Doha’s hotels outperformed regional peers in terms of occupancy rates in 2014 and are expected to see a return of positive average daily rate (ADR) this year and in 2016, a new report has shown.
Despite a number of challenges faced by the region in 2014, such as the fall in oil prices and devaluation of the euro against the dollar, Qatar’s hotels performed relatively well.
Doha saw growth in 2014 with a double digit rise of 10.8% in RevPar (revenue per available room), PwC said in its second hotel forecast for the Middle East titled “Accommodating Growth.”
The primary growth driver in Doha was an “impressive” occupancy rate of 74%, rates in the Middle East average 68.8%; but ADR was only $181 against an expected $192. Supply was the real issue as some 3,000 new rooms in Doha came to the market.
This is an increase in supply of around 25%, higher than the rate at which tourist numbers are increasing, and this is set to continue over the next three to four years, the report said. Across the region, high occupancy has been a long-term trend, but with so much new supply coming on-stream in the Middle East, the report has raised doubts over its sustainability.
“During the peak month of February, Middle East supply (5.7%) outstripped demand (3.5%) for the first time since 2009,” said Stephen Anderson, country senior partner, PwC Qatar.
The report notes that the FIFA World Cup in 2022 will create challenges and opportunities. The Qatari authorities are considering the use of ‘floating hotels’–cruise ships that can moor for the duration of the tournament but then move elsewhere. As many as 6,000 rooms could be provided this way.
“Doha is in an early stage of development which presents a unique set of opportunities and challenges,” Anderson said. “Looking forward to the 2022 FIFA World Cup, Qatar is looking to diversify away from oil, but tourism is not the principal or the only focus for this investment. Education, innovation, and technology have been a particular priority in recent years. The hotel sector and the economy as a whole must maintain momentum until Qatar 2022, and manage the tournament’s legacy thereafter.”
Nearly 3mn people visited Qatar in 2014, a rise of 8.2% on 2013. Some 722 rooms recently opened and 6,000 are under construction. Furthermore, a return of positive ADR is expected in Doha throughout 2015 and 2016 at 6.5% and 4.5% respectively.
“The city’s ability to manage the supply coming on board will be the driving factor to achieving this forecast,” said Alison Grinnell, director and PwC Middle East hospitality and leisure assurance leader.
According to PwC, a key challenge for the Middle East’s hotel sector overall is the high proportion of hotels in the five star and luxury segment. Most mature markets have a ‘pyramid’ distribution of properties, with the majority of rooms in the economy or budget segment, and only a few at the ultra-premium end.
Doha follows the same trend of the predominance of luxury and upscale hotels. However, there is clearly an opportunity here for owners and operators to expand their portfolios into the mid-scale and economy segments: particularly given the profile of visitors expected for the World Cup.
As Doha gears up for 2022 FIFA World Cup, there are a number of economy or mid-range properties planned in Doha as well as many new hotels in the luxury sector. The city currently has 16,000 rooms, but this is expected to rise to 60,000 by 2022.
Grinnell said, “There has also been massive investment in a new airport and other infrastructure, which will benefit the city long after the football is over. This includes the Mall of Qatar, and $1.8bn Doha Festival City, including an Angry Birds theme park.”