hvs - 2011 middle east hotel survey - shifting sands

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2011 MIDDLE EAST HOTEL SURVEY SHIFTING SANDS

APRIL 2011 | PRICE US$250

Hala Matar ChoufanyManaging Director

HVS Dubai | Liberty House Building, DIFC, 7th Floor, Of fice 715, Dubai, UAE

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PAGE 2 | 2011 MIDDLE EAST HOTEL SURVEY

HighlightsWhile the global economies cautiously stepped onto theroad to recovery in the second half of 2010, current unrestin certain parts of the Middle East and soaring oil prices areposing new questions about future hotel performance in

several parts of the region.Following the cancellation and suspension of severalprojects in 2009, 2010 witnessed the re-engineering andre-designing of projects that are now aligned with morereasonable expectations of each market’s potential forgrowth in the short to medium term. This shift also allowsfor the development of much-needed asset classes suchas limited service and budget hotels that will support andenhance tourism potential in the future.

All in all, international visitation remained ratherconservative in 2010 and an increase in regional anddomestic tourism was recorded. The current unrest incertain parts of the Middle East will displace high levels ofdemand to those cities that are now considered ‘safer’.

Growth in corporate and leisure visitation came as a resultof improved economic conditions during the second halfof 2010, coupled with more affordable rates across manycities.

As a result, 22 cities achieved higher occupancies whencompared to 2009, despite the opening of a number of newhotels.

In line with occupancy growth, 23 markets recordedaverage rate growth while the remaining markets struggledto improve rates when occupancy was coming underpressure.

The Middle East Hotel Survey 2011 includes 352 hotels andsome 93,500 hotel rooms (an increase of 36% on last year)

across 52 cities in the Middle East, making it one of the mostreliable benchmarking surveys in the region.

Overall, investment in budget and four-star hotels is gainingmomentum across most cities in the Middle East.

A total of 30 branded hotels, or approximately 8,000 hotelrooms, opened in the region in 2010, of which 65% openedin the UAE alone.

Several markets remain undersupplied and underdevelopedand there are large opportunities for investors anddevelopers. Damascus, Beirut, Erbil, Yemen, Kuwait andOman have not seen much growth in hotel supply over thelast few years and are becoming increasingly attractive forinvestors and operators.

Asset conversion and brand conversion seem to deinethe new growth strategy of operators, especially in thosemarkets that offer little opportunity for new development inthe current limited investment climate.

By aligning the product offering and service levels withmarket needs, the market share of hotels is being redeined

in a number of cities.

Dubai continues to scale new heights with a record 47.2million passenger movements in 2010, a 17.6% increase onthe 40 million passenger movements recorded in 2009.

Saudi Arabia, the FDI magnet, attracted more than half ofthe total Foreign Direct Investment in the Middle East in2009 and unoficial data suggest the same was true in 2010.

Saudi Arabia, the UAE and Qatar remain at the forefront ofhospitality development .

Tourist arrivals to the Middle East increased by 14% in2010, registering approximately 56.6 million tourists.

Winners and LosersIn 2010, most Cities in Egypt saw occupancy levels grow asa result of improved regional leisure travel. Al Giza was thewinner with growth of 19 percentage points (pp) followedby Dahab (9 pp), Al Quseir, Red Sea and Sharm El Sheikh(7 pp) and Cairo Heliopolis and Taba (6 pp). Cairo CityCentre marginally increased occupancy by 2 pp while CairoPyramids’ occupancy fell by just 1 pp.

In Jordan, all markets experienced an increase in occupancyafter a strong dip in 2009. Aqaba, a predominantly leisuredestination, grew by 12 pp, followed by the capital Ammanat 6 pp and Petra at 5 pp.

After a sharp decline in 2009, Doha occupancy grew by 8 pp,driven largely by increased corporate visitation. With theannouncement of the Doha 2022 World Cup, it is expectedthat corporate business will accelerate over the medium tolong term.

Despite some 15 hotel openings in Dubai in 2010, andspeculation about a double dip in the market, marketwideoccupancy grew by 3 pp, reaching 72%, driven primarily byintraregional visitation as well as an increase in corporatedemand. All other emirates suffered occupancy drops in2010 as they faced stiffer competition from Dubai. AbuDhabi’s occupancy fell by 9 pp and we expect furtherpressure from new supply in 2011 to bring marketwideoccupancy in Abu Dhabi to the low-to-mid 50s.

In Syria, all markets experienced occupancy growth;Saidnaya achieved a 15 pp growth while Damascus andLatakia achieved 3 pp and 4 pp growth, respectively.

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US$% Occupancy (%) Average Rate (US$) RevPAR (US$)

FIGURE 1: PERFORMANCE OF FIRST CLASS HOTELS IN THE MIDDLE EAST



2011 MIDDLE EAST HOTEL SURVEY | PAGE 3

Neighbouring Beirutexperienced a 4 pp fallin occupancy, despite anincrease in visitation tothe city. The most recentaddition to supply inBeirut in 2010 was LeGray Hotel and the FourSeasons Hotel, both ofwhich are at the high endof the market.

New emerging marketssuch as Erbil areexperiencing growthas demand currentlyexceeds the supply ofquality accommodationin the city.

Sanaa, the capital of Yemen, has seen deterioratingoccupancy levels as a result of the ongoing tension and

political instability over the last few years.All markets in Saudi Arabia have seen drops in occupancylevels ranging from 1 pp in Jeddah to 30 pp in Al Qassim.Riyadh experienced a 4 pp drop in occupancy while supplyhas grown by approximately 10%.

Some 23 cities registered moderate increases in averagerate; topping the list were those cities that have previouslyachieved an average rate of less than US$75.

Owing to a shortage in quality accommodation, marketwideaverage rate grew by 10% in Erbil in 2010.

In the current economic climate and with a number of newhotels still coming on stream in the near term, we projectaverage rate to remain stagnant over the next few years.

Very modest, if any, RevPAR increases were witnessed in2010, resulting in a lower value per key for most markets inthe Middle East.

MacroeconomicIndicatorsFollowing the decline in GDP growth in most cities in 2009,the start of the recovery was evident in 2010, notablyduring the second half of the year. Qatar witnessed thehighest growth in GDP at 14%, followed by Lebanon at 8%.Most other cities grew between 3% and 5%. The overalloutlook for 2011 at the beginning of the year remainedpositive, albeit the unrest that is currently being witnessedin several cities will undoubtedly hinder growth, especially

if the situation endures. On the other hand, the recent surgein oil prices is expected to support the GDP projections ofoil-rich economies.

Egypt, Qatar and Yemen grappled with double-igureinlation in 2010, and this trend is expected to continue. Thecurrent unrest in Egypt and Yemen will further deine themacroeconomic trend for these countries and we expecta revision of these estimates short ly. The increasing oilprices are causing valid concerns in regard to the increase ininlation across the world’s economies and, as we have seenin the past, the snowball effect cannot be ruled out in theregional economies.

Oil-rich Kuwait and Qatar lead the region in terms ofbudget balance, despite signiicant public spending by theirgovernments in building infrastructure.

Foreign DirectInvestmentSaudi Arabia, the FDI magnet, attracted more than half ofthe total Foreign Direct Investment in the Middle East in2009. A large population base, rich oil reserves and strongmacroeconomic indicators make it the undisputed leader,followed by UAE and Egypt. Unoficial data suggest thatSaudi Arabia once again tops the list in 2010.

Qatar and Lebanon feature as other leading countries forFDI. With the upcoming Doha 2022 World Cup, Qatar isexpected to attract a larger share of FDI in the next ten yearswhile Lebanon needs to pave the way for political stabilityin order to consolidate on FDI gains in future years.

2 00 8 2 00 9 2 01 0 2 01 1F 2 00 8 2 00 9 2 01 0 2 01 1F 2 00 8 2 00 9 2 01 0 2 01 1F 2 00 8 2 00 9 2 01 0 2 01 1F

Bahrain 6.3 3.1 3.5 4.1 3.2 2.7 2.8 2.9 7.5 0.8 0.3 0.2 10.3 6.4 2.2 0.1

Egypt 7.2 4.7 5.1 4.1 18.3 11.9 11.1 14.6 6.8 6.6 8.0 12.0 0.8 1.3 0.3 1.5

Iraq 7.8 4.5 5.5 6.5 2.8 2.8 2.5 5.6 — 10.0 1.4 7.4 — 2.1 4.1 12.9

Jordan 5.8 2.4 3.2 3.8 9.4 2.7 5.9 3.1

9.6

12.3

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4.3

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Kuwait 8.5 4.6 3.4 4.2 9.0 2.1 4.5 4.5 28.3 17.7 24.1 22.5 41.1 20.1 37.6 35.9

Lebanon 9.3 8.5 7.5 5.9 5.5 3.4 4.0 2.8 9.5 8.6 5.4 7.6 14.4 21.9 19.3 14.5

Oman 12.8 2.0 3.6 3.8 12.5 3.5 4.0 4.5 9.0 3.0 7.9 7.2 9.1 4.6 4.9 5.2

Qatar 11.7 9.5 14.0 15.8 13.2 3.4 11.5 14.4 10.0 2.9 13.6 23.1 13.0 7.3 22.3 25.5

Saudi Arabia 4.2 0.6 3.8 3.9 9.9 5.1 5.4 6.3 32.5 6.1 6.6 6.2 27.5 6.1 15.9 14.3

Syria 4.3 5.0 4.0 4.6 15.7 2.5 4.4 7.2 2.5 2.8 3.2 0.6 0.1 0.7 1.6 2.0

UAE 7.4 2.7 2.1 3.5 12.3 1.6 0.9 2.5 14.2 2.6 2.2 3.5 14.0 1.8 2.4 4.9

Yemen 3.2 3.8 5.2 3.0 19.0 5.4 12.2 13.3 1.1 9.4 5.1 6.4 4.0 7.8 6.6 7.4

Real GDP Growth (%) Consumer Price Inflation Budget Balance Current Account Balance

S o u r c e : E c o n o m i s t I n t e l l i g e n c e U n i t

2006 2007 2008 2009

Bahrain 2,915 1,756 1,794 257

Egypt 10,043 11,578 9,495 6,712

Iraq 383 972 1,856 1,070

Jordan 3,544 2,622 2,829 2,385

Kuwait 122 116 — 145

Lebanon 3,132 3,376 4,333 4,804

Oman 1,597 3,332 2,359 2,211

Qatar 3,500 4,700 4,107 8,722

Saudi Arabia 17,140 22,821 38,151 35,514

Syria 659 1,242 1,467 1,434

UAE 12,806 14,187 13,700 4,003

Yemen 1,121 917 1,555 129 S o u r c e : U N C T A D 2

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FIGURE 2: ECONOMIC INDICATORS

FIGURE 3: FOREIGN DIRECT INVESTMENT (US$ MILLIONS)




Worldwide TouristArrivals and Middle EastGrowthThe Middle East bounced back sharply in 2010 with 14%year-on-year gains in tourist arrivals – twice the growthpercentage for the entire world and the highest across allcontinents. Asia followed closely with a 13% increase on2009 igures. Europe found itself trailing behind with amodest 3% gain on 2009 tourist arrivals.

Various factors have contributed to the growth in visitationto the Middle East ranging from rate corrections in mostcities making them much more affordable to increasesin the number of regional budget airline lights and theintroduction of additional routes to Asia, Americas andEurope by the main Middle Eastern carriers, such asEmirates, Itihad and Qatar Airways.

Airport PassengerMovementsDubai continues to scale new heights with a record

47.2 million passenger movements in 2010, a 17.6% increaseon the 40 million passenger movements recorded in 2009.Jeddah, without any signiicant gains in 2010, marginallyincreased its year-on-year passenger movements to ranksecond, with more than 15 million passengers, just enoughto edge out Doha to third place. In terms of percentage gainsover 2009 passenger trafic, Erbil witnessed a 28% increase,Muscat 26%, Amman 14%, Abu Dhabi 12%, Beirut andRiyadh 10%, and Sharjah 9%. Plans to extend airports arestill underway in most Middle Eastern cities albeit the delaysin commencing and completing these projects.

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2005 2006 2007 2008 2009 2010 S o u r c e : W T O

2005 2006 2007 2008 2009 2010

% Change

200910

World 8 06 ,0 00 8 46 ,0 00 9 08 ,0 00 9 24 ,0 00 8 87 ,0 00 9 46 ,4 00 7 %

Africa 37,300 40,300 44,900 46,900 49,200 52,200 6%

Americas 1 33 ,5 00 1 36 ,3 00 1 42 ,5 00 1 47 ,6 00 1 40 ,2 00 1 51 ,4 00 8 %

Asia Pacific 1 55 ,4 00 1 67 ,1 00 1 85 ,4 00 1 88 ,3 00 1 84 ,5 00 2 08 ,5 00 1 3%

Europe 4 41 ,0 00 4 60 ,8 00 4 88 ,0 00 4 88 ,5 00 4 59 ,2 00 4 73 ,0 00 3 %

Middle East 39,200 41,000 47,500 52,900 53,900 61,400 14% S o u r c e : W T

O

FIGURE 5: ARRIVALS TO THE MIDDLE EAST (000S)FIGURE 4: WORLDWIDE TOURIST ARRIVALS

2005 2006 2007 2008 2009 2010 % Change

Abu Dhabi 4,940,502 4,789,536 6,565,556 8,687,712 9,374,631 10,500,000 12%

Amman 3,272,020 3,506,061 3,850,347 4,477,811 4,770,769 5,430,000 14%Beirut 3,179,753 2,739,606 3,326,433 4,039,560 4,952,899 5,464,038 10%

Cairo 10,089,339 10,665,708 12,475,605 14,272,180 14,305,800 14,305,800 0%

Damascus 6,125,833 6,009,485 5,991,627 5,976,016 6,091,889 6,091,889 0%

Dammam 3,013,240 3,341,092 3,840,671 3,883,700 4,149,598 — —

Doha 7,191,991 8,733,160 10,795,417 12,214,870 13,129,467 15,000,000 14%

Dubai 23,922,292 27,925,522 33,481,257 36,592,307 40,104,149 47,200,000 18%

Erbil 17,898 67,698 131,055 146,589 169,539 216,728 28%

Jeddah 1 3,239,144 13,265,07 1 14,356 ,4 33 15,27 5,144 15 ,2 91,768 1 5,334,768 0%

Kuwait 5,381,258 6,053,094 6,910,309 7,226,345 8,125,617 8,125,617 0%

Manama 1,693,207 1,834,158 1,966,922 2,218,536 2,337,737 2,279,952 2%

Medina 1,641,871 1,749,118 2,009,790 2,421,505 2,703,859 — —

Muscat 3,383,042 4,521,343 4,050,005 3,918,136 4,556,502 5,751,516 26%

Ras alKhaimah 67,555 98,198 141,206 208,213 19,291 — —

Riyadh 10,532,752 10,962,043 11,709,230 10,804,881 12,635,739 13,919,000 10%

Sanaa — — — 113,209 393,322 — 247%Sharjah 2,237,546 3,064,396 3,976,860 5,008,105 5,631,786 6,161,737 9%

The 2010 figures are reported based on the sources other than ACI Report

The 2010 figures in in italics are estimations

*In regards to airport arrivals, Dubai has been the market leader with over 40 million passengers arriving in 2009.

BibliographyAP

Abu Dhabi http://www.zawya.com/story.cfm/sidZAWYA20101214061623/?relcontent=ZAWYA20101214061623

Doha http://www.zawya.com/story.cfm/sidZAWYA20101219040858?q=new doha international airport arrivals 2010

Syria http://www.zawya.com/story.cfm/sidZAWYA20110125064628?q=syria airport arrivals 2011

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

2005

2006

2007

2008

2009

Egypt http://www.hotelmule.com/network/space.php?uid=185&do=blog&id=754

Kuwait http://www.thefreelibrary.com/Kuwait+International+to+increase+capacity.a0250251793

Jeddah http://en.wikipedia.org/wiki/King_Abdulaziz_International_Airport

Riyadh http://en.wikipedia.org/wiki/King_Khalid_International_Airport

Beirut http://www.ansamed.info/en/libano/news/ME.XEF12261.html

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FIGURE 6: AIRPORT PASSENGER MOVEMENTS




Sanaa, Yemen witnessed more than a twofold increase inpassenger trafic between 2008 and 2009; however, theseigures are outliers and the absolute increase in passengertrafic is rather low, despite the healthy percentage gain.

Market SegmentationDammam, Al Khobar, Riyadh, Doha, Abu Dhabi and Manamaare markets predominantly driven by corporate demand.Cities such as Muscat, Dubai, Beirut, Amman and Cairoattract a balanced share of corporate and leisure demand.

The Free Independent Traveller (FIT)segment remains a lucrative source of

income for the majority of cities in theMiddle East, including Amman, Beirut,Cairo and Dubai. On the other hand,Dubai, Amman and Manama enjoy a highlevel of meeting, incentive, conferenceand exhibition (MICE) business. Dubai,although commanding only 15% ofits total demand from this segment, inabsolute terms is still the region’s MICEmarket leader.

Source MarketsVisitation to Middle Eastern countries

originates primarily from neighbouringArab countries (owing to the shortjourney time) and Europe (owing tothe number and frequency of lightsbetween the two). Markets such asManama, Amman, Dammam, Damascusand Saudi Arabia received more than 60%of their visitation from Arab countriesand are heavily reliant on the economiccondition and trends of the Arab region.

European source markets witnessed a signiicant declinefollowing the global economic slowdown in late 2008 tomid-2010; however, with a correction in average rates, mostof the Middle Eastern destinations became more attractiveto a wider base of European tourists and the second halfof 2010 witnessed an increased inlow from these sourcemarkets. Cairo, Oman, Beirut, Abu Dhabi, Ras al-Khaimahand Dubai attract a large share of visitation from Europe.

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FIT

Leisure

MICE

Corporate

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FIGURE 7: MARKET SEGMENTATION

FIGURE 8: VISITATION FROM ARAB COUNTRIES 2010

FIGURE 9: VISITATION FROM EUROPE 2010




Distribution ofInternational BrandsDubai retains top position with an impressive number ofhotels and hotel rooms in the ive-star category justifyingits position as a luxury destination. Cairo ranks secondfollowed by Abu Dhabi, Qatar, Beirut and Jeddah.

In the international four-star category, Dubai once againleads the pack, followed by Manama and Abu Dhabi. Morerecently, several Middle Eastern markets have seen theopening of four-star hotels, which proved to be more

resilient during economic downturns.

There is limited supply of internationally branded three-star hotels in the Middle East. Few internationally managedproperties are currently established in the UAE, and notablyDubai, while most other markets have a number of locallymanaged budget hotels.

Proposed Supply andNew OpeningsThe Middle East is set to attract additional operators andhotels in the coming three to ive years. A total of 190hotels – equating to approximately 61,000 hotel rooms –is currently under design or construction for the variouscities.

The UAE will attract 30% of the proposed supply with some56 hotels, 24,000 hotel rooms, in the coming four years.

Not surprisingly, Saudi Arabia ranks second with a planned41 hotels or some 12,300 hotel rooms. Beirut will have theleast number of conirmed properties and each is set tosee the opening of ive hotels, or approximately 1,000 keys.The most recent addition in Kuwait will be the Missonihotel, opening towards the end of May 2011. This is the irstMissoni hotel to open in the Middle East. The average sizeof proposed hotels ranges from 200 rooms in Beirut to 400rooms in Dubai.

Questions have been raised over the effect of additionalsupply entering the market in next three to ive yearsand the resultant impact on marketwide occupancy and

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Saudi Arabia15%

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6%

UAE

64%

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9%

Egypt

6%

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FIGURE 10: TOTAL NUMBER OF BRANDED HOTELS FIGURE 11: TOTAL NUMBER OF BRANDED HOTEL ROOMS

FIGURE 12: DISTRIBUTION OF NEW OPENINGS 2010


0 5, 000 1 0, 00 0 1 5, 00 0 2 0, 000 25 ,000

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FIGURE 13: DEVELOPMENT PIPELINE BY NUMBER OF HOTELS AND NUMBER OF ROOMS




average rate. We estimate reasonable growth in demandfor transient accommodation for most of the markets inthe foreseeable future. We expect average rate to remainstagnant in the more established market and to increaseconservatively in markets welcoming high-end and luxuryoperators.

Some 16 hotels opened in Dubai in 2010, ranging for limitedservice to luxury brands. The Armani hotel, which occupiesa number of loors in Burj Khalifa, opened in May 2010.Other hotels that entered the market include ibis, Pullman,Soitel, Centro, Rotana, Mövenpick, Ramada and Holiday InnExpress. Dubai accounted for around 50% of the new hotelopenings in 2010. Saudi Arabia saw the entry of severaloperators, including IHG, Accor, Hilton and Wyndham.

Operator PresenceDubai is the leading destination with at least 16international lags currently in operation in the market.Cairo ranks next and has attracted some 12 international

operators, followed closely by Doha (11), Kuwait (10)and Abu Dhabi (9). Markets such as Dammam, Damascus,Sharjah, Ras al-Khaimah and Erbil have a large number oflocally managed properties and present large opportunitiesfor international operators to grow either through newdevelopments or conversions.

While most of these cities are expected to have additionalbrands in the near future, some of the destinations – likeDamascus in Syria and Erbil in Iraq – will be closelymonitored by operators for geographical expansion.

IHG, Hilton, Marriott, Rotana and Starwood will add morethan 8,000 rooms each in the next ive years. Both Accorand Mövenpick will also expand their geographical presencewith just under 6,000 rooms each while Kempinski, Rezidorand Wyndham will bring a total of 11 hotels (or 3,000rooms) each.

Mandarin Oriental has signed a management agreementfor Doha and Abu Dhabi while the Four Seasons is expectedin Abu Dhabi, Manama, Kuwait, Doha and Oman. TwoFairmont properties are expected to open in Saudi Arabia,with further hotels in Oman and Fujairah. On the otherhand, Kempinski is to intensify its presence with upcomingproperties in the UAE, Bahrain, Syria, Saudi Arabia, Beirutand Oman.

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existing presence; proposed properties


FIGURE 15: EXISTING AND PROPOSED OPERATOR PRESENCE BY MARKET 2010

Accor

Mövenpick

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0 2,000 4,000 6,000 8,000 10,000

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FIGURE 14: PROPOSED NEW SUPPLY BY OPERATOR (NUMBER OF ROOMS)




Infrastructure Projects Airport Expansion

Abu Dhabi

Total Infrastructure Investment – US$16.8 billion

This investment includes the construction and expansion of roads and substations, infrastructure

packages catering to new developments such as Yas Island, Saadiyat Island, Raha Beach Complex and

the introduction of a 350 km light railway connecting major regions within Abu Dhabi.

Notable Developments:

Abu Dhabi Light Rail Project – This project calls for the design and construction of a highspeed

railway that includes 38 stations amongst various developments and regions of Abu Dhabi –

US$3 billion

Abu Dhabi International Airport Expansion – US$1.7 billion

This expansion includes the introduction and implementation of a new baggage handling system,

construction of a new terminal 2 building which will serve a million passengers a year and a new interim

passenger terminal dedicated to Etihad Airways.

Bahrain


This investment includes roadworks, motorway upgrades, district cooling systems and rail networks,

all helping to link various regions of Bahrain including Durrat Al Bahrain and the Financial Harbour.


Qatar Bahrain Causeway – Friendship Bridge linking Qatar and Bahrain – US$1.5 billion

Bahrain Rail Network – Monorails, trains and trams encompassing all districts in 3 Phases –

US$13 billion

Bahrain International Airport Expansion – US$4.8 billion

This expansion is looking to increase airport capacity from 7 million passengers to 17 millions

passengers by 2014, and then to 27 million passengers by 2038. This development includes upgrading

the existing terminals and all related facilities. The scope of work also includes recreational areas, hotels

and shopping centres.

Cairo


This investment includes desert road extension, railway upgrades and the introduction of new metro

lines.

Notable Developments: Cairo Metro Line 2 to 6 – The introduction of new metro lines will further interconnect various

regions within Cairo, such as Heliopolis, Greater Cairo and the airport – US$5.3billion

Cairo International Airport Expansion – US$584 million

Cairo International Airport has recently completed the development of a new terminal that has the

capacity to hold 11 million passengers. This expansion also includes the construction of a new 128

metre control tower at the airport.

Dubai


This

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the

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various

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bridges,

uprgrades to substations and infrastructure packages catering to developments such as Business Bay

and DIFC. This investment also includes the design and construction of a tram system and the

completion of the Green Line on the Dubai Metro.


Dubai Metro (Light Rail Transport) – This project includes the construction and execution of a

planned Blue Line that will connect Dubai International Airport and Jebel Ali Airport City and an

extension/completion of the Green Line – US$10.7 billion

Al Maktoum International Airport Expansion – US$1.1 billion

This

expansion

includes

the

construction

of

a

new

passenger

terminal

that

will

accommodate

7

million

passengers a year and the construction of a new cargo terminal along with all the services that are

essential to the operation of the airport.

Dubai International Airport Expansion – US$2.3 billion

This expansion includes the construction of a new concourse at Terminal 3, a multistorey car park and

the refurbishment and maintenance of Terminal 2.

Jeddah


This investment includes heavy roadworks to ease the flow of transport, substations, expansion and

upgrades of main highways and the installation of numerous bridges across intersections.


13 New Tunnels and Bridges – This project includes the removal of several roundabouts within

Jeddah to ease the flow of traffic and decrease congestion with the city. It also includes the

construction of an 800metre tunnel on King Abdul Aziz Road – US$210million

King AbdulAziz International Airport Expansion – US$2.1 billion

King AbdulAziz International Airport has recently seen the development of the new Hajj terminals and

facilities which can now accommodate 3,500 passengers an hour instead of 1,250. Future expansion

also includes the introduction of a new terminal which will accommodate 30 million passengers a year

along with the implementation of a railway system that will link the airport with the Mecca and Medina

railway.

Jordan

Total Infrastructure Investment – US$872 million

This investment includes the construction of a 28 km light railway connecting to Amman and Zarqa

and the design/execution of a new Aqaba port

Kuwait


This investment includes the construction of motorways, substations, transformers, a railway/metro

system, major roads and seaport expansion.


Bubiyan Island Development (Seaport) – This project calls for the expansion of the seaport from

four berths to 60 berths by 2033 on Bubiyan Island in 3 Phases – US$18.1 billion

Kuwait Railway and Metro – This project calls for the construction of a 165km metro within Kuwait

and the construction of a railway network connecting Umm Qasr in Iraq, Kuwait and Salemy (Kuwait

and Saudi Border) – US$25 billion

Mecca

Total Infrastructure Investment – $5.3bn

This investment includes the construction of a railway network, tunnels, roadworks, substations,

district cooling and motorway upgrades and expansion to support various districts such as Kara,

Mecca and Altaif.


Mecca Light Rail – A 19kilometre railway system connecting the holy sites, with an ability to serve

90,000 passengers an hour – US$2.0 billion

MeccaMedina Railway – This project entails all the civil works involved in the 444kilometre railway

between the holy cities – US$1.8 billion

Medina


This investment

includes

the

construction

and

expansion

of

primary

roads

within

the

Medina

region,

development of roads connecting to the industrial city and various substations (transmission).


King Faisal Road – This project calls for the completion of work on King Faisal Road; the scope of

work includes passenger subways and the extension of a primary tunnel (Manakha Tunnel) –

US$92 million

Prince Mohammed bin Abdulaziz International Airport Expansion – US$650 million

The capacity

of

Prince

Mohammed

bin

Abdulaziz

International

Airport

expansion

is

looking

to

be

increased to 12 million passengers by 2022 with the construction of a new terminal and runway and an

upgrade of the existing facilities.

Muscat


This investment includes the construction and expansion of roads within Muscat city, substations and

port expansion.


Port Sultan Qaboos Expansion – This expansion calls for raising container terminal capacity at the

port – US$400 million

Muscat International Airport Expansion – US$10.8 billion

This expansion includes the maintenance and expansion of Manama International Airport's cargo and

catering facilities and increasing terminal capcity to 12 million passengers by 2014 and 50 million

passengers by 2050, along with a new passenger terminal.

Riyadh


This investment includes the construction of railway systems, major road expansions, substation

upgrades and bridge works.


ADA Light Rail – The project calls for the design, supply, construction and operation of a light railway

system to serve Riyadh city. This railway will look to support 8,000 passenger an hour per track –

US$3 billion

Princess

Norah

University

(Riyadh

Monorail)

–

This

project

involves

the

construction

of

a light

monorail connecting all the facilities within Princess Norah University – US$1 billion

Sharjah


This investment includes the expansion and construction of major roads, substations, bridges and

tunnels.

Sharjah International Airport Expansion – US$112 million

This expansion includes the renovation of the current facilities at Sharjah International Airport. It will

include new departure and arrivals areas, car parking facilities, duty free and other aspects of the

airport

FIGURE 16: INFRASTRUCTURE PROJECTS




Bahrain Manama 65 % 58 % 53 % 63 % 58 % 56 % 59 % 62 % 64 % 64 % 72 % 75 % 71 % 77 % 75 % 68 % 66 % 2 62 %

Egypt Al Giza 52 45 64 19 54

Al Gouna 81 72 72 0 75

Al Quseir 71 78 7 75

Al Soukhna 37 41 46 5 41

Alexandria 69 68 65 3 67

Aswan 40 53 51 2 48

Cairo City Centre 67 73 75 69 79 78 66 68 67 78 79 77 76 75 70 72 2 69

Cairo Heliopolis 65 79 72 70 83 83 75 75 73 75 77 74 86 67 66 72 6 71

Cairo Pyramids 58 66 66 47 70 76 61 62 61 73 76 75 80 86 76 75 1 65

Dahab 54 61 70 9 62

Hurghada 48 63 70 63 50 80 77 65 66 66 86 75 75 86 88 80 82 2 69

Luxor 52 45 42 3 46

Marsa Al Alam 79 71 64 7 71

Nuweiba 84 85 84 1 84

Red Sea 79 71 78 7 76

Sharm El Sheikh 79 73 72 66 68 79 63 61 66 64 75 71 66 76 81 75 82 7 68

Taba 74 74 80 6 76

Iraq Erbil 74 81 79

2 78

Jordan Amman 61 74 71 61 56 56 59 44 45 57 72 70 58 64 66 57 63 6 58

Aqaba 73 41 53 12 56

Dead Sea 68 55 57 2 60

Petra 75 59 64 5 66

Kuwait Kuwait City 44 41 44 46 46 47 46 49 53 84 64 70 65 58 62 59 54 5 52

20062003 Average

% Point

Change

2009102008 20102002 2004 20072005 20091994 1995 1996 1997 1998 20011999 2000

Lebanon Beirut 45 61 61 56 57 55 57 59 71 52 48 39 57 70 66 4 54

Oman Muscat 67 66 64 71 56 57 55 62 59 57 69 80 74 67 69 54 58 4 64

Salalah 67 70 67 3 68

Qatar Doha 61 75 80 78 72 61 58 56 60 72 72 71 71 71 70 58 66 8 64

Saudi Arabia Al Jubail 86 64 22 75

Al Khobar 61 62 45 17 56

Al Qassim 35 50 20 30 35

Burayda 45 52 37 15 45

Dammam 60 71 49 22 60

Jeddah 68 64 61 58 60 59 63 59 57 53 54 61 64 73 77 73 72 1 61

Mecca 60 55 54

1 56

Medina 61 63 56 7 60

Riyadh 66 62 61 62 63 62 60 61 65 64 55 62 70 71 74 67 63 4 61

Taif 48 58 57 1 54

Yanbu 43 37 6 40

Syria Aleppo 55 56 1 56

Damascus 70 73 68 70 69 69 66 65 67 65 69 75 73 80 79 71 74 3 67

Latakia 41 44 4 43

Saidnaya 41 56 15 49

UAE Abu Dhabi 65 58 66 65 66 64 67 67 68 68 82 85 84 81 81 73 64 9 68

Ajman 77 63 40 23 60

Al Ain 71 69 69 0 70

Dubai 74 69 74 73 70 70 74 71 76 79 86 82 84 87 81 69 72 3 72

Fujairah 74 69 66 3 70

Ras alKhamiah 81 67 67 0 72

Sharjah 83 67 61 6 70

Yemen Eden 44 48 4 46

Sanaa 49 39 33 6 40

Average 64 64 65 66 61 66 65 61 63 66 72 73 71 73 68 62 61 1

Source: HVS Research

FIGURE 17: AVERAGE ANNUAL OCCUPANCY 1994-2010




1 99 4 1 995 19 96 1 99 7 1 998 19 99 2 00 0 20 01 2 00 2 2 003 20 04 2 00 5 20 06 2 00 7 2 008 20 09 2 01 0

Bahrain Manama 86 87 92 90 93 102 105 103 119 122 132 177 196 249 259 205 209 2 % 6 %

Egypt Al Giza 116 72 63 12 26

Al Gouna 89 89 0 0

Al Quseir 67 60 10 10

Al Soukhna 92 82 83 1

5

Alexandria 124 110 100 9 10

Aswan 57 71 79 11 17



Cairo Pyramids 38 42 46 44 47 59 60 36 38 42 46 49 61 68 72 73 2 4

Dahab 82 76 79 4 2

Hurghada 67 39 41 44 30 34 41 35 30 32 40 47 46 41 49 45 49 10 2

Luxor 46 47 88 87 38

Marsa Al Alam 55 59 7 7

Nuweiba 39 38 39 2 0

Red Sea 89 84 77 8 7

Sharm El Sheikh 51 49 53 52 35 44 45 41 37 39 42 52 54 53 81 80 82 2 3

Taba 43 41 43 5 0

Iraq Erbil 170 138 152 10 5

Jordan Amman 67 75 83 83 81 71 68 68 65 69 85 118 132 147 161 140 137 2 5

Aqaba 95 126 122 3 13

Dead

Sea 168 188 174

8 2Petra 86 129 132 2 24


Lebanon Beirut 166 173 143 129 110 101 110 154 168 116 110 78 143 281 263 6 3

Compound Annual

Growth Rate 1994¹10

% Change

200910

Oman Muscat 103 103 112 101 95 91 86 80 74 66 82 117 154 283 329 244 210 14 5

Salalah 97 122 124 1 13

Qatar Doha 65 68 77 101 116 112 115 105 100 101 146 268 296 306 304 261 230 12 8


Al Khobar 229 233 193 17 8

Al Qassim 150 140 140 0 3

Burayda 140 143 146 2 2

Dammam 179 185 172 7 2

Jeddah 99 103 117 115 113 111 119 110 104 104 114 144 137 165 208 205 181 12 4

Mecca 182 228 202 12 5

Medina 96 106 114 8 9

Riyadh 98 105 106 110 113 116 115 110 107 104 105 110 142 202 233 297 261 12 6

Taif 176 170 174 2 1

Yanbu 139 139 0 0

Syria Aleppo 130 120

8

8Damascus 102 73 124 118 111 104 97 94 94 102 100 105 95 120 178 236 233 1 5

Latakia 119 103 13 13

Saidnaya 71 70 1 1

UAE Abu Dhabi 108 114 129 111 101 99 88 89 89 87 91 117 167 238 309 294 210 29 4

Ajman 245 172 175 2 15

Al Ain 158 157 153 3 2

Dubai 117 119 120 126 107 104 105 100 110 113 144 192 225 258 259 184 167 9 2

Fujairah 183 156 147 6 10


Sharjah 96 78 84 7 7


Sanaa 70 104 106 2 23

Average 98 87 101 101 95 206 207 204 202 206 215 235 248 276 192 178 171 8 % 4 %

¹ Or the earliest year for which data are available Source: HVS Research

FIGURE 18: AVERAGE RATE 1994-2010 (US$)




1 99 4 1 99 5 1 99 6 1 997 19 98 19 99 2 00 0 2 00 1 20 02 20 03 2 00 4 2 00 5 2 006 20 07 20 08 2 00 9 2 01 0

Bahrain Manama 56 51 49 56 54 57 62 64 76 78 95 133 140 193 195 139 138 1 % 6 %

Egypt Al Giza 60 32 41 25 18

Al Gouna 64 64 1 1

Al Quseir 48 47 1 1

Al Soukhna 34 34 38 14 6

Alexandria 86 75 65 14 13

Aswan 23 38 40 6 33



Cairo Pyramids 22 28 30 20 33 45 37 22 23 31 35 37 48 58 55 55 0 7

Dahab 44 46 56 20 12

Hurghada 32 24 29 28 15 27 31 23 20 21 34 35 34 35 43 36 40 12 2

Luxor 24 21 37 74 24

Marsa Al Alam 39 38 4 4

Nuweiba 33 32 33 1 0

Red Sea 70 60 60 1 8

Sharm El Sheikh 40 36 38 34 24 35 28 25 24 25 32 37 36 40 66 60 67 12 3

Taba 32 30 35 14 4

Iraq Erbil 126 111 120 8 2

Jordan Amman 41 55 59 51 45 40 40 30 29 39 61 82 77 95 106 80 87 9 5

Aqaba 69 52 65 25 3

Dead Sea 114 103 99 4 7

Petra 65 76 84 10 14


Lebanon Beirut 75 105 88 73 62 56 63 91 119 61 53 30 81 197 174 11 7

% Change

200910

Compound Annual

Growth Rate 1994¹10

Oman Muscat 69 68 72 72 53 52 47 50 44 38 57 94 114 190 227 131 121 8 4

Salalah 65 86 83 3 13

Qatar Doha 39 51 62 79 83 69 67 59 60 73 105 191 208 218 213 151 151 0 9


Al Khobar 140 144 86 40 21

Al Qassim 53 70 28 60 27

Burayda 63 74 54 27 7

Dammam 107 131 85 36 11

Jeddah 67 66 71 67 68 66 75 65 59 55 62 88 87 121 161 150 130 13 5

Mecca 109 125 109 13 0

Medina 59 67 64 4 4

Riyadh 65 66 64 69 71 72 69 67 70 67 58 68 100 143 173 199 164 18 6

Taif 84 99 98 0 8

Yanbu 60 51 15 15

Syria Aleppo 72 67

6

6Damascus 71 53 84 82 76 72 65 61 63 66 69 79 69 95 140 168 172 2 6

Latakia 49 46 5 5

Saidnaya 29 39 35 35

UAE Abu Dhabi 70 66 85 72 66 63 60 60 61 59 75 99 140 192 252 215 134 38 4

Ajman 189 108 70 36 39

Al Ain 112 108 105 3 3

Dubai 87 82 89 92 75 73 78 71 84 89 124 158 188 225 209 127 121 5 2

Fujairah 135 108 97 10 15


Sharjah 80 52 51 2 20


Sanaa 34 40 35 13 1

Average 63 56 66 66 58 135 135 125 127 136 155 171 175 202 130 111 104 6 % 4 %

¹ Or the earliest year for which data are available Source: HVS Research

FIGURE 19: REVPAR PERFORMANCE 1994-2010 (US$)



About HVS

HVS is the world’s leading consulting and servicesorganization focused on the hotel, restaurant, sharedownership, gaming, and leisure industries. Establishedin 1980, the company performs more than 2,000assignments per year for virtually every major industryparticipant. HVS principals are regarded as the leadingprofessionals in their respective regions of the globe.Through a worldwide network of 30 of fices staffed by400 seasoned industry professionals, HVS provides anunparalleled range of complementary services for thehospitality industry. For further information regarding ourexpertise and specifics about our services, please visitwww.hvs.com.

HVS DUBAI has a team of experts that conducts ouroperations in the Middle East and North Africa. The teambenefits from international and local backgrounds, diverseacademic and hotel-related experience, in-depth expertisein the hotel markets and mixed-use developments in theMiddle East and a broad exposure to international hotelmarkets. Over the last four years, the team has advisedon more than 180 projects in the region for hotel owners,developers, lenders, investors and operators. HVS hasadvised on more than US$45 billion worth of hotel andmixed-use real estate projects in the region.

Note: No investment decision should be made based on the information

presented in this article. For further advice please contact the authors.

Hala Matar Choufany is theManaging Director of HVSDubai and is responsible forthe irm’s valuation andconsulting work in the MENAregion. Hala is multi-skilled inthe real estate and hotelindustry and has worked

extensively in several markets throughout Asia,Europe, the Middle East and North Africa, havingworked previously for the London andSingapore/Shanghai ofices of HVS. Hala holds anMPhil from Leeds University and an MBA fromIMHI (Essec- Cornell) University, Paris, France.Since joining HVS, she has worked on strategyrelated assignments and mid- and large-scalemixed-use developments and conductednumerous valuations, feasibility studies, operatorsearches, return on investment analyses andmarket studies in Europe, the Middle East, Africaand Asia. Hala has a strong understanding of thedynamics and success factors that governproitable mixed-use projects and she maintainsexcellent contacts with key private andinstitutional investors, developers, inanciers,owners and operators, having a goodunderstanding of their investment requirements.

Hitesh Gandhi is an Assistant

Consultant and ValuationAnalyst with HVS Dubai. Hehas recently graduated fromthe Emirates Academy ofHospitality Management (inafiliation with École hôtelièrede Lausanne) with a Bachelors

of Science degree. He started his career withJumeirah Hotels in Dubai as a house-keepingteam leader. He joined Emirates National Bank ofDubai in 2008 where he provided systemsolutions research for the IT department. Hiteshjoined HVS Dubai in September, 2010.

HVS Dubai | Liberty House Building, DIFC, 7th Floor, Of fice 715, Dubai, UAE

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