Following a largely positive performance for year-end 2011, major markets throughout the Gulf Cooperation Council (GCC) reported mixed results in revenue per available room (RevPAR) during the first quarter of 2012.
Throughout the first quarter of 2012, Jeddah, Al Khobar, and Dubai, United Arab Emirates, all saw continued increases in RevPAR. Even though demand rose in all but one of the major GCC markets, the other markets’ RevPAR performances were constrained by ongoing supply growth.
The majority of the GCC’s markets have fared relatively well after the recent storms, according to Elizabeth Randall, managing director of STR Global. “The majority of the markets in the region have experienced an increase in demand, highlighting the region’s stronger underlying foundations of stability and allure for local and foreign tourists. As long as the area continues to be appealing to hotel owners and operators, increasing room inventory will be a major factor influencing performance. Dubai and Abu Dhabi make for fascinating case studies to demonstrate how hotel markets can manage to balance supply and demand “.
RevPAR changes from year to year for a few cities (%), in local money
Jeddah is the best performer in terms of RevPAR growth for the first quarter, excluding Makkah and Medina, both of which are in Saudi Arabia. Westin Jeddah was closed from October 2011 to the summer of 2012 for renovations, which resulted in a temporary decrease in the number of rooms available and an increase in demand (+17.3 percent) for the city.
Al Khobar’s RevPAR increased to SAR414.16 (+18.0%) in the first quarter of 2012, driven by occupancy reaching 57.3 percent (+13.4%) higher than in the same period in 2011. Increased demand (+21.2%) outpaced relatively modest increases in new supply (+6.9%%), which in prior years increased by double digits, to primarily drive occupancy growth. In Q1 2012, Riyadh’s supply growth (+11.5%) outpaced demand (+3.1%) elsewhere in Saudi Arabia. Occupancy fell by 7.5 percent to 63.2 percent as a result.
Dubai and Abu Dhabi in the United Arab Emirates represent two distinct cycle phases, especially when considering supply growth over the previous 15 months. Both cities benefited from a relatively similar increase in demand in Q1 2012, with Abu Dhabi increasing by 9.7 percent and Dubai increasing by 11.0 percent. However, the impact on RevPAR performance has been very different when taking into account the supply growth since 2011. Since December 2011, Abu Dhabi has experienced double-digit supply growth, which reached 16.7 percent in the first quarter of 2012. The additional room supply caused the occupancy to drop by 6.0 percent to 64.1%. The average daily rate (ADR) in Abu Dhabi for the first three months of the year was AED633.85, down 11.7 percent from the same period last year. In Dubai, the rate of new supply growth was only 2.6 percent in the first quarter, which led to an 8.2 percent rise in occupancy to 86.6 percent. ADR rose 8.7 percent to AED964.86 during the same time period, contributing to a 17.6 percent growth in RevPAR.
Every year Changes in Supply and Demand
RevPAR declines are seen in other GCC markets.
Occupancy fell by 10.5 percent to 63.6 percent in Doha, Qatar, in the first quarter of 2012, driven by supply growth that was double-digit (+17.4 percent), outpacing demand growth of 5.1 percent. ADR decreased to QAR827.8 (-4.5%) in Q1 compared to QAR908.2 (-4.5%) in Q1 of the prior year due to the competitive environment.
Following the unrest that began in February 2011, RevPAR performance in Manama, Bahrain, continued to decline, falling to BHD35.87 (-9.0 percent) in Q1 2012 compared to the same period in 2011. While occupancy in March 2012 increased by 112.1 percent, that growth came from a low base of 21.2 percent in March 2011. For the first quarter of this year, demand for the destination increased by 1.1%.
In the first quarter of 2012, Kuwait saw occupancy reach 57.3 percent, a decrease of 6.6% from the same period in 2011. ADR fell to KWD63.00 during the same time frame, a 1.9 percent decrease. Only Kuwait reported a decrease in demand (-5.0 percent) for the first quarter.
While ADR in Muscat, Oman, decreased by 7.3 percent to OMR94.98, the city’s hotels saw an occupancy increase to 67.3 percent (+3.5%) as a result of higher demand (+8.0%) for the first quarter of 2012. Muscat’s supply increased by 4.3 percent, but demand rose by more.
In the GCC region, STR Global monitors more than 93,200 rooms and provides reports on all the major cities, including Makkah and Medina.