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June 11, 2008 |
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For media inquiries: Kathleen Hurley
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Lodging
Econometrics Quarterly Report Shows Middle East Hotel
Construction Pipeline at 527 Projects/155,989 Guestrooms
New Hotel Openings to Accelerate Through 2008 and 2009 |
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According to its newly released
Construction Pipeline Report for the Middle East, Lodging Econometrics (LE),
the Global Authority for Hotel Real Estate, shows the Total Construction
Pipeline at a record high 527 projects with 155,989 guestrooms at the end of
Q1 2008. There has been a tremendous surge in the Development Pipeline,
particularly in Dubai, Abu Dhabi, Saudi Arabia, Oman, and Qatar.
World-class, master planned communities – luxurious beachfront resorts and
residential developments, business and financial centers, modern new
airports, and tax-free business and industrial zones - are providing
once-in-a-lifetime opportunities for developers, investors, global lodging
brands, architectural and design firms, and vendors/suppliers to the
industry. |
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| A cyclical high 233
projects/66,775 rooms, or 43% of the Total Pipeline, are already Under
Construction. Total project and room counts Scheduled to Start Construction
in the Next 12 Months peaked in Q4 2007, and declined slightly to 159
projects/45,529 rooms in Q1 2008. There are 135 projects/43,685 rooms in
Early Planning, which is also a cyclical high. All projects included in the
LE Pipeline have dedicated land parcels, are being actively pursued by
developers and have been verified by the brands. |
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| LE’s Forecast for
New Hotel Openings |
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| In Q1 2008, 13 projects having
3,802 rooms opened, a fraction of what is due to come online. New Openings
are set to burst forward from now through 2010. LE’s Forecast calls for
another 88 projects/23,756 rooms to open during the remainder of 2008, with
a further 167 projects/43,428 rooms expected in 2009. |
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| LE’s Forecasts are based on
current trend lines, and do not account for a steeper decline in worldwide
economic conditions or for additional declines in the availability of
construction materials and other shocks to construction costs which could
cause further project delays and cancellations. |
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| A Development Pause May Be
in the Offing |
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| Certain exigencies may cause
developers to slow their pace for future planning and take a brief pause.
The high volume of development here and around the world is creating intense
competition and causing critical shortages in construction materials, like
steel and concrete, and in skilled labor. Increased labor costs are also a
factor. With inflation spiraling upward, construction costs are soaring,
with some commenting that they have doubled in the past four years. The
financial instability of some subcontractors is also compounding the
problem. |
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| With a substantial wave of New
Openings projected for 2008, 2009, 2010 and beyond, there is concern that
such a sizeable influx of new supply will deflate occupancy rates and put
downward pressure on room rates, which have been among the highest in the
world. All of this is at a time when a global economic slowdown is beginning
to unwind. This could moderate the flow of inbound tourism, making the
absorption of these new guestrooms more difficult than originally
contemplated. |
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A Back-Up in the Pipeline
These mounting developer concerns are reflected in the Pipeline. New
Construction Starts, reported at 28 projects/8,760 rooms in Q1 2008, have
been in a holding pattern for three quarters, while the Pipeline grew to a
record high. This indicates project movement up the Pipeline is quite
sluggish. Many projects appear to be “parked” in Early Planning and Starts
in the Next 12 Months as developers sort through the new difficulties.
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A Slowing of New Project Announcements
A solid indicator of developer sentiment, New Project
Announcements have also been in a holding pattern, with Q1 2008 totaling
just 40 projects/14,011 rooms. This is the third consecutive quarterly
decline in project counts and a 57% drop from the 92 projects announced in
Q2 2007.
Both metrics are clear indications of a slowdown in New Hotel Openings early
in the next decade.
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| The Dubai Plan |
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| Dubai has long been the global
media focus of the Middle East as it progressed with its strategic plan for
transforming the Emirate through incredible, large-scale development:
landmark structures designed by the world’s leading “starchitects;” exotic
resorts and spas at renowned beaches, including Nakheel Properties’
spectacular man-made Jumeriah Palm, the world’s largest land reclamation
project; soaring office towers; luxurious residential communities;
state-of-the art airports and convention centers. Reportedly, 40% of the
world’s construction cranes are in Dubai. |
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Lodging development has
flourished in Dubai. The Total Pipeline has 162 projects/60,503 rooms, which
will double its existing upscale guestroom supply when developed out
completely. Half of Dubai’s Total Pipeline, 92 projects/30,107 rooms, is
already Under Construction. There are 34 hotels/11,299 rooms expected to
open in the last three quarters of 2008, while 54 hotels/ 15,360 rooms are
forecast to come online in 2009.
Dubai contains 31% of all projects and 39% of all rooms in the Total Middle
East Pipeline. If viewed as a “city state,” Dubai would have the largest
Construction Pipeline of any metropolitan area in the world, even larger
than Las Vegas, New York, Washington, London, Shanghai, or Beijing. |
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| Other Master
Plan Developments in the Works |
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Abu Dhabi, the government center
of the United Arab Emirates (UAE), has embarked on its own Emirate-wide
development program. Strategically, it wants to establish its role as the
Middle East’s cultural/educational hub, being home already to Abu Dhabi
University and a satellite campus of Paris-Sorbonne University.
With 73 projects/21,809 rooms, Abu Dhabi has the second largest Pipeline in
the region. Nearly 25% of the rooms are Under Construction, while 47% are
Scheduled to Start Construction in the Next 12 Months. |
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 Saadiyat Island is the
designated cultural center, and will have a Frank Gehry-designed Guggenheim
Museum, a branch of the famous Louvre Museum, a world-class performing arts
center and concert hall.
The shore-lined Corniche and the adjoining retail, financial and embassy
district have 11 projects/3,773 rooms in the Pipeline. Yas Island, a $40
billion dollar development by Aldar Properties, will include a Formula One
racetrack and the Ferrari World Theme Park, along with 11 hotel projects in
various stages of development.
Saudi Arabia’s plan is to become the religious and cultural center of Islam.
It has 52 projects in the Pipeline, nearly 42% of which are already Under
Construction. |
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Much of the
development is in the religious centers of Jeddah, with 16 projects, and
Islam’s Holiest City, Makkah, with 10 projects. The capital city, Riyadh,
has 10 projects in the Pipeline.
Oman’s Pipeline has 51 projects, with over 63% of the guestroom activity in
the capital, Muscat. Qatar’s Total Pipeline is 35 projects/11,350 rooms,
most of which is in Doha.
Egypt aims to expand its tourist appeal by further developing its beachfront
resorts on the “Red Sea Riviera,” including the former port town of Sharm
El-Sheikh, popular domestic destination Taba and the beach-lined town of
Hurghada. The country has 31 projects/10,922 rooms in its Pipeline. |
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| An Extraordinary
Opportunity for Global Brands |
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Of the 527 projects in the Total
Pipeline, 341 or 65% have already made a branding decision, while 155
projects have yet to decide. LE anticipates that 75% of those will make a
branding decision prior to opening.
Such explosive growth makes the Middle East one of the most important areas
for Global Hotel Brands. With 77% of total development in the upscale
segments, it serves as an important showcase area for companies to establish
and advance their brands through large, iconic, luxurious hotels.
Middle East-based Rotana Hotels, Inns & Suites has 33 projects/10,256 rooms,
which is the largest guestroom count in the Pipeline. Of its total projects,
17 are Under Construction. The company has an aggressive strategic plan,
with a stated goal of having 65 hotels open by 2012.
The globally renowned Jumeirah International hotel company has 10
ultra-luxury properties in the works, including The Palm Trump International
Hotel on Palm Jumeirah Island, which will have 300 hotel rooms and 360
private residences, and the 330-room Jumeirah Desert Pearl in Dubailand.
Fairmont Hotel and Resorts, which is majority owned by Saudi Arabia’s
Kingdom Hotel Investments, also has 10 luxury properties in the Pipeline,
including one on Palm Jumeriah with 372 hotel rooms and 558 private
residences and the 1,005 room Fairmont overlooking the Holy Mosque in Makkah.
France’s Accor has the largest Pipeline project count in the Middle East
with 34 hotels. There are 8 Sofitels and 11 Novotels. Accor is also one of
the pioneer mid-market developers in the region, with 13 Hotel Ibis projects
in the Pipeline.
The InterContinental Hotel Group has 8 InterContinentals and 5 Crowne Plazas
in the Pipeline. InterContinental is also accelerating a mid-market program
in the region with 9 newly designed, prototypical Holiday Inns and 3 Holiday
Inn Express’. |
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 Europe’s Rezidor Hotel Group has 9 Radisson SAS properties under
development, and 5 of its mid-market brand, Park Inn. Switzerland’s
Mövenpick also has an impressive Pipeline of 24 projects, 10 of which are
located in Dubai.
Kempinski Hotels & Resorts, which operates the world famous
Emirates Palace Hotel in Abu Dhabi and the Kempinski Hotel at the Emirates
Mall in Dubai, has another 10 under development, including projects in
Syria, Bahrain, Lebanon, and Jordan.
North American-based companies see the Middle East as an
important target for their brands. Marriott has 23 projects in the Pipeline, led by 7 Ritz Carltons, but also including JW
Marriott, Renaissance and Courtyard properties. Starwood is focused on its high-end offerings, having a total of
21 Pipeline projects from its Luxury Collection, St. Regis, W, Le Meridien,
Westin and Sheraton Brands. Hilton has a total of 11 projects under
development between its Conrad and Hilton labels.
Based in Singapore, Banyan Tree Hotels & Resorts has 6 each of its
celebrated Banyan Tree and Angsana Resorts & Spas in the Pipeline. These are
smaller, luxurious, one-of-a-kind, boutique designs where the resort and spa
are the destination itself. |
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| Summary |
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After rapid growth throughout
the middle of the decade, the Middle East Construction Pipeline is about to
unfold in earnest. Approximately 67,000 rooms are expected to open during
the last 3 quarters of 2008 and in 2009, most of which are already Under
Construction, making LE’s forecast a near certainty. New Openings will be
heavy in 2010 as well. A build-out of the existing Pipeline will mean a
doubling of current upper upscale and luxury supply.
Indications are that project counts in the Total Pipeline are at or near
peak for this decade. Rapidly spiraling construction costs, a shortage of
construction materials and skilled labor, along with a softening in the
global economy with its potential impact on inbound tourism, appear to be
raising concerns in the development community.
With the unfolding of 70-80% of the existing Pipeline as New Openings in
2008-2010, developers may well be watching how this current development wave
will be absorbed before entering into another period of rapid growth. It
could prove advantageous to have such a period of assessment to see how well
tourist and business demand growth keeps pace with what will be a
significant supply increase across the region during the next three years. |
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© 2008 Lodging Econometrics, The Global Authority For Hotel Real Estate, 500 Market St. Suite 13, Portsmouth, NH 03801,
USA, Phone: +1 603-431-8740, Ext 25
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