STR: Mixed Q2 bag for MEA hotels

ME by Melia Dubai
Dubai-based developer Omniyat secured financing of AED150 million from Mashreq Bank to complete work on the ME Dubai hotel in The Opus by Zaha Hadid. Photo credit: Zaha Hadid Architects

Hotels in the Middle East reported mixed second-quarter 2019 performance results, while hotels in Africa posted increases across the three key performance metrics, according to the latest data from STR.

In the Middle East, occupancy was up 2.6 percent to 61.7 percent in Q2 2019 compared to Q2 2018, but average daily rate was down 7.2 percent to $147.44. Furthermore, revenue per available room dropped 4.8 percent to $91.03.

The news was better for Africa, where occupancy improved 2.2 percent to 57.6 percent, ADR grew 4 percent to $106.53 and RevPAR increased 6.3 percent to $61.33.

But not all African cities saw a boost in business. In Casablanca, Morocco, occupancy dropped 7.6 percent to 58.8 percent while ADR declined 6.4 percent to MAD989.65 and RevPAR fell a worrisome 13.5 percent to MAD582.15.

The absolute ADR and RevPAR levels were the lowest for a Q2 in STR’s Casablanca database, and the company's analysts noted this is the first Q2 in Casablanca that showed a double-digit increase in supply (up 15 percent), which seems to have negatively affected performance levels. When looking at individual months, May showed the market’s weakest performance across the three key performance metrics: occupancy was down 27.8 percent, ADR dropped 12.3 percent and RevPAR fell 36.7 percent. 

In Dubai, occupancy declined a slight 0.9 percent to 67.1 percent, but ADR fell 12.3 percent to AED513.73 and RevPAR dropped 13.1 percent to AED344.65.

Supply has now outgrown demand in Dubai for six consecutive quarters, and STR analysts noted that the occupancy level was the lowest for a Q2 in Dubai since the time of the economic crisis in 2009, while the absolute ADR and RevPAR levels were the lowest since 2003. June was the strongest month of the quarter with a 30.5 percent increase in demand, which helped monthly performance levels. 

Dubai is looking to have 132,000 guestrooms by the end of 2019 and 164,000 by the time the Expo 2020 festivities get underway. Last year, the emirate's Department of Tourism and Commerce Marketing estimated that hotel supply would increase by 13.3 percent, with a compound annual growth rate of 10.2 percent in occupied room nights reaching 35.5 million by the end of 2019. While occupancy appears to be holding steady, the falling room rates and revenue suggest that hoteliers are sacrificing profits in order to keep rooms filled. Still, these numbers are likely to change once the Expo kicks off late next year, and the development push may yet prove profitable.