Middle East outstrips Europe in building big hotels

The Crowne Plaza (left) and InterContinental hotel (right) in Dubai Festival City. The InterContinental Hotels Group (IHG) has 18 hotels in the Emirates with more than 5,000 rooms, and seven more propShow more

The Middle East is putting Europe in the shade when it comes to building big hotels.

The current crop of hotels being built in the region have on average 50 per cent more rooms than those being developed in Europe, latest industry figures show.

According to data released from the consultancy STR Global, the July pipeline in Europe comprises 813 hotels with 133,797 rooms, or an average of 165 rooms per hotel while in Middle East and Africa there are plans for 485 hotels with 118,535 rooms, or 244 rooms on average.

"This is typical in [European] cities which are already saturated and land values are expensive so the correspondingly smaller plots can only support smaller properties," said John Podaras, an independent consultant in Dubai. "Europe's growth in this sector is likely to derive mostly from the eastern European countries which are, or at least were, until the financial crisis hit, going through similar growth spurts as in the Middle East."

In Europe, Istanbul's horizon is the busiest followed by London, Berlin, Moscow, Amsterdam, Vienna and Madrid.

The InterContinental Hotels Group (IHG) has 18 hotels in the Emirates with more than 5,000 rooms, and seven more properties in the pipeline.

"Our current pipeline in the UAE is weighted towards luxury and upper upscale brands - InterContinental Hotels, Crowne Plaza and Staybridge Suites - in line with the region's continued preference for luxury travel experiences," said Pascal Gauvin, the chief operating officer for India, Middle East and Africa for IHG. "Europe, on the other hand, has more demand in the mid-scale segment. Having said that, we have seen increasing demand for our mid-scale brands in the Middle East."

IHG regional properties slated to open this year are in Oman, Saudi Arabia and Lebanon, with five for 2014 in Kuwait, Oman, Saudi Arabia and the UAE.

The InterContinental Dubai Marina will open next year. There are two more InterContinental properties, three Staybridge Suites properties and the UAE's first Crowne Plaza Resort in Ras Al Khaimah in the pipeline.

There were 114 hotels under construction or in planning for the UAE as of July, according to STR Global.

Overall in the Middle East and Africa, the highest growth is in Oman, with 4,577 rooms in development. It is followed by Saudi Arabia, Qatar, the UAE, Kuwait and Jordan.

"North Africa and the Levant will unfortunately be heavily influenced by unrest and is highly unlikely to recover before a good five years have elapsed from the cessation of hostilities," Mr Podaras said.

In the UAE, 32,261 rooms are under construction or planned.

In Abu Dhabi, there are 15 hotels under construction and 11 more in the pipeline, according to STR Global. There is an existing supply of more than 20,000 rooms and 6,800 in the pipeline in the capital.

The average daily room rate in June in Abu Dhabi was Dh421.49, a decline of 3.9 per cent over May, with the revenue per available room standing at Dh251.42. STR Global data shows average daily room rates were the highest this year in February at Dh726.

"No doubt the increase in capacity at the airport and Etihad when the new Midfield Terminal is delivered will assist, although the key demand driver of exhibitions and conferences will also need a boost," Mr Podaras said.

In Dubai, the demand continues to increase the number of hotels with the property developer Emaar, for example, announcing its own brand of budget hotels last month.

"The Dubai pipeline currently represents a growth in hotel rooms of approximately 7 per cent annually, a rate which is likely to continue," Mr Podaras said. "A potential slew of new or resurrected projects being announced in the near future could well result in a flattening of the revpar [revenue per available room] growth two to three years from now as the new supply begins to be delivered."

Outside Dubai and Abu Dhabi, the hotel industry in the rest of the country is still in its infancy and the pipeline in emirates such as Ras Al Khaimah will impact overall revenue per available room there, he said.

Rixos Bab Al Bahr in Ras Al Khaimah with around 600 rooms is expected to open its doors in February.