HotStats MENA Chain Hotels Market Review – July 2014

The Dubai hotel market saw occupancy levels fall to 50.3 percent in July as overall demand within the city reduced due the summer heat and impact of Ramadan, according to the latest HotStats survey of full service four and five star hotels by TRI Consulting.

Occupancy in Dubai hotels was down 4.6 percentage points compared to the same period last year but hoteliers were able to achieve a 1.1 percent increase in average room rates (ARR) to US$202.94. As a result, revenue per available room (RevPAR) levels fell by 7.4 percent. With food and beverage revenues also declining, gross operating profit per available room (GOPPAR) plummeted by 99.5 percent to US$0.07, resulting in hotels barely covering operational expenses.

"Dubai hotels were impacted from the collective effect of the annual summer slowdown and the occurrence of the holy month of Ramadan throughout the entire month of July, resulting in occupancy levels falling to 50.3 percent. This had a trickledown effect on the profitability of hotels especially with significantly lower food and beverage revenues during the month. Hotels only marginally broke even as high fixed operating costs resulted in GOPPAR dropping to US$0.07. Although performance was down in July, the overall market remains strong with year to date occupancy levels averaging 79.4 percent and profit margins at 46.4 percent" commented Peter Goddard, Managing Director of TRI Consulting in Dubai.

Banqueting demand helps boost Riyadh hotel profits

The Riyadh hotel market experienced mixed results during the month of July with a reduction in rate and occupancy impacting RevPAR levels, however food and beverage and banqueting demand boosted total revenue per available room (TRevPAR) by 7.2 percent. RevPAR performance was down 8.3 percent during the month driven by a 7.6 percent drop in ARR to US$214.91 and a 0.3 percentage point fall in occupancy to 38.3 percent. An increase in food and beverage and banquet revenues of 25.0 and 63.3 percent respectively, drove top-line revenue growth and when coupled with consistent operating expenses saw GOPPAR rise 10.8 percent to US$53.25.

"Although Riyadh hotels saw overall room revenue fall during July, a significant increase in banquet revenues driven by Iftar events, helped hotels record a 7.2 percent growth in top-line revenues. The holy month of Ramadan historically results in substantially lower levels of demand and July was no exception with the overall market achieving an average occupancy of 38.3 percent. Even though the hotel market was depressed during the month, year-to-date performance remains strong with occupancy levels up 6.6 percentage points to 63.8 percent" commented Goddard.

Rates in Abu Dhabi continue rebound as demand strengthens

Average room rates in Abu Dhabi increased by 5.1 percent in July to US$114.10, driven by a 4.5 percent growth in RevPAR to US$57.36. The growth in ARR was due to a shift in yield strategies from hoteliers as a response to strong overall occupancy levels. The growth in room revenues was complemented by an increase in banqueting revenues, resulting in a 2.5 percent growth in top-line revenues to US$136.41. However, a marginal decrease in operating expenses was not sufficient to prevent hotels from running a loss during July, with GOPPAR levels of -US$12.44.

"Although the hotels in Abu Dhabi recorded a trading loss during July, the market is witnessing encouraging indicators, especially with a revival in average rate performance. The market has suffered from a steady decline in average rates since August 2011, however this trend is starting to reverse with hotels undergoing a steady growth in average rates during the past five months, fuelled by strong regional visitor demand. We expect this trend to continue throughout the remainder of the year, especially as hoteliers gear up for the peak season" commented Goddard.

Doha hotels record a 13.8% rise in RevPAR during July

Doha experienced a 5.5 percentage point growth in occupancy to 47.6 percent in July, driving a 13.8 percent growth in RevPAR to US$95.91. Hotels recorded a marginal increase of ARR by 0.7% to US$201.56, maintaining year-to-date figures of US$217.79. A regional trend of strong banquet revenues during the holy month of Ramadan continued in Doha with hotels experiencing a 39.0% growth in during the month. A 15.2% rise in total revenues coupled with efficient operating expenses resulted in an 86.7% rise in GOPPAR to US$53.22.

"Doha was one of the strongest performing hotel markets in region during July with a rise in all key performance indicators. The growth in top-line revenues was primarily due to a 5.5 percentage point rise in occupancy driven by increased regional leisure demand. This top-line performance contributed to an increased bottom-line profitability, with GOPPAR rising 86.7% during the month" commented Goddard.

Cairo hotels continue to see green shoots as demand rises 8.7 percent

The hotel market in the Egyptian capital experienced continuation of growth in July with increases in all key performance indicators. The increase in visitor demand boosted occupancy by 8.7 percentage points compared to the same period last year to 29.3 percent, whilst ARR rose 1.0 percent to US$114.85, driving a 43.4 percent growth in RevPAR. The growth in top-line performance fell through to the bottom-line with GOPPAR increasing to US$16.01 from US$2.83 during the same period last year.

"Cairo hoteliers have been facing challenging conditions for the past two years, however the new political situation in Egypt has brought much needed market stability. Although occupancy levels are still marginally lower than 2013 levels, the growth in performance levels witnessed in previous months is a positive sign and indicates the market is on track to achieve performance levels over and above those experienced in 2013" commented Goddard.

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HotStats provides monthly P&L benchmarking and market insight for the global hotel industry, collecting monthly detailed financial data from more than 8,500 hotels worldwide and over 100 different brands and independent hotels. HotStats provides more than 550 different KPIs covering all operating revenues, payroll, expenses, cost of sales and departmental and total hotel profitability.

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