Making room: the Middle East’s hotel boom

MAKING ROOM:

THE MIDDLE EAST’S HOTEL BOOM

The dawn of the new millennium was something of a tipping point for the hospitality industry in the Middle East, with tremendous growth in hotel inventory setting the tone. Kostas Nikolaidis, Middle East and Africa executive for STR, discusses the evolution of the sector in the region and what the next five years hold.

The Middle East’s hotel pipeline is no longer dominated by luxury hotels, which was the norm up until a few years ago.

The Middle East has a proven track record of overcoming crises. We got through the global financial crisis of 2008, and we will see the end of the Covid-19 pandemic. Make no mistake, this region has always managed to make strong comebacks. There are currently 622 hotels, with a combined 175,821 rooms, under construction or in the planning/final planning phases, according to STR’s data for the Middle East. If all goes to plan, there will be a total of 610,093 rooms on offer in five years' time - a substantial increase in a relatively narrow time frame. Ambitious tourism strategies and government visions to reinvent the region and further diversify oil-driven economies are behind this growth. However, it is worth mentioning that the region has long been preparing extensive hospitality infrastructure in order to host and accommodate global mega events, such as EXPO 2020 and the 2022 FIFA World Cup in Qatar. Furthermore, Saudi Arabia is expanding with new destinations and cities like NEOM, Qiddiya, Al-Ula, Amaala, Diriyah and the Red Sea project, all of which are expected to become global tourism hot spots once complete. Interestingly, the Middle East’s hotel pipeline is no longer dominated by luxury hotels, which was the norm up until a few years ago. With many destinations now maturing as established tourism hubs, owners and developers are shifting their focus toward the less saturated hotel classes. As a result, the region's branded pipeline now consists of 42,144 upscale rooms, followed by 33,206 upper upscale and 24,975 luxury rooms. Almost 47 percent of the upscale pipeline is located in Saudi Arabia, primarily in Makkah. Known for the millions of pilgrims who visit every year, the holy city is also recognized for having some of the largest hotels in the region, such as the 1,885-room voco Makkah, which opened last year. Dubai’s hotel pipeline has been consistently strong for many years now, so it comes as no surprise that a further 9,054 upscale rooms are still currently under contract, as well as 7,947 and 5,718 upper upscale and luxury rooms respectively. Future visitors to Dubai will be able to choose between a total of 174,059 hotel rooms; that’s more than the current number in London or Los Angeles. This translates into an abundance of hotel offerings and concepts to suit every type of guest and a significantly enhanced F&B scene, available to both residents and tourists.

In Qatar, luxury remains the largest pipeline segment. With just over a year left until the World Cup, construction is ramping up for the 5,392 luxury hotel rooms that are expected to accommodate athletes, FIFA executives and football fans. Adding to the already abundant luxury hotel selection, iconic properties and brands such as Raffles Lusail City, Rosewood Doha and The Chedi Katara Hotel & Resort will soon be making their debuts. They will be supplemented by another 5,172 upper upscale and 4,008 upscale properties, such as Rixos Doha Qetaifan Island and Delta Hotel City Center Doha.

Despite the many years of intensive hotel development, it feels as though the Middle East is just getting started. Numbers don’t lie, and there are still plenty of exciting hotel openings ahead. While most of the pipeline is scheduled to open around the mega events of the next few years, government visions extend much further into the future. Ambitious plans require equally ambitious infrastructure, which we are fortunate enough to witness all over the region. Recent development trends have favored lower hotel classes, paving the way for numerous new brands and independent hotel concepts to make their foray into the Middle East.

Ultimately, once the pandemic is behind us, we could be poised for a new "Roaring Twenties."