Third Arabian Hotel Investment Conference attracts over 1,000 Delegates

More than 1,000 delegates and speakers gathered at the Madinat Jumeirah Convention Centre in Dubai for the third Arab Hotel Investment Conference, underlining the buoyancy of the hotel sector both in the region and globally.

Top officials from the major hotel groups and investment institutions underlined the emergence of the Middle East as a major player in the sector in terms of investment and development, raising prospects of even more dynamic growth in the coming decade.

Influential Wall Street economist, Stephen Roach from Morgan Stanley set the scene with his evaluation of the past six years’ of record economic expansion worldwide, although he sounded a warning about the ripple effects of protectionism in the developed world.

On a macro level, Arthur de Haast, global chief executive officer of Jones Lang LaSalle Hotels, stressed the impressive growth of the global hotel investment sector, which had grown seven-fold in five years to reach US$70bn in 2006.

“One trend we have seen since 2002 has been the rapid globalisation of hotel investment with private equity funds now taking some 20% of the market,” he said. “And, in the past two years, we have seen the rapid re-emergence of Middle East capital which comprise 12% of volumes in Europe and three per cent in Asia and North America.”

He said this investment reached $3.5bn in 2006 having grown sevenfold in two years, while the total for the first quarter this year was already topping $2bn.

“Today, we are forecasting a total volume of Middle East investment this year of $7bn, doubling that of 2006, and it is expected that Asia will be a major beneficiary of these increasing volumes.”

Biggest investors outside their own national markets overwhelming came from the UAE, said de Haast, quoting a figure of 76% of the total, while Qatar and Kuwait followed with 14% and 10% respectively, while the main beneficiaries of this honeypot were Egypt, Saudi Arabia and Morocco.

Turning to the supply pipeline, de Haast said that Dubai was set to add some 45,000 hotel rooms by 2012, while Abu Dhabi was in line for an additional 10,000 rooms, and Qatar, Bahrain and Kuwait each had between four and six thousand rooms under development.

Emphasising the emergence of the Gulf in particular as a major new travel hotspot, de Haast said only Las Vegas came close to rivalling the huge hotel developments of Dubai – with around 42,000 rooms on the construction schedule in the Nevada playground – although China’s burgeoning metropolises of Shanghai, Macau and Beijing were also experiencing enormous growth.

According to de Haast, the onslaught of hotel and related leisure projects in the Middle East region was justified by the expectations of sustained growth in demand.

“Key drivers range from the growth of airlines, including new low-cost carriers, to the continued expansion of religious tourism, regional leisure travel and business travel,” he said.

“As long as there is no ‘shock’, we expect the current situation to remain favourable and that demand will support the supply (of rooms) coming on stream – although there may be a slow down in revPAR (or income).”

Turning to the materialisation of ‘new’ destinations such as Abu Dhabi, Doha, Oman and Bahrain, de Haast said it was essential that the tourism authorities focused on different niche sectors to ensure the overall market was not cannibalised as supply grew.

“The key thing is to ensure points of differentiation as all destinations cannot attract the same markets,” he stressed. “Growth cannot be sustained without focusing on different market segments.”

Another essential component of the package would be continued promotion of the region complementing the key investment in infrastructure: “Given the right scenario, growth will be maintained,” he said.

Concluding his presentation, de Haast raised the prospect of the acquisition of a global hotel ‘name’ by investors from the Middle East, speculating this scenario could arise ‘some time soon’.

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