already tapping into new markets, particularly those in Central Europe, to match with in-bound visitors with the new asset classes coming online.