COVID19- Beyond the Dust - Hotel Performance Forecast 2020-2024 HVS.COM
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HVS.COM COVID19- Beyond the Dust Hotel Performance Forecast 2020-2024 May 2020 Hala Matar Choufany President, HVS Middle East, Africa and South Asia
Author’s Note
The increasing concern over the post COVID-19 implications on the travel and tourism sector coupled with a challenging economic outlook for
the GCC region will have a major impact on the recovery of the hotel sector.
At the time of writing this publication and despite the uncertainties and unknowns that lie ahead, there are several confirmed realities that will
have a long-lasting impact on the hospitality and tourism sector in 2020 and beyond;
- Most major airlines in the Middle East and from feeder markets have not resumed commercial operations and airports activity is limited to
operating repatriation trips;
- Governments pandemic healthcare bill as well as the economic and financial support extended to support local businesses will have
significant effect on the governments’ budgets and future investment priorities;
- Economic growth across the Kingdom of Saudi Arabia and other GCC countries will contract as a result of lower oil prices and reduced
production output;
- Large corporations have downsized, and spending budgets are drastically squeezed;
- Household disposable income and consumers purchasing power are reduced;
- Guest confidence is low, and it will take time for the industry to meet new guest’s expectations;
- World Fair Dubai (Expo 2020) is rescheduled to October 2021; Formula One Grand Prix in Bahrain was scrapped, Umrah pilgrimage was
suspended in February, and the annual hajj pilgrimage in July may be cancelled;
- Owners cash reserves and asset cashflows are running low or turning negative.
We take pride in our experience in the hospitality sector and our ability to forecast performance and undertake valuations that mirror quite
accurately market dynamics and investor sentiment. Our work experience, access to actual operating data and comprehensive analysis of
historical trends have allowed us, time and time again, to anticipate market changes, ascertain the uncertainty during market downturns, and
develop a realistic outlook for recovery. Our 2019 Forecast versus 2019 Actual Performance of Hotels in select GCC cities is a testament to our
experience in those markets and our ability to accurately project changes in market dynamics and the likely impact on EBITDA and hotel values.
Although COVID-19 has challenged our fundamental forecasting approach that typically relies on market trends, supply and demand dynamics
and other useful metrics such as development pipeline, induced demand generators etc. we share with you our assumptions pertaining to what
the recovery model may look like for select cities in the GCC region. For the purpose of future forecast, we have relied on publicly available
information as on 4 May 2020 pertaining to travel and tourism national and international announcements and made a set of assumptions to help
2
the reader interpret these forecasts.CONTENT
Actual & Forecast 2019 Dubai Market Forecast Bahrain Market Forecast
Regional Occupancy Forecast 2020 Abu Dhabi Market Forecast Muscat Market Forecast
Regional ADR Forecast 2020 Jeddah Market Forecast Manama Market Forecast
Regional KPIs 2020 YoY Variance Riyadh Market Forecast Regional RevPAR Outlook 2018 - 2024
Global RevPAR Outlook 2018 - 2024
Abu Dhabi Market Forecast$108 $109 FORECAST ACTUAL
$94 $94
Manama
$144 $120
2019
HVS Forecast vs
Actual RevPAR
$108 $122 Doha In USD
Dubai
Riyadh Abu Dhabi Muscat
Jeddah $75 $72
$93 $95
$154 $153
Source: HVS
As a result of increased supply, Revenue Per Available Room (RevPAR) in key GCC cities have declined over the last three years. Our forecast for 2019 was
largely inline with the actual performance of hotels across the seven cities in the graph above. RevPAR decline was mainly triggered by a decrease in
average rate although all cities experienced an increase in accommodated room night demand. In 2019, Jeddah was the market leader in average rate
(USD260) while Dubai was the market leader in occupancy (78%).
Riyadh achieved higher RevPAR than forecasted on the back of the aggressive marketing and economic activities that took place in Riyadh in 2019 and
induced additional roomnights in the market. On the other hand, as a result of additional hotel competition, average rates in Dubai declined by 13%
4 leading to a significant decline in market RevPAR.Forecast of Occupancy and Rate- Select GCC cities
We have made several assumptions which govern our projections of occupancy and average rate from 2020 and up to 2024:
- Oil and gas prices will recover over the next 12 months;
- Governments will continue to support and facilitate regional and local events;
- Governments will continue to monitor and contain the spread of COVID-19;
- COVID-19 vaccine and/or approved treatment will be available within the next 12 months;
- Regional and international travel ban to and from key source markets will be fully lifted by October 2020;
- Traveler and guest confidence improves;
- 65% of closed hotels will have re-opened and those converted to quarantine facilities will resume normal operations by end of 2020;
- Dubai Expo will take place between October 2021 and March 2022;
- World Cup 2022 in Qatar will take place as scheduled;
- Travel to and from Qatar will resume to other GCC cities by end of 2020;
- Domestic tourism will generate the largest portion of demand in Saudi Arabia followed by religious tourism;
- Hotels under construction will be delayed and only 25% of new hotel inventory will come into the respective markets between 2021 and
2023;
- It will take four years for a full recovery with the exception of increased demand around major events such as Expo Dubai and World Cup
Qatar;
- Brand and Hotel Managers will be successful in implementing new health and safety regulations and owners will meet funding
requirements;
- Brand and Hotel Managers will not apply heavy discounts as lower rates is unlikely to be the key driver for decision making as evidenced
in HVS Traveler and Guest Sentiment Survey.
- These assumptions exclude any future abnormal events, including but not limited to currency fluctuations, political conflicts, social
unrest, hard-hit recession, and new viruses.
52019-2020F Occupancy
78%
59%
25%
2019 2020 41%
Manama
Doha 2019 2020
Dubai
62%
45% Abu Dhabi
Riyadh 71% Muscat
64%
2019 2020 61%
Jeddah 47%
35%
59% 32%
49%
2019 2020 2019 2020 2019 2020
2019 2020
6 Source: HVS2019-2020F ADR
$160
$144 $155
2019 2020 $135
Manama
Doha 2019 2020
Dubai
$155
Riyadh $120 Abu Dhabi
Muscat
$190 $154
2019 2020 $117
Jeddah $150
$130 $105
$260
$230 2019 2020
2019 2020
2019 2020
7
2019 20202019-2020F YoY Variance
OCC(%) -57%
ADR($) -10%
OCC(%) -47%
REVPAR($) -62%
Manama ADR($) -13%
REVPAR($) -54%
Doha Dubai
OCC(%) -27%
Abu Dhabi
Riyadh ADR($) -23%
OCC(%) -33%
OCC(%) -46% REVPAR($) -43% Muscat
ADR($) -16%
Jeddah ADR($) -21%
REVPAR($) -44%
OCC(%) -17% REVPAR($) -57%
ADR($) -12% OCC(%) -48%
REVPAR($) -26% ADR($) -10%
REVPAR($) -53%
8
Source: HVSRegional RevPAR Change 2019-2020F
-26%
-44% -43%
-49%
-54% -53%
-57%
-62%
Manama Riyadh Dubai Muscat Overall Abu Dhabi Doha Jeddah
Source: HVS
92019-2020F YoY Variance – Global Outlook
RevPAR %
Change
Canada
-50%
Europe
-42%
USA Japan
-44% -44%
GCC* Hong Kong
India
-49% -60% -51%
Mexico
-47%
Singapore
-41%
Australia
-52%
10 Source: HVS, *: Select CitiesSeasonality, Source Market and Segmentation
Typical segmentation for each hotel market in 2019, which is also In 2019. key source markets to Jeddah and Riyadh were domestic guests, 63% and
reflected in the seasonality trends below, was as follows: 65% respectively. This was followed by visitation from the GCC which accounted to
20%.
85% Commercial Leisure
80%
65% In 2018 and 2019, Muscat benefited from transient demand on the way to and from
60% 60%
55% 50% Qatar which generated additional room nights in the market. Key source of visitation
50%
45%
40% 40% to Muscat in 2019 was 58% from the Middle East, followed by 20% from Asia Pacific.
35%
Approximately 20% of hotel demand is generated domestically.
15% 20%
Qatar’s hotel market is largely dependent on commercial demand and international
Riyadh Jeddah Dubai Abu Dhabi Muscat Manama Doha visitation. Approximately 80% of hotel demand in 2019 originated from Europe,
South and South East Asia and America. Local demand generated less than 10% of
Amongst all seven cities, Dubai has the least pronounced seasonality as it room nights. A large portion of hotel demand in Doha is extended stay (more than 1
caters to both commercial and leisure segments equally. Dubai has been month).
successful in diversifying its offering over the last five years and flattening
the seasonality curve. In particular, Doha and Riyadh attract mostly the Regional tourism constituted a large portion of demand in Dubai in 2019. GCC and
commercial segment and therefore experience sharper seasonality inline Other MENA countries accounted for roughly 28% of the total number of hotel
with corporate activity. guests in Dubai. Asia also generated 28% of international visitors and was followed
by Western Europe and Americas, 20% and 7% respectively.
Commercial: Corporate/Airline/MICE/Government
Leisure: Group, Individual, FIT, Tour Operators/Wholesale While 30% of hotel stays in Abu Dhabi in 2019 were generated from the domestic
market, 42% of international visitors were from Europe. Additional key source
Seasonality Trend- 2019 markets to Abu Dhabi were from Asian subcontinent and MENA, 17% and 13%
respectively.
In 2019, the main feeder market to Bahrain was the GCC, accounting for
approximately 70% of total number of arrivals, of which 58% came from Saudi
Arabia. This was followed by Asia, Europe and Americas, accounting for
11 Jan Feb March April May June July Aug Sept Oct Nov Dec approximately 25% of the number of inbound visitors.
Dubai Abu Dhabi Jeddah Riyadh Muscat Bahrain DohaDUBAI
$200 90%
ADR RevPAR Occ
Hotel market recovery in Dubai is likely to $180 80%
commence in September 2020 and will be driven
$160
mainly by local demand emanating from UAE 70%
residents followed by commercial demand from $140
60%
neighboring GCC countries.
$120
50%
Dubai will see a faster recovery than other GCC $100
40%
markets on the back of the anticipated demand in $80
the lead up to and during Expo Dubai which will 30%
$60
take place in October 2021 and ending in March
2022. $40
20%
$20 10%
A correction in market-wide occupancy is
expected in 2023 and the hotel market is $0 0%
2018 2019 2020 2021 2022 2023 2024
forecasted to stabilize and recover by 2024, albeit
at lower levels than 2019. 2019-2024(F), RevPAR, YoY %Change, In USD
-11.9% -54.0% 78.5% 24.7% -4.8% 8.9%
2019 2020 2021 2022 2023 2024
12
Source: HVS, Currency USDABU DHABI
$180 80%
ADR RevPAR Occ
Hotel market recovery in Abu Dhabi is likely to $160 70%
commence in September 2020 and will be driven
mainly by government related initiatives and $140
60%
meetings followed by local demand emanating
$120
from UAE residents. 50%
$100
Abu Dhabi hotel market will benefit from 40%
$80
demand in the lead up to and during Expo Dubai
30%
which will take place in October 2021 and ending $60
in March 2022.
20%
$40
A correction in market-wide occupancy is 10%
$20
expected in 2023 and the market is forecasted to
stabilize in 2024 to levels similar to those $0 0%
registered in 2019. 2018 2019 2020 2021 2022 2023 2024
2019-2024(F), RevPAR, YoY %Change, In USD
5.5% -43.8% 60.7% 20.5% -8.0% 6.2%
2019 2020 2021 2022 2023 2024
13
Source: HVS, Currency USDJEDDAH
$300 ADR RevPAR Occ 70%
We forecast recovery in the Jeddah hotel market
will be primarily driven by local tourism in Q4 of 60%
$250
2020 and well into 2021.
50%
Over the next 18-24 months, Jeddah is likely to $200
benefit primarily from domestic leisure demand 40%
and potentially transient guests to and from $150
Makkah to perform religious duties. 30%
$100
On the basis that the Saudi government remains 20%
committed to Vision 2030 investment and
development plans, Jeddah’s hotel market is $50
10%
forecasted to stabilize in 2024 at slightly higher
levels than those achieved in 2019. $0 0%
2018 2019 2020 2021 2022 2023 2024
2019-2024(F), RevPAR, YoY %Change, In USD
3.7% -26.4% 16.8% 5.7% 7.4% 5.8%
2019 2020 2021 2022 2023 2024
14
Source: HVS, Currency USDRIYADH
$250 80%
ADR RevPAR Occ
We forecast recovery in the Riyadh hotel market
70%
to be slow in Q4 2020 and hotel demand during
$200
that period will be primarily driven by domestic 60%
commercial demand.
50%
$150
We forecast that market-wide occupancy will
grow substantially in 2021 driven largely by 40%
regional corporate demand. $100
30%
On the basis that the Saudi government remains
20%
committed to Vision 2030 investment and $50
development plans, Riyadh’s hotel market is 10%
forecasted to see reasonable growth in 2022 and
thereafter to stabilize in 2024; at slightly higher $0 0%
levels than 2019. 2018 2019 2020 2021 2022 2023 2024
2019-2024(F), RevPAR, YoY %Change, In USD
We expect a change in guest segmentation in the
stabilized year, with a noticeable increase in
leisure travelers. 23.5% -57.1% 52.4% 20.3% 23.6% 11.5%
2019 2020 2021 2022 2023 2024
15
Source: HVS, Currency USDDOHA
$180 70%
ADR RevPAR Occ
Hotel recovery in Doha will remain slow over the $160
next 12 months, considering Doha’s heavy 60%
dependence on international visitation. More $140
than 80% of hotel guests emanate from Europe, 50%
$120
US and Asia.
$100 40%
Doha will see strong growth in 2022 on the back
of the anticipated demand in the lead up to and $80 30%
during the World Cup which will take place in
$60
November 2022. 20%
$40
A correction in market-wide occupancy is 10%
$20
expected in 2023 and the hotel market is
forecasted to stabilize and recover by 2024, $0 0%
albeit at lower levels than 2019. 2018 2019 2020 2021 2022 2023 2024
2019-2024(F), RevPAR, YoY %Change, In USD
It is yet to be seen whether Doha will be able to
diversify its recreational offerings to attract the
leisure traveler and reduce its reliance on the 14.1% -43.4% 25.0% 37.8% -12.7% 1.7%
commercial segment.
2019 2020 2021 2022 2023 2024
16
Source: HVS, Currency USDMUSCAT
$140 ADR RevPAR Occ 70%
We forecast recovery in the Muscat hotel market
$120 60%
will remain slow in Q4 2020 and hotel stays
during that period will be primarily driven by
domestic demand. $100 50%
Gradual recovery is forecasted from 2021 to $80 40%
2023 and the hotel market is forecasted to
stabilize in 2024, albeit at lower levels than $60 30%
those registered in 2019.
$40 20%
Over the last two years, the hotel market in
Muscat benefitted from unexpected demand $20 10%
from travelers on the way to and from Doha as a
result of the Qatar diplomatic crisis which $0 0%
2018 2019 2020 2021 2022 2023 2024
brought about travel restrictions between Doha
and several other countries in the region. 2019-2024(F), RevPAR, YoY %Change, In USD
5.3% -53.1% 33.9% 28.3% 7.5% 14.9%
2019 2020 2021 2022 2023 2024
17
Source: HVS, Currency USD200 ADR RevPAR Occ
MANAMA 70%
Hotel market recovery in Manama is likely to 180
60%
commence in the last quarter of 2020 and will 160
be driven mainly by local demand emanating
140 50%
from Bahrain residents as well as demand from
Saudi Arabia. 120
40%
100
From an international perspective, demand is
30%
predominantly attributable to corporate 80
visitation and the Bahrain Grand Prix, which is
60 20%
the largest inbound demand generator in
Bahrain. 40
10%
20
We forecast that the hotel market will recover
gradually and stabilize in 2024 to similar levels as 0 0%
2018 2019 2020 2021 2022 2023 2024
those registered in 2019.
2019-2024(F), RevPAR, YoY %Change, In USD
-2.7% -61.7% 87.5% 12.6% 10.1% 10.9%
2019 2020 2021 2022 2023 2024
18Regional RevPAR Outlook 2018-2024F
180 Dubai Abu Dhabi Jeddah Riyadh Doha Muscat Manama Overall
160
140
120
100
80
60
40
20
0
2018 2019 2020 2021 2022 2023 2024
19
Source: HVS, Currency USDGlobal RevPAR Outlook 2018-2024
2019 2020 2021 2022 2023 2024
120%
100%
80%
60%
40%
20%
0%
-20%
-40%
-60%
U.S. Canada Mexico Europe GCC India Hong Kong Japan Australia
20
Source: HVS, Currency USDSuperior Results
Through Unrivaled
Hospitality Intelligence.
Everywhere.
About HVS About the Author
HVS is the world’s leading consulting and valuation services HALA MATAR CHOUFANY is the President for HVS Middle East, Africa &
organization focused on the hotel, restaurant, shared South Asia and Managing Partner of HVS Dubai.
ownership, gaming, and leisure industries. Established in
1980, the company performs more than 2,000 assignments Hala is an experienced Managing Partner and Hospitality Advisor with a
per year for virtually every major industry participant. HVS demonstrated history of working in the hospitality industry. Skilled in
principals are regarded as the leading professionals in their Contract Negotiation, Feasibility Studies, Development Recommendation,
respective regions of the globe. Valuation, Asset Management, and Strategic Advisory; she has advised on
more than 3.000 hospitality and mixed-use projects in the last 17 years
Our Middle East and Africa team benefits from across Europe, MEA and Asia. Hala has in-depth expertise in regional hotel
international and local backgrounds as well as diverse markets and a broad exposure to international markets and maintains
academic and hotel/real estate-related experience. Over excellent contacts with developers, owners, operators, investment
the last ten years, the team has advised on more than 1000 institutions and government entities. Hala speaks frequently at investment
projects and approximately US$120 billion worth of hotel conferences on a range of topics including asset valuation, management
real estate and mixed-use projects in the region for issues and women leadership.
hotel/real estate owners, developers, lenders, investors
and operators. Hala completed Executive Education at Harvard Business School. She also
holds an MBA in Finance and Strategy from IMHI (Essec-Cornell) University,
For further information regarding our expertise and Paris, France and a BA in Hospitality Management from Notre Dame
specifics about our services, please visit www.hvs.com. University, Lebanon. Hala is fluent in English, French and Arabic.
Hala is a board member of Harvard Business School club of the GCC and is a
mum of three. Born in Beirut, Hala lived and worked in a number of cities
across Europe, Asia and the Middle East.Disclaimer: HVS forecast of occupancy and rate is based on a set of assumptions and information available
HVS.COM to us at the time of forecast. HVS forecast should be viewed as indicative only and not relied upon for future
course of action. These forecast may be subject to change and therefore HVS has no obligation to update
these forecasts and makes no representation or warranty and expressly disclaims any liability with respect
thereto.
HVS Dubai /company/hvsmea/
2102 North, Emirates Financial
Towers
Dubai International Financial @hvsmea
Centre
PO Box: 482068
https://www.facebook.com/HVSMEA/
Dubai, United Arab Emirates
+971 4 354 4771 @hvsmea
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