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The well has run dry on the hotel industry in the Middle East and North Africa in 2016

For hoteliers in the Middle East and North Africa, results for 2016 are particularly bleak: not only is the region still greatly marked by a context of political instability and insecurity that threaten certain leisure destinations with long-lasting desertification of tourism, but the Arabian Peninsula, which was an oasis in the desert, was also dragged into a down cycle. The entire region came out in the red, with no fuel to feed the traditional motor of its hotel industry.

2016 was a bad year with no silver lining for hotels in the Middle East and North Africa: from January to November 2016, all countries posted a drop in performances.

One exception confirms the rule: Egypt, with a RevPAR that bounced back (+8.8%) compared to an even more depressed base in 2015. The average daily rate rose by +17.5% with hoteliers are trying to make up for the depreciation of the currency (whose effects could be particularly felt in November), while arrivals continued to shrink: -4.0 points for the occupancy rate on the first 11 months. Considering the weak levels generally recorded in December, occupancy at international chain operated hotels across the year should drop below 50% in the country of the Pharaohs. At least the collapse of the Egyptian pound at the end of the year should strengthen the country's competitive price position in 2017... But will that be enough considering the economic and security uncertainties that continue to weigh on the country? Last September, in a strategy to relaunch tourism the government announced its desire to inject 63 million euros into the sector, an ambitious plan. But considering the persisting weakness of the market, the country -a former mastodon of Mediterranean hospitality- could soon, become a target of choice for investors specialized in distressed assets, bold enough to rub up against and take their chances with the destination's country-risk...

More or less the same situation may be observed in Tunisia, which will close the year with an even lower average occupancy rate, close to 40% (it was 40.9% on the first 11 months of 2016). Below the flotation line for many hotels, some of which may be forced to close. And yet, Tunisia posts a perfectly stable RevPAR with respect to 2015 on the first 11 months of 2016, with the 0.4 points in occupancy rate being compensated for by a slight increase in average daily rate (+1.0%). While the strengthening of security measures implemented by the Tunisian government stalled a relaunch of the hospitality business, but undoubtedly played a role in minimizing the drop in tourism activity experienced by its neighbors. The problem is how can confidence in Tunisia be raised within a context where the media and populations of the leading source countries (already France and Belgium, and now Germany) are thinking first and foremost about terrorism risks associated with the country because of its former ex-patriots?



MENA 2016: Year-to-date results (from January to November 2016) hotel chains by category





Morocco, meanwhile, which held up fairly well against the decline in hotel results in the region in recent years, posts a drop in its indicators. Its RevPAR is down -4.5%, due to a drop in its occupancy rate by -1.4 points and a slight drop in average daily rate (-2.1%). The drop is thus more moderate than in most neighboring countries, and even certain major source markets (France, Belgium). It is is above all the Arabian Peninsula, previously an island of prosperity in the region, that posted results that are down significantly in 2016, reflecting the region's crumbling economic context (low growth, reduced spending to contain the explosion of the public deficit...) further to the collapse of the price of oil the previous year.

The sharp drop in demand and recent growth in supply caused results to plunge: the RevPAR in Qatar (-18.2%), Oman (-12.4%) and the United Arab Emirates (-10.2%) post double digit drops in the first 11 months of the year. Kuwait and Bahrain also follow a downtrend with a RevPAR down by -8.3% and -6.7%. All these countries also experienced a drop in their occupancy rate. The United Arab Emirates post a RevPAR down by -10.2% caused by an average daily rate down by -10.1%, although hotels in the country succeeded in maintaining their occupancy at levels much better than the region's averages (occupancy close to 77% on the first 11 months of the year). Outside the Arabian Peninsula, but still in a country-market with a high level of "oil" exposure, hotels in Algeria are seeing their RevPAR drop by -7.8% due to a more than 6 point drop in occupancy.

It should be observed that Dubai also posts a RevPAR down by -7.8%, which does not currently appear likely to slow authorities in the expansion policy of their hotel supply in anticipation of Expo 2020. Dubai's hotel supply thus surpassed 100,000 rooms this year, and Dubai has just announced another new mega-project. However, the Emirate is not invulnerable to future upsets: at the beginning of the crisis, in 2008-2009, it had already gone through a period of slowed growth in its hotel industry. Many projects were frozen or cancelled; but the Emirate rapidly resumed its forward moving dynamic.

In this overview of the Middle East and North Africa that is already so dried up that certain hotel markets run a risk of structural desertification, the award for strongest decline in 2016 unfortunately goes to Turkey. Its geographic proximity with territories that are in conflict and the series of attacks that hit the country in 2016 (more than 50 attacks in a year and a half attributed to Kurdish rebels or the Islamic State, according to Le Monde) as well as its political situation all combine to sink the country into an unstable situation. On the first eleven months of the year, Turkey posted a -31.4% drop in its RevPAR, which may be explained by a -10.8 point drop in occupancy rate and an -18.1% drop in its ADR.

With an occupancy rate of 55.9% between January and November 2016, Turkey came close to the results of neighboring countries in the Levant, Lebanon and Jordan, which grew slightly (to nearly 52%).

The region was thus marked by a very difficult context that impacted economic and tourist activity in the MENA region: 2016 will definitively have been a bad year. A few glimmers of hope for 2017: the rise in the price of crude oil throughout 2016 should ease economic situations in oil producing countries, reduce budgetary pressure and revive demand. The rise to power of Donald Trump and his announced rapprochement to Moscow could change things for eastern countries, which have been impacted by the drawn out Syrian conflict in recent years.

Occupancy rates on certain key markets were back on an uptrend in November (+3.9 points in Egypt and the United Arab Emirates, +3.6 in Tunisia, +1.4 in Saudi Arabia...). But this meant significant price adjustments on the Arabian Peninsula (-8.5% in the UAE, -5% in Saudi Arabia), and particularly before Istanbul was hit by a new tragedy on New Year's Eve, December 31, 2016.

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