Exclusive forecast: hospitality trends for 2016

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Exclusive forecast: hospitality trends for 2016

Devina Divecha, January 12th, 2016
Last year, Hotelier Middle East reported that the trouble
with the rouble from 2014 filtered through to 2015,
while the Egyptian market was experiencing a slight
upturn. The infrastructure in the region however, is still
going strong, and tourism numbers are on the up and
up.
TRI Consulting associate director Chris Hewett tells
Hotelier: 2015 was a challenging year for hoteliers in the
region with macroeconomic, currency fluctuations and
geopolitical factors all impacting performance levels. With
oil prices expecting to remain low and stagnant growth in
Europe and Asia, we anticipate 2016 to be another challenging year. And Rotana COO Guy Hutchinson
admits that 2015 has been a tough year due to the impact of the fall in oil prices and the currency drop with the
rouble and euro.
However, PwC released its research and forecast mid-2015, which suggested that growth will again be the
dominant theme for 2016.
According to a statement: Much will depend on when and whether visitor numbers pick up again from Russia,
and hoteliers in the region are still assessing the impact this could have on both RevPAR and TRevPAR. The
weakened euro is also making it considerably cheaper for GCC tourists to head to Europe for shopping rather
than travelling within the Middle East.
STR Globals Middle East and Africa hotel pipeline for November 2015 has revealed growth as well. There are
501 hotels totalling 144,321 rooms under contract in the Middle East and 285 hotels totalling 53,093 rooms
under contract in Africa, according to the November 2015 STR Global Construction Pipeline Report (NB: Under
contract data includes projects in the in construction, final planning and planning stages but does not include
projects in the unconfirmed stage).
Hotels under contract in the Middle East subcontinent represents a 30.1% increase in rooms under contract
compared with November 2014 and a 57% year-over-year increase in rooms under construction. The Middle
East reported 82,446 rooms in 253 hotels under construction for the month.
REVPAR, SOURCE MARKETS, AND OCCUPANCY
Viability managing partner Guy Wilkinson tells Hotelier Middle East: Specifically in Dubai, the citys hotel
market was quite significantly impacted in RevPAR terms during 2015 by a combination of fast pipeline growth
(29 new hotels with almost 8,000 rooms have opened in Dubai since our previous pipeline survey published in
June 2015) and diminished demand from key markets such as Russia and China, whose weakened currencies
affected their tourism spending power. He adds that this downward hotel performance trend will continue over
the next few years, until demand growth resumes in the run-up to Expo 2020.
Time Hotels CEO Mohamed Awadalla says that in 2015, Saudi Arabia was the brands main source market,
while it has also seen a rise in travellers from Kuwait. This can be attributed to the emirates attractiveness as
a safe and welcoming destination in the region, compared to other previously popular Middle Eastern and
Levant countries. We expect both markets to grow in 2016, adds Awadalla.
Hilton Worldwide Middle East & Africa president Rudi Jagersbacher highlights the importance of the Chinese
market. In 2016 and beyond, Chinese outbound travel is expected to grow at an unprecedented pace, with the
number of outbound Chinese travellers expected to double from 100 million to 200 million by 2020. This will
have a natural ripple effect on arrivals to the GCC, with China remaining a top target source market for the
coming years.

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Jagersbacher notes that the number of Indian visitors to the GCC is also expected to grow in 2016 with a
number of tourism boards in the GCC, including those in Sharjah and Ras Al Khaimah, driving promotional
efforts in the south Asian nation. He also says that Egypt is definitely a growing market, as the country targets
20 million tourists by 2020 and the government undertakes a global marketing drive.
Hutchinson says new source markets such as Poland, Slovakia, and Hungary have also emerged, and adds:
Surprisingly, the GCC itself was one of the main markets in 2015, thanks to the inter-regional travel
percentage. It is worth mentioning that a recent study stated that the average spend in the GCC countries for
inter-regional travel is as high as US $4,980, and for international travel, it is $9,920. This includes airfare, hotel
room, ground transport, travel supplies, and car rentals.
Echoing what the other hoteliers shared, he says Saudi Arabia was one of the most important tourism source
market in the GCC for inter-regional travel. Hutchinson says: The main source markets remained the same as
the previous years and that included the UK, Russia, Germany, China and India. In terms of geographical
areas, the Middle East looks set to remain as the UAEs single largest source market for visitors, with its share
of arrivals sitting at around 30%. The Asia Pacific region is forecasted to take a greater stake this year, with the
number of tourists predicted to rise from 2.9 million in 2014 to four million in 2018.
Taj Dubai general manager and area director Jason Harding says that in its first year of operations, Saudi
Arabia, Abu Dhabi and India have been driving the largest number of visits. We dont expect this to change
substantially in the months to come, although given the uncertainty of the oil prices, we anticipate business
from the petroleum sector to soften, says Harding.
TRAVEL AND TOURISM
Speaking about the opportunities for hoteliers in the next 12 months, Jagersbacher notes: Having worked in
hospitality industry for more than 40 years, I can say that the pace of growth and change we have witnessed in
the past five years is almost unmatched, and presents a great opportunity to evolve our offering to meet
broader guest demands.
In this regard, Jagersbacher says there is an increased demand for experiential travel, while owners want their
properties to retain their individual identities. We see this as a major growth area in 2016, following the launch
of Curio A Collection by Hilton in late 2014. Curio currently has 21 properties under development, which
include the Curio at the Mall of Qatar and the Rosemont Hotel & Residences in Dubai.
The Rezidor Hotel Group area vice president Middle East and Turkey Mark Willis also says that authenticity will
be a key opportunity: Sophisticated travellers are increasingly choosing iconic products in unique locations that
define the destination and are able to tell a story. These unique locations used to be often run as independent
hotels but often lacked visibility or service quality. Some hotel operators have seen the opportunity by adopting
to the model and accordingly, Carlson Rezidor launched the Quorvus Collection.
Harding also points out that there is a growth in lifestyle concept properties which will increase over the coming
years.
Hutchinson says he is optimistic about the outlook of the GCC tourism sector. We expect strong growth in
tourist arrivals, tourism receipts and hotel industry value. The GCC has made major investments in expanding
airports For instance, an AED 117.5 billion ($32bn) expansion of Al Maktoum International at Dubai World
Central is expected to begin by the end of the year. Airports across the region are expected to handle as many
as 250 million passengers by 2020, which is a very promising sign to the tourism industry.
Jagersbacher continues on similar lines: While we see changes to guest demands, we are also witnessing
major development of tourism infrastructure to accommodate industry growth. As the region upstages its
position in global travel, with more world-class tourism infrastructure taking shape, and as airports across MEA
see record passenger numbers, there is an opportunity to continue the Hilton Worldwide tradition of developing
airport hotels.
To mark that, in May 2015, the brand signed a Hilton hotel for Dubai South, which will be in close proximity to
the main passenger entrance of Dubai Al Maktoum International Airport. We also signed Hampton by Hilton Al
Qusais, which will be close to Dubai International Airports Terminal 2 and in June, we signed Hilton Garden Inn
Jomo Kenyatta International Airport in Nairobi, adds Jagersbacher.
Wilkinson says that in terms of opportunities, Expo 2020 (expected to attract 25 million visitors over six months)
is key.

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Hutchinson says: Many other more permanent demand drivers support developers faith in the future strength
of Dubais market, not least the large numbers of visitors expected at Al Maktoum International, with a capacity
of 200 million passengers.
Increasing tourist/business traveller numbers to the region have lifted investor confidence in the Middle
Eastern hotel sector, while domestic developers and HNWIs form a large portion of investors; there is also an
increased appetite from global institutions and conglomerates. Demand from visitors is rising in the UAE and in
Dubai in particular, leading to the investor confidence, but there is also a consciousness of the possibility of
oversupply.
He continues to say that the sectors growth is also expected to be driven by international tourist arrivals,
especially those from Asia, and a stronger MICE [meetings, incentives, conferences and exhibitions] segment.
In 2016, we are expecting the growth of the sector to be driven by initiatives undertaken by GCC governments
to enhance infrastructure, thereby positively impacting the continued investor appetite for the region and
tourism.
Catering to the millennial traveller is still important in 2016. One of the hot topics has been the rise of lifestyle
brands and the unique demand from todays millennial traveller for products that are mobile and technology
driven. Hoteliers need to provide an experience to meet the changing demand of forward-thinking customers
who want more from their hotel stay. A personal interaction experience is where we will see growth next year,
explains Willis.
Hutchinson agrees that one of the top trends is todays generation, ie the millennial or Generation Y. Hoteliers
are now focusing on wider variety of demographics, and definitely the new generation travellers have been the
latest focus for the industry. Generation Y is definitely a driving force as they love to be online and do a lot of
research and this segment helps the hotelier to plan accordingly to cater their needs. Were seeing a lot of
growth in that area and then theyre influencing the boomer and the older generations as well.
TRENDS
Wilkinson is brief when asked about what trends hes expecting in 2016: Falling rates and more cut-throat
competition!
Top hospitality trends according to Jagersbacher include the increase in the number of guests seeking
mid-market hotel options in 2016 and beyond. In April 2015, we announced the launch of our second
mid-market brand Hampton by Hilton in the UAE and by 2016, the Emirates will boast three Hilton Garden Inn
properties, underlining our unequivocal support of the governments call for more mid-market options. This
focus has resulted in our mid-market pipeline in the Middle East more than doubling in size to 15 hotels under
either our Hilton Garden Inn or Hampton by Hilton brands during the 12-month period from Q1 2014 to Q1
2015.
Awadalla concurs on the mid-market trend and says: One ongoing trend is that of the rise in budget-conscious
travellers, especially given the continued forecasted low oil prices. Corporate travellers are increasingly looking
at switching to mid-scale range hotels and hotel apartments when travelling to the Middle East for business.
Though luxury is the trademark in our region, there has been growth in the three- and four-star hotel market,
which broadens the regions appeal to a wider audience, adds Harding.
Family travel is also a major trend to watch out for. Jagersbacher says: With the newest additions, Hilton
Worldwide is well placed to own a large portion of the family travel market, which accounts for over 12.5% of
global tourism. We see huge potential for growth within this segment; particularly in Dubai, which welcomes
growing numbers of incoming guests from top family source markets including Saudi Arabia, Oman and India;
and sees plans to open family-friendly attractions such as Legoland Dubai taking shape.
In line with this, theme parks, say the hoteliers, figure as a top opportunity. As another example, the three
theme parks and water park at Meraas Dubai Parks & Resorts are expected to attract 6.7 million ticketed
visitors in 2017, the first full year of operation, explains Wilkinson.
Willis also believes that while the hospitality industry has fully embraced social media, 2016 will see a lot more
creativity in the use of platforms and the employment of tools. Hotels will invest more in social media in the
coming years, particularly in tracking online activities and resources to manage their social media efforts. Rich
media and great content in general will remain as the cornerstone of successful social media management, he
adds.

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Hutchinson says that he also thinks social media will continue to be highly influential in terms of driving
customer behaviour and purchases.
With more than 1.5 billion people connected to the world through the internet today, a recent survey found that
more than 70% of them trust online reviews as much as personal recommendations. They spend more time
surfing online to make their decision on where to book hotel mobile apps can make this process much
easier. They also highly appreciate the importance of social media platforms as they allow them to share their
experiences.
These platforms have become one of the hospitality sectors strongest tools to enhance the experience and
satisfaction of every single guest, improve operational efficiency by receiving positive and negative feedback,
build solid trust and increase engagement. They are very essential in creating brand awareness, reputation,
visibility and business as word of mouth spreads swiftly. However, managing bad feedback properly and
promptly can turn a disgruntled client into a lifelong one.
Millennium & Copthorne MEA chairman and founder Ali Hamad Lakhraim Alzaabi agrees that there will a focus
on content marketing and continual growth of social media.
We will see increased focus on content marketing as a means for brands to differentiate themselves whilst
boosting their search optimisation. Video content in particular will continue to increase in the hotel marketing.
Statistics show that more than three billion videos are uploaded each day on Facebook, whilst we see a
continued strong upward trend of travel-related content on YouTube.
As we know the digital world is rapidly evolving and video is becoming one of the most trusted sources of
brand content and becoming a key influence within the purchasing decision for a consumer.
CHALLENGES AND THE FUTURE
Pipeline numbers and supply is a challenge, according to Time Hotels Awadalla. It is obvious that as more
hotels come onto the market in 2016, we, and other hotel groups, face the spectre of oversupply. With this
comes increased competition and the possibility that more rooms and more competitive rates will drive down
overall ADR. This means that we need to focus on refining our business strategy and ensure that we remain
front of mind for inbound travellers in 2016.
Jagersbacher agrees the supply is a challenge in terms of remaining innovative and relevant in the face of
rising competition especially with STR Globals Construction Pipeline Report showing more than 700 hotels
in the Middle East & Africa development pipeline.
Alzaabi also says there will be increased competition due to new hotel supply. However, we believe that
increased competition is good for consumers as it provides more choice and intuitively drives up the quality of
offering for guests. Increased competition drives us to be more creative in communicating our unique points of
difference and to strive to deliver the best possible experience for our guests, he adds.
Another challenge is related to security, says Willis. For some countries the challenge of political uncertainty
and security issues remains although countries such as Egypt, Libya and Beirut have started seeing signs of
recovery. Hutchinson also highlights the political unrest in the wider region, which, he says, will continue to
have an impact on travel habits. While the turmoil has had an impact in some markets, we are hoping that the
situation will stabilise in the near future, he says.
The hoteliers are also not unaware of the challenges related to oil. The decrease in oil prices and instability in
main source markets such as Russia have affected inbound tourism to countries such as Egypt, Oman and the
UAE, explains Willis.
Hutchinson agrees that the considerable drop in oil prices will have an adverse impact on the GCC revenues.
However, the GCC economies are increasingly diversified and any negative impact will be lesser as compared
to the national economies of other countries within the region which rely more heavily on oil as a revenue
source, he adds.
One of the other challenges in 2016 would be to recover our Russian market as the number of Russians
leaving home for vacation had dropped by 40.3% during the first quarter of 2015, according to official figures
from the Russian Federal State Statistics Service, reveals Hutchinson.

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He continues: More visitors are still travelling to the UAE, but arrivals from Russia and the CIS has been weak.
The decline in the rouble has had a major impact on spending by Russian tourists, which dropped by 52% in
Q1 2015, taking Russia out of the top five spenders list for the first time in recent history.
The currencys depreciation puts higher pressure on the GCC and mainly UAE tourism industry to provide a
wider range of affordable accommodation. So, we are forecasting that these situations will continue for some
period in 2016.
Alzaabi however says its important for hoteliers to adapt their strategy and approach where necessary to cope
with this situation and look to alternative source markets as we have done in the last two years. He adds: We
will continue to tap into source markets such as the Middle East, Europe and India and also continue to
develop tailored seasonal campaigns and promotions to target new markets such as China and South East
Asia.
However, Hutchinson anticipates stronger RevPAR growth from 2016 onwards, with Abu Dhabi and Muscat
leading the field with the growth. He says: In most cases, this progress is coming from increased occupancy,
as the different cities face different challenges in terms of levels of supply, increased competition, and changes
in the demographic profile of their visitors.
Even though 2016 does not seem like a very promising year for the hospitality industry, it yet has some
markets that stand a potential to gain business. For example, Abu Dhabi is predicted to have a positive impact
in 2016 in terms of room RevPAR. Dubai on the other hand is expecting a greater occupancy rate, with 28,000
hotel rooms to build up by 2016, which is quite massive. However the survival of the industries will be tough for
the next two years considering the current scenario.
Harding says: We are all aware that overall occupancies and average rates achieved have softened in the past
12 months and looking forward new properties are opening. With these two factors alone in mind, one would
imagine the main challenge will be how each hotelier is to grow their respective business.

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