With two icons such as the Burj Al Arab (Jumeirah) in Dubai and the Emirates Palace (Kempinski) in Abu Dhabi, Middle Eastern hospitality is closely associated with luxury, and even outrageous luxury. Boosted by the petrodollars of its powerful ruling families, the region has become the worldwide meeting place for all the most prestigious brands in just a few years, and remains such although the price per barrel is no longer reaching such high peaks. Among the newest arrivals: W opened in Doha last March. Others are preparing to establish their flagships. Missoni, the new lifestyle brand from Rezidor, will soon make its grand débuts in Kuwait next winter and then in Mascate. The Rocco Forte Collection, which remained 100% European for a long time, will “go international” in Abu Dhabi and Jeddah.
Except for the Mandarin Oriental, players in the upscale and luxury hotel industry will all soon be present around the Persian Gulf. Everything concurs in this direction: the solid economic and tourism ambitions of the great cities in the wake of Dubai which was the first to enter this trend towards diversification with respect to the petrol manna; the strong growth of intra-regional tourism; the taste for prestigious properties. In addition to the big local players Jumeirah and Rotana and western brands that are well represented such as Mövenpick, IHG, Kempinski, Accor and Starwood, Asian groups are beginning to study this part of the world. After Shangri- La which has already settled in Mascate, Abu Dhabi and Dubai, the Indian Taj is expected in Ras Al Khaimah, the Japanese JAL in Bahrain and Dubai and the Hong Kong brand Swiss-Belhotel in Kuwait and Mascate. Banyan Tree and Anantara, the resort specialists, have also discovered the region’s potential for exclusive retreats in the intimacy of the desert or on the shores of transparent waters.Unlike Jumeirah, Rotana concentrates its development in its native land. The leading operator of the Middle Eastern upscale sector with 26 hotels awaits several openings of its eponymous brand in the region’s major cities: Abu Dhabi, Bahrain, Doha but also Baghdad, Beirut and Amman. Rotana, of which the first hotel opened in Abu Dhabi in 1993, is now beginning to diversify its brand portfolio. The mid-scale segment, which remains less developed in the region, is the target for the new brand Centro. Abu Dhabi and Dubai will see the brand take its first steps, after which it will head towards Egypt where five management contracts have been signed with the investors Orascom and SHUAA. The latter has, moreover, signed an agreement with Rotana for 17 properties with 4* and 5* in Saudi Arabia. But the group’s ambitions do not stop with these brands. Two new brands were launched last year, each on a niche market. Arjaan by Rotana was born out of the ex-Rotana Suites to offer accommodations suited to longstay clients and families. Abu Dhabi and Al Ain will be the first to see these upscale apartments. Another initiative is Raahyan hotels by Rotana, which are alcohol-free properties especially dedicated to local clientele and which are beginning operations in Abu Dhabi and Mecca. With all these developments, the goal is 65 hotels in 2012.The impressive growth in results in recent years with some of the highest levels of RevPAR worldwide in Dubai, Kuwait and Abu Dhabi have convinced the most timid. These results are representative of the upscale properties which make up almost the entire hotel supply in the Middle East. As North America and Europe rapidly sank into the crisis, the region long remained untouched by the cycle’s downturn. In many countries, the development phase is only just beginning. This situation of near under-capacity favored a high occupancy rate and growth in daily rates. Overall for the year 2008, Bahrain, Oman, Qatar took advantage of growth in the RevPAR by more than 20%. The Emirates had slightly less impressive results with +14.9%. Only Kuwait and Saudi Arabia slipped - slightly - into the red. These results are representative of how well upscale properties – which make up almost the entirety of the Middle Eastern hotel supply – are doing.The depression that business tourism is traversing and the weakness of international leisure tourism have forced the Middle Eastern exception back into line. On the first six months of the year, the United Arab Emirates (17.8%), Oman (11.4%), Qatar (-5.0%), Kuwait (4.5%) posted results that were more in keeping with the global standard. Only Saudi Arabia stands out with growth by 2.0%. The most worrisome case is, of course, Dubai, which felt the global wave of the crisis first. The occupancy rate entered a downturn by the end of 2007 and was soon joined by the average daily rate at the end of summer 2008. Since then it has been a collapse: 2.3% over the last three months of 2008, yet -18.3% for December alone and 28.5% on the last semester 2009. The price war is raging as the OR fell by more than 7 points (to 76.4% nonetheless…).The city that easily absorbed all the new hotels is now beginning to raise a few questions. Is mass tourism, one of the goals of an ambitious strategy that aims toward becoming a hub for the business world, compatible with a luxury hotel supply that is growing steadily? The time has come to revise ambitions downwards. While on the one hand results at properties are falling, on the other the real estate bubble burst with a drop by nearly 25%. Several multi-functional complexes are weighed down. Sources for financing are drying up and investors are proving to be more prudent.In all, the bank HSBC counted sixty real estate projects experiencing difficulties for a value of 75 billion dollars. 8 were purely and simply canceled while 51 others remain on standby. Upscale hotels, classically integrated into these developments, bear the brunt. According to Lodging Econometrics, for the entire the Middle East the number of hotel projects was down by 14% at the end of the first quarter 2009 with respect to the figure at the end of June 2008. 477 projects are ongoing for 142,702 rooms versus 577 projects for 164,259 rooms less than a year ago. This slump may be attributed to the regional Metropolis. Will Bawadi – the 10-kilometer hotel boulevard intended to border on Dubailand – see the 51 properties with 60,000 rooms that have been planned ever open? Already, the Desert Gate Hotels & Towers, a 5* with 800 rooms, has been canceled. The Asia Asia – a 5* development costing 3.3 billion dollars for 6,500 rooms – is also at a standstill. The future of the Pharaonic projects that have made the renown and publicity of Dubai is sketchy. Dubailand, which was supposed to be twice the size of Disneyworld, saw its primary attraction – Falcon City of Wonders – cancelled.Other projects are delayed. Nakheel suspended works on the Palm Trump Hotel and Tower sine die. The opening of the W Dubai Festival City, initially scheduled for 2008, was first postponed to June 2010, and now to 2013. The Four Seasons Dubai Festival City is also hanging in the scales. On the positive side for already established hoteliers: these delays and cancellations will relieve pressure on an already weak market. But is this synonymous with a renewal of increased moderation in the country of immoderacy? Not so certain. Dubai’s authorities are planning on rapidly regaining the intense vitality that marked the first years of the millennium. Some media projects are still relevant. The city of superlatives is preparing to inaugurate Burj Dubai this month, making it the tallest tower in the world – at present – with 818 meters. Within it the hotel Armani, its 175 rooms and 144 residences, should open at the end of the year. The final phase of recruiting began last July. The final touch is in process to open before the end of the year the first ever undersea resort, Hydropolis with 300 suites laying at the bottom of the sea.Another famous haute couture brand should join the Armani label in 12 to 18 months. In Dubai Creek, the Palazzo Versace has certainly abandoned the idea of refrigerating its beach after ecological and financial pressure, but the project is half built. Emirates Sunland claims to be proud to have sold 80% of the 169 private residences alongside the hotel prior to the crisis. Should inaugurations as flamboyant as that for the Atlantis in November 2008 be expected? The launch of Sol Kerzner’s mega-resort, developed by Nakheel, cost no less than 20 million dollars and brought in 2,000 VIPs. Its current occupancy is far from being so wonderful.Less of a show-off and focused more on culture, Abu Dhabi is also preparing to welcome the upper crust of the world’s hotel industry. The Park Hyatt, Ritz Carlton, Rocco Forte, St Regis, Sofitel are all in the starting blocks. In fact the capital of the Emirates is in top form, breaking away from the current economic climate. Its RevPAR rose by +41.8% for the year 2008 and by +7.1% for the first semester 2009. The activity of the 5* hotels in Abu Dhabi benefits from business tourism that is thriving all the more as they are not many sharing this market. The city is notoriously under capacity. Could the openings scheduled upset this fine balance? Authorities are actually hoping they will go harmoniously hand in hand with the city’s rise in tourism. The sheikh Sultan bin Tahnoon continues to expect 50% growth in the sector to reach 2.3 million clients in 2012.Thanks to its large reserves of black gold, Abu Dhabi is less impatient than Dubai to free itself from the petrol manna, and has begun its tourism transition more gradually. In Dubai the aim is fun, in Abu Dhabi it is culture: the strategy of authorities is resolutely elitist. Currently under construction under the aegis of the Tourism Development and Investment Company (TDIC), from 2013 the artificial island of Saadiyat will welcome a high-tech cultural center, and, above all, the annexes of two prestigious museums: the Louvre and the Guggenheim. And accommodations have not gone by the wayside either with the construction of a St Regis by Starwood.Another island under construction is Yas Island, which will complete the tourism supply with regard to leisure, Family and MICE segments. This development will be center stage by next November when it will welcome the final stretch of the Formula 1 Grand Prix championship. Shopping mall, Ferrari theme park, Warner Bros aquatic park, golf: the island has a resolutely playful vocation. As for hotels, the developer Aldar has preserved the lion’s share for itself with Yas Hotel, a luxury hotel with a futurist allure and 500 rooms overlooking the marina that is an integral part of the race track. Rotana, IHG and Rezidor are the other happy winners of places with the management of two hotels each.Since 2004, Bahrain has benefited from a media showcase of its Formula 1 Grand Prix. Like Oman and Qatar, the little kingdom is trying to play its cards right by profiting from the global development of the region. Dependent on intraregional leisure and business tourism since Bahrain positioned itself as an important center for Islamic investment, the kingdom is counting on the arrival of international brands to diversify its clientele mix and develop its leisure and MICE segments.The forecast for Vision 2030 of the Al Khalifa family centers on the implementation of a global economy in which tourism would account for 10% of the GNP. Focal point of the strategy: areas for developing tourism such as Dilmunia, an artificial island developed by Ithmaar for a 1.6 billion dollar investment. Dilmunia may be defined as the future health pole in the region with the construction of hospitals and specialized clinics around which hotels wellness centers and residences will gravitate.Although it is difficult to evaluate the evolution and feasibility of all the mega-projects announced, the strategy of the gulf monarchies relies on the same ingredients to definitively establish their country on the tourism planis phere: ambitious privatepublic investments; improved accessibility with new airport or highway infrastructures; support to national airlines. In Qatar, the government will consecrate 17 billion dollars over the next 5 years to raise up luxury infrastructures including The Pearl, which should cost 2.5 billion dollars and include 3 luxury hotels. The total hotel capacity is preparing to grow by 400% by 2012. In order to bring in future clients, a new international airport is being completed in order to process 50 million travelers. Another tourist draw: the Qatar National Convention Centre and its 40,000 sq.m of exhibition areaSo while Bahrain is taking a turn towards finance and health and Qatar towards the MICE segment, Oman is playing the nature-culture card to attract wealthy local and international clientele. The beauty of the country allows Oman to offer an alternative to the skyscrapers of Dubai. The country already has several resorts such as Six Senses Zighy Bay, Chedi and Bustan Palace, and a recently renovated Inter- Continental. The country is also counting on mega-projects like the two adjacent developments Omagine and The Wave. Built around a marina and an 18-hole golf course supervised by Greg Norman, this project includes three luxury hotels including a Kempinski and a Fairmont. While Kuwait and Saudi Arabia are two solid bastions for the luxury hotel industry, these two markets are also the oldest and most mature. But this does not prevent new luxury hotels such as the Missoni in Kuwait or the Raffles in Mecca from opening. These two countries are not exempt from megaprojects either. In Kuwait, the first phase of Failaka Island, a leisure development with a golf course and twenty or so hotels, should rise out of the waves in 2013. In Saudi Arabia, the new city King Abdullah Economic City is developed by Emaar and targets the leisure tourism and MICE segment. 11,000 rooms and 70 hotels are expected there.Saudi Arabia has a few sure values in upscale tourism: bustling Riyadh, religious Mecca and “liberal” Jeddah. On the shores of the Red Sea, the latter proves to be one of the most solid markets in the region. With an OR flirting with 75%, the RevPAR rose 18.4% in 2008 and 10.8% since the beginning of 2009. Enough to make many professionals around the world envious. The city’s future lies in the scheduled renovation of the city center by Solidere, the Lebanese group already involved in Beirut’s rejuvenation. Located near Mecca, Jeddah thus plans to reinforce its tourism appeal. This goal is in keeping with national ambitions. The 2020 plan includes a doubling of visitors from 47 million in 2008 to 88 million in 2020, the number of rooms will grow from 117,097 to 254,310 units. These developments should benefit upscale properties since one of the growth vectors is intended to profit from tourism that is very profitable – domestic clientele – through the boom in short leisure stays.Nonetheless, considering its size, Saudi Arabia will be another location where the competition is perfecting its offense. International economy– Ibis, Premier Inn, Holiday Inn Express as well as Yotel – and mid-scale brands – Park Inn, Ramada, Courtyard by Marriott, Mercure but also Hilton Garden Inn and Aloft are positioning themselves to provide a more economic alternative. These actors have the firm intention to establish regional networks. Upscale hoteliers must also look around them. In addition to lower range properties, the longstay sector is fast attracting business clients on long missions. Middle Eastern groups are taking advantage of this vein with the brands EWA by Coral International, Jumeirah Living and more recently The Address. International brands such as Staybridge Suites and Element or the residential concepts from Marriott, Hilton Kempinski and Mövenpick have many ongoing projects in most of the large cities. Competition promises to be fierce in the years to come.The Address Official partner of mega-projects in Dubai, Emaar logically turned this savoir-faire to its own advantage. In 2008, the real estate developer rejoiced over opening – near the world’s tallest tower – its first hotel properties The Palace in the Old Town and The Address in Downtown Burj Dubai. This multi-functional complex consists of 196 upscale rooms, 626 residences and offers the businessman all he needs to work. Two new properties should open their doors this year: The Address Dubai Mall (244 rooms) in Downtown Burj Dubai and The Address Dubai Marina. Emaar plans to continue growing the brand outside its native land either by branding its own developments, or through management contracts with third parties. Emaar is developing its concept through four extensions: Flagship, Urban, Resort and Retreat. In 2009, the group signed a second management contract with Jnan Amar Retreat in Morocco after the latter signed with the domain Lavagnac in France. Located in the Languedoc, The Address Lavagnac is a real estate development built around a 17th century château converted into a 5* with 17 suites an a golf course. Other locations are awaited: the Middle East with Abu Dhabi, Cairo, Istanbul, Damascus and the world’s great cities such as Paris, London, New York, Los Angeles or Shanghai. Jumeirah Founded in 1997 and subsidiary of Dubai Holding, the investment vehicle of the Dubai government, since 2004 Jumeirah has been closely associated with the growth of tourism in the Emirates. Managed since its beginnings by Gerard Lawless, the group has come a long way since the opening of the emblematic Burj Al Arab in 1999. Today the group has 5 hotels in Dubai in addition to the Wild Wadi Waterpark and the Emirates Academy, a hotel management school in a partnership with the EHL. Better still, the brand has become a sure value for export and Jumeirah wants to leave its luxury mark just about everywhere around the world. After New York with the Essex House and London, the group is preparing to develop in all directions. The Jumeirah Hantang Xintiandi which should soon open its doors in Shanghai will mark the kick off of an Asian offer with 7 hotels in China, Indonesia, the Maldives and Thailand. Europe will soon have a new hotel in Frankfurt and Glasgow in addition to a third property in London. Jumeirah will also demonstrate its resort savoir-faire on the island of Majorca, in the Virgin Islands and Argentina with the management of a polo resort. The Middle East has not gone forgotten with most of its cities on the gulf in the line of fire. At the same time, the group banks on its long-stay concept Jumeirah Living to establish itself as a major player on his profitable market.RotanaUnlike Jumeirah, Rotana concentrates its development in its native land. The leading operator of the Middle Eastern upscale sector with 26 hotels awaits several openings of its eponymous brand in the region’s major cities: Abu Dhabi, Bahrain, Doha but also Baghdad, Beirut and Amman. Rotana, of which the first hotel opened in Abu Dhabi in 1993, is now beginning to diversify its brand portfolio. The mid-scale segment, which remains less developed in the region, is the target for the new brand Centro. Abu Dhabi and Dubai will see the brand take its first steps, after which it will head towards Egypt where five management contracts have been signed with the investors Orascom and SHUAA. The latter has, moreover, signed an agreement with Rotana for 17 properties with 4* and 5* in Saudi Arabia. But the group’s ambitions do not stop with these brands. Two new brands were launched last year, each on a niche market. Arjaan by Rotana was born out of the ex-Rotana Suites to offer accommodations suited to longstay clients and families. Abu Dhabi and Al Ain will be the first to see these upscale apartments. Another initiative is Raahyan hotels by Rotana, which are alcohol-free properties especially dedicated to local clientele and which are beginning operations in Abu Dhabi and Mecca. With all these developments, the goal is 65 hotels in 2012.
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