While the global economies cautiously stepped onto the road to recovery in the second half of 2011, current unrest in certain parts of the Middle East and soaring oil prices are posing new questions about future hotel performance.
Following the cancellation and suspension of several projects in 2009, 2010 witnessed the re-engineering and re-designing of projects that are now aligned with more reasonable expectations of each market's potential for growth in the short to medium term. This shift also allows for the development of much-needed asset classes such as limited service and budget hotels that will support and enhance tourism potential in the future.
All in all, international visitation remained rather conservative in 2010 and an increase in regional and domestic tourism was recorded. the current unrest in certain parts of the Middle East will displace high levels of demand to those cities that are now considered 'safer'.
Growth in corporate and leisure visitation came as a result of improved economic conditions during the second half of 2010, coupled with more affordable rates accross many cities.
As a result, 22 cities acheived higher occupancies when compared to 2009, despite the opening of a number of new hotels.
In line with occupancy growth, 23 markets recorded average rate growth while the remaining markets struggled to improve rates when occupancy was coming under pressure.
The Middle East hotel Survey 2011 includes 352 hotels and some 93,500 hotel rooms (an increase of 36% on last year) accross 52 cities in the Middle East, making it one of the most reliable benchmarking surveys in the region.
Overall, investment in budget and four-star hotels is gaining momentum accross most cities in the Middle East.
A total of 30 branded hotels, or approximately 8,000 hotel rooms, opened in the region in 2010, of which 65% opened in the UAE alone.
Several markets remain undersupplied and underdeveloped and there are large opportunities for investors and developers. Damascus, Beirut, Erbil, Yemen, Kuwait and Oman have not seen much growth in hotel supply over the last few years and are becoming increasingly attractive for investors and operators.
Asset conversion and brand conversion seem to define the new growth strategy of operators, especially in those markets that offer little opportunity for new development in the current limited investment climate.
By aligning the product offering and service levels with market needs, the market share of hotels is being redefined in a number of cities.
Dubai continues to scale new heights with a record 47.2 million passenger movements in 2010, a 17.6% increase in the 40 million passenger movements recorded in 2009.
Saudi Arabia, the FDI magnet, attracted more than half of the total Foreign Direct Investment in the Middle East in 2009 and unofficial data suggest the same was true in 2010.
Saudi Arabia, the UAE and Qatar remain at the forefront of hospitality development.
Tourist arrivals to the Middle East increased by 14% in 2010, registering approximately 56.6 million tourists.