BILLIONS OF INVESTMENTS IN THE HOSPITALITY AT THE GULF REGION – NEW STRATEGY IN QATAR – OMAN HAS A CONTINUOUS GROWTH – PERSPECTIVE IN BAHRAIN AND KUWAIT UNCERTAIN.
All six countries of the Gulf Cooperation Council (GCC) hope on a further strong expansion of their tourism industry. Therefore, the hotel capacity will be expanded strongly. Currently hotel projects worth 17 billion dollars are under construction within this region, which will be completed during the next three years. Over half of the volume of construction is in the United Arab Emirates, Saudi Arabia and Qatar all together about 40 percent.
According to World Travel and Tourism Council (WTTC) calculations, the investment of the entire tourism industry from 2009 to 2013 increased from 10.3 billion to 15.7 billion U.S. dollars in the GCC region (2012: U.S. $ 14.7 billion). The strong growth trend is expected to continue in 2020 with investments worth 29.1 billion U.S. dollars. Saudi Arabia is the leading investor with a total amount of 6.7 billion dollars in 2013. Followed by the United Arab Emirates (U.S. $ 5.7 billion), Qatar (U.S. $ 1.7 billion), Oman (U.S. $ 0.7 billion), Kuwait (U.S. $ 0.6 billion) and Bahrain (U.S. $ 0.4 billion).

The WTTC expects that the UAE will become the largest investor by 2016. In the period 2014-2020 the GCC region is expected to spend a total investment of 160.2 billion U.S. dollars, of which the UAE will have 63.2 billion U.S. dollars, Saudi Arabia 59.4 billion U.S. dollars, Qatar 22.1 billion dollars, Oman 6.3 billion dollars, 5.6 billion dollars Kuwait and Bahrain 3.7 billion dollars.

The hotel capacity in the GCC countries are currently estimated on 470,000 rooms, suites and hotel apartments, in the next five years more than 100,000 could be added. About 85 percent of the current hotel offer does not apply to Saudi Arabia and the United Arab Emirates (UAE). Qatar hopes to multiply its hotel capacities. Oman also has big ambitions. In Bahrain and Kuwait the further development of the hotel sector appears uncertain.

The two tourist hotspots in the Arabian Peninsula could not be more different. The Emirate of Dubai in the Persian Gulf offers its twelve million hotel guests (forecast for 2014) beaches, attractions, sensations and any kind of amusement. In contrast, the ten million domestic and foreign visitors to the holy city of Mecca, the most restrictive and probably most conservative city in the world, looks for religious edification – for Non-Muslims the journey ends at the city border. In Dubai the “Dress Code” allows almost everything, only wearing bathing beach suits outside the regions could mean trouble. In Mecca women are just allowed to only show the face and hands.

Oman cannot offer sensations such as Dubai, but a friendly, relaxed atmosphere, lots of culture and attractive coastal, mountain and desert landscapes. The socially liberal but politically restrictive small island state of Bahrain has mainly guests from Saudi Arabia to offer “recovery” from the restrictions in their home country, but the desired strong expansion of its international business and leisure tourism should be possible only after a political stabilization of the country. The conservative Qatar will mainly attract Arab tourists and rejects western pleasure tourism although it will host the 2022 football World Cup. In Kuwait, the tourism sector shows little dynamics; a major change is not initially expected.

Saudi Arabia
The preliminary data of the Saudi Commission for Tourism and Antiquities (SCTA) for 2013 show a renewed decline in the number of foreign tourists. With about 17 million foreign visitors a peak was reached in 2011; only 14 million visitors were visiting the country in 2012 and 2013 shows a further decline to 13 million. The foreign guests in 2013 spend about 12.8 million U.S. dollars in the country (2012: U.S. $ 15.2 million). For domestic tourists a significant increase in the number of passengers to 24 million is specified for 2013, but with 7.5 billion U.S. dollars about 15 percent spending less than last year.

Detailed data on tourism are just available up to 2012. From the 14.3 million foreign tourists 37 percent, or 5.2 million came as a pilgrim to visit Mecca and Medina in Saudi Arabia, about 2.7 million were business travellers and 2.5 million made private visits to friends and relatives. Statistics show that 0.6 percent of foreign guests were leisure tourists. The sharp decline in foreign visitors in 2012 was caused by a decline of 25 percent in religious tourism and a reduction in private visits by 30 percent. In these two groups of visitors there had been very strong growth during 2011.

The increase of foreign religious tourism in 2011 was a consequence of the extension of visa quotas for “Umrah” trips. Umrah, also referred to as “little pilgrimage”, is the visit of Mecca outside the “Hajj” period during the last month of the Islamic calendar (Dhu I-Hijjah).

Due to the construction work for massive expansion of the mosque in Mecca District (started in 2011), the number of visits reduced during Dhu I-Hijjah since 2013. A total number of 3.2 million pilgrims during the Hajj went to Mecca in 2012, including 1.8 million from abroad. Only a total of 2.0 million were approved in 2013. The pilgrims, who arrived from abroad, were limited in 2013 to 1.4 million, the number of residents (locals and foreigners living in Saudi Arabia) were limited to 0.6 million (2012: 1.4 million). This year will remain at the same low level of 2013.

The importance of religious tourism is reflected in the distribution of hotel capacity. From the 2012 officially classified 1,098 hotels (184,833 rooms) in Saudi Arabia the provinces of Mecca (this includes from Jeddah) and Medina accounted a total of 905 (163,831 rooms). In Riyadh Province, there were only 67 classified hotels (9,076 rooms) and in the Eastern Province (Dammam, etc.) 52 (7293). The other nine provinces possessed only a total of 74 hotels with 4,633 rooms.

The utilization rate of the Saudi hotels rose in 2012 to an average of 64 percent (2013: 62%), for Riad 61 percent are given, for Mecca 63 percent, 69 percent for Medina and 59 percent for the Eastern Province. In Mecca and Medina, the load during the 2012 Hajj month reached over 90 percent. The reduction in the number of pilgrims since 2013 has, however, greatly reduced the workload, there now are many special offers also during the Hajj period.

In addition, we have the national statistics for 2012: 1,971 accommodation establishments with 89,681 hotel apartments. Mecca and Medina had a share of about 50 percent; Riyadh came to 16 percent, the Eastern Province to 14 percent.

According to Jones Lang LaSalle (JLL), the international real estate service provider, the number of hotel rooms in the belonging of the province of Mecca port city of Jeddah are 8150 (only three to five-star hotels) dated to the end of 2013. By the end of 2017 the room capacity is expected to increase by over 50 percent to 12,350. The strong growth is also due to the completion of projects that should be opened as early as 2012 or 2013.

In Jeddah 1,250 rooms will be added. The hotel Elaf Galleria will offer 445 rooms, the Assila Towers 197 rooms and a Novotel will offer 160 rooms. Expected additions in 2015 according to JLL will include a Park Inn Hotel & Residences (350 rooms), the first Kempinski in Jeddah (220) and a Courtyard by Marriott (250) in the Mall of Arabia. Hotel occupancy in Jeddah is above average with 75 percent, but the number of new openings is likely to lead to a temporary deterioration.

According to JLL, the number of hotel rooms in Riyadh in three to five star segments increased in 2013 to 12,503. Also in Riyadh, the room offer will expand greatly until 2017. JLL predicts an increase of about two-thirds to nearly 21,000. In the spring of 2014, the Kempinski Burj Rafal on Olaya Street (349 rooms and suites) was completed, also in 2014 the Rose Rayhan will open its doors (236 rooms) as well as the Park Inn by Radisson (168 rooms). One of the most important openings in 2015 is going to be the 450 million dollar Hilton Hotel & Residences project (850 rooms). In Riyadh, the average hotel occupancy rate in the 1st quarter of 2014 was at 67%, the forthcoming new openings could let drop the ratio to below 60 percent.

In Saudi Arabia five new hotels with a value of 1.7 billion dollars were completed, including four projects in Mecca (Al Rawasheen Hotel, Tamara Hotel, Al Tayseer Hotel, Anjum Hotel) and a Marriott hotel in Jizan. The value of the currently under construction hotel projects is specified at 3.8 billion dollars. 1.4 billion dollars is the investment in Riyadh, the largest construction project is the Hilton project.

In Riyadh’s new King Abdullah Financial District (KAFD; still a major construction) a 374 million dollar Wyndham Hotel (214 rooms) will be completed by late-2014, but the opening is expected to take place in 2015. In Mecca the construction of a part of the 3.5 billion dollars Jebel Omar project (mixes-use development) has been started in 2013 (720 million dollar building /4 towers, 2,160 rooms). The contract was awarded in 2012 to a joint venture between Drake & Scull International of Dubai-based Lebanese Arabian Construction Company and the (ACC).

The value of the planned hotel projects in Saudi Arabia is specified at 4.8 billion dollars. The largest hotel project in planning stage has five more hotels of Jabal Al Kaaba in Mecca project with a total of 6,700 rooms for 2.1 billion dollars, with the Abdul Latif Jameel Group as investor. In 2013, as part of the Jabal Al Kaaba project the construction of the 570 million dollars Anjum hotels has been already completed (1,780 rooms).

In Jeddah two Millennium hotels (Al Andalus and Corniche Jeddah) are planned for a total of 900 million dollars with about 500 rooms, Al Sharif Mansour Bin Saleh Abu Rayash Investment & Development Company is the investor. In Jeddah the Al Khozama Company wants to built a 280 million dollars One & Only resort with 150 rooms. In Al Khobar a Golden Tulip (Dana Bay Resort). will be built with 650 villas and 530 rooms for 400 million dollars.

United Arab Emirates
Dubai
With the 2020/21 in Dubai held World Exposition (Expo) the importance of the emirate will be further strengthened as a leading regional tourist destination. Even without considering the EXPO-effect, plans for the expansion of the tourism sector were ambitious. So far 20 million hotel guests were targeted for 2020, by now even more than 25 million visitors 2020/21) will be expected only during the time of the Expo, from which 70 percent came from abroad. In recent years, the political crises in the MENA region (Middle East and North Africa) promoted Dubai as an alternative tourist destination. The number of hotel guests had increased from 7.5 million to ten million (including hotel apartments) between 2008 and 2012, in 2013 eleven million are reported.

To cope with the volume of visitors in 2020, Dubai’s government holds a doubling of hotel capacity as necessary. However, there are also experts who assess the additional needs much lower. According to official figures Dubai’s hotel room supply will increased by 40 percent to 57,345 (without hotel apartments) between 2008 and 2012, at the end of 2013 there were 61,670 rooms in 416 hotels.

If the hotel room capacity should be doubled until the Expo 2020, compared to autumn 2013, more than 45.000 rooms have to be built in the time period of 2017 to 2020. A total of 40,000 additional rooms will be built solely in the “Mall of the World Entertainment City” and on the Deira Islands. However, both mega-projects are still in the planning stage and it is unclear in what time frame the project can be implemented. In Dubai there are hotel projects with a capacity of 17,261 rooms in the pipeline. The hotel investment currently focuses on the five-star segment. But there is a shift expected in regards to the three and four-star hotels to meet the growing demand in the medium price segment.

Besides hotels, in 2012 Dubai counts a total of 200 hotel apartments with 23,069 units. According to official statistics, by the end of 2013 only 195 hotel apartments with 22,864 apartments were left. This sector is also discussing on a doubling of capacity by 2020.

Abu Dhabi
Compared to Dubai the Abu Dhabi hotel sector is significantly smaller and less dynamic. According to JLL information, utilization in 2012 had dropped to 61 percent (2011: 65%) due to an increase in room supply and not correspondingly greater demand. During 2013 an improvement of 68 percent was reported. The number of tourists has increased in Abu Dhabi in 2013 by 18 percent to 2.8 million.

In 2012 hotel openings increaed the number of hotel rooms in Abu Dhabi (without Al Ain and Al Gharbia) by 1,700 to 15,700, in 2013 an expansion to about 18,150 was reported. Major new store openings in 2013 were the Ritz Carlton Spa Resort (532 rooms), a Premier Inn (300), a Dusit Thani (402), a Rosewood (189) and the St. Regis Nation Towers (283). By the end of 2016, Abu Dhabi City has about 22,300 hotel rooms.

According to the latest statistics of the Abu Dhabi Tourism and Cultural Authority, the hotel rooms offer in the entire Emirate of Abu Dhabi (ie including Al Ain and Al Gharbia) increased by 14 percent to 21,609 between April 2013 and April 2014. The proportion of rooms in five-star hotels was 50 percent. The number of hotel apartments remained virtually unchanged at 5,567.

Qatar
Qatar plans to increase the number of foreign visitors to seven million by 2030, according to the most recent policy document of the government. Last year, there were only 1.33 million, from which 0.04 million were from Europe and North America. According to the Qatar Tourism Authority (QTA) visitors from other GCC countries were the largest group with 1.09 million, in 2013. Saudi Arabia led with 0.67 million, followed by the UAE (0.12 million), Bahrain (0.11 million), Oman (0.1 million) and Kuwait (0.08 million).

Currently three quarters are business tourists visiting Qatar, it should remain only by one-third by 2030. Qatar welcomes business travelers unrestricted . However leisure tourists should be selectively filtered by the conservative Emirate. The Tourism Authority explained that there were regulations and monitoring mechanisms to promote a family-friendly tourism. Qatar wants mainly Arab visitors and “Wealthy World Traveler”.

In Qatar hotels with four and five-star classification dominate: Of the 13,551 available rooms in late 2013 about 80 percent fell in these two categories. The average occupancy rate is 65 percent higher in 2013 (2012: 60%) and for 2014 it is expected to be about 75% on average, in the first quarter of 2014 there were even 78% (Q1 2013: 68%). Acorrding to QTA facts currently 75 hotels with 15,713 rooms and 49 hotel apartments with 5,581 units are under construction. Observers assume that a majority of the projects is not actually under construction but in planning.

In 2011 the QTA had explained the hotel room inventory to 8500, it is sayd that by 2013 the capacity will raise to 30,000 rooms. In the “Tourism Sector Strategy 2030″ published by the QTA in February 2014, the 30,000 mark it is to be achieved until 2022, and for 2030, an increase from 56,100 to 62,000 hotel rooms is planned.

In June 2014 the QTA Chairman Issa bin Mohammed Al Mohannadi spoke of additional 14,000 to 17,000 hotel rooms to be ready by 2022 for the Soccer World Cup in Qatar. This means that the rooms offer would increase from 27,000 to 30,000. The new additions will be mainly hotels of the three and four star categories.

The budget figures for 2022, however, raise questions regarding the need of accommodation capacity during the World Cup, Qatar is expecting about a million visitors. On the occasion of the World Cup Qatar had announced to offer 85000-100000 rooms near the stadiums. QTA chief Al Mohannadi admits that the current target for 2022 hotel offer will not be enough and thinks about different solutions. This includes accommodation on cruise ships and in private homes. Also the use of hotel capacity in neighboring countries (especially in Dubai) is considered as an option, the visitor would have to travel for the individual games.

Oman
Also in Oman tourism is as a sector with great potential. As reported in 2012, the hotel industry in 2013 had a strong growth as well. The number of hotel guests in the four and five star category rose by 8.6 percent to 0.62 million, the revenue increased by 11.8 percent to 391 million U.S. dollars, the average occupancy rate improved from 54 2 to 58.3 percent. The number of guest had increased in 2012 compared to 2011 by 6.3 percent to 0.57 million, the revenue increased by 12.5 percent to 350 million dollars. In the first five months of 2014, the number of customers increased over the same period last year by 23.8 percent to 0.32 million in revenue, there was an increase of ten percent.

Data regarding the development of the entire hotel industry is only available until 2012. The revenue of a total of 238 hotels of all categories increased in 2012 over the previous year to 13.3 percent to 453 million dollars. According to the statistics the hotels offered over 18,565 beds (12,180 rooms) and hosted 1.84 million guests, of which 1.02 million were from abroad. The largest international visitors come from India (0.2 million), followed by the UAE (0.09 million), the UK (0.08 million), Germany (0.06 million) as well as Pakistan and France (both 0.04 million).

In 2013 three major hotel projects completed with total a of 148 million dollars (486 rooms). Eight projects with over 1,500 rooms (total investment: 573 million U.S. $) are under construction. Eight hotels with almost 1,800 rooms with an investment volume about $ 1 billion are in the planning and scheduled to open in the time period of 2016 to 2018. This will increase Oman’s hotel capacity in 2018 from 16,000 to 17,000 rooms. The government already envisaged about 20,000 rooms in 2015.

Bahrain
The hotel occupancy is expected to significantly improve in Bahrain in 2014, when the positive trend of the first half of the year will continue. Nevertheless, in the GCC comparison the utilization remains the lowest. According to the official statistics, the utilization in 2013 was 41 per cent in average, the figure could rise to over 50 percent in 2014. In the five-star category, a ratio of 44 percent and for four-star hotels 46 percent for are reported for 2013.

Despite the poor occupance new hotels are planned to be opened. By the end of June the four-star Hotel Swiss Belhotel Seef (149 rooms) entered the market and demands 177 dollars (including tax but excluding breakfast) for mid-August for the simplest room as “introductory price” A five-star 311-room Rotana will open in the fourth quarter of 2014 on the Amwaj Islands (near the airport). Also the 2014 five-star hotel (H-shaped) Four Seasons Bahrain Bay (273 rooms) will also begin operation. Another new addition is expected in 2014, a 52 million dollar expensive Best Western Premium (250 rooms). If everything follows the schedule, Bahrain’s hotel capacity would increase to approximately 13,900 rooms and suites in 2014 (2013: 12,869).

The higher capacity could lower the average occupancy rate of hotels in Bahrain. While Bahrain hotel sector recovered quite quickly after fall in 2011 (due to the political unrest), still the desired strong expansion of the tourism industry is only likely to be possible after a reconciliation of the still very tense political situation, which however, is still not in sight.

For 2015, the Wyndham Hotel Group announced the opening of a Ramada Hotel in the City Center Mall (140 rooms) and a Wyndham Grand Bahrain (Bahrain Bay, 260 rooms). Currently approved to tender is the 100 million dollar JW Marriott Manama (276 rooms and 96 apartments), scheduled to open in 2017; nine companies have submitted offers.

The vast majority of guests are leisure tourists from Saudi Arabia, most of them come to Bahrain via land route. For 2013 the ministry of the interior announces, the number of incoming tourists with 12.1 million, which is attributable to the Causeway with 9.9 million, the airport 2.2 million and the remaining 0.07 million on the ports.

Only a small minority of incoming travelers utilize hotels, only 1.1 million hotel guests are dipsplayed in the statistics for 2013 (2012: 1.0 million). In addition to residents, or at least with their own Flat in Bahrain, a significant proportion of travelers are daily visitors and commuters (living in Bahrain, working in Saudi Arabia). The majority of tourist nights are in apartments. There are about 90 official accommodation establishments which are registered as hotel apartment’s.

Kuwait
However the new regulations and participation in international tourism fairs (ITB Berlin etc.) the development of the hospitality and tourism industry in Kuwait is not a priority. The long history of the now stopped construction of an estimated three billion dollars project such us the second airport terminals proves this clearly.

The plans for a renovation / expansion of the airport began in 2004. Since 2008, passenger traffic is above the capacity limit of seven million, about 9.4 million were counted 2013. In the fall of 2011, the London architects Forster + Partners presented drafts of Terminal 2. After completion of the first phase the Kuwait International Airport should be able to handle (terminal 1 and 2) 20 million passengers, in long-term 55 million are expected.

Between 2008 and 2012 the official hotel statistics registered an extension of the hotel capacity from 7,405 rooms and suites to 8,814. In 2013 several hotel projects have been completed. The 191 room Radisson Blu Hotel reopened after a renovation for 37 million dollars. A 20-MiIllionen dollar expansion project at Safir Hotel Bastaky was finished.

Further completed projects in 2013 were the expansion of the Four Points Sheraton to 218 rooms for 45 million dollars, the Millennium Hotel Salmiya (Room 307, U.S. $ 47 million) and the Al Nafisi Residence Inn Marriott (120 rooms, 36 million U.S. $). In the spring of 2013, the Jumeirah Messilah Beach Hotel & Spa was opened with about 400 rooms, apartments and villas. Under construction is a Staybridge Suites Hotel (300 rooms, US $ 58 million) as an extension of the existing Crowne Plaza, with completion expected in 2015. The opening of the InterContinental Kuwait (237 rooms and suites) has been announced for 2016.

Since 2002 a major tourist project on Failaka Iceland is discussed. Another several plans were created for the island 20 kilometers east of Kuwait City, but the calculated three billion project is still waiting for investors. The PPP (Public Private Partnership) and Partnership Technical Bureau (PTB) is to promote the project, but so far without resounding success. A new consultant contract was put out to tender in 2013, but not yet awarded.

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