Hospitality and residential projects worth $1.9 trillion are under development in the Middle East, with Saudi Arabia, UAE and Egypt accounting for 90% ($1.7 trillion) of the investment, according to new data.
The data was released ahead of the Future Hospitality Summit (FHS) taking place in Abu Dhabi from September 25 to 27, 2023.
Research by global independent real estate consultants Knight Frank reveals that KSA is at the top of the region’s project investment table, with $1.2 trillion worth of developments in the pipeline, followed by the UAE ($300 billion) and Egypt ($200 billion), highlighting the Middle East’s continued commitment to reaching 160 million annual tourists by 2030.
Complete business recovery
Turab Saleem, Partner and Head of Hospitality, Tourism and Leisure – Mena at Knight Frank, said: “The Middle East was the first region globally to make a complete business recovery after the pandemic. While much of the world still faces challenges in its return to normality, this region is set to surpass pre-Covid levels in terms of hospitality and tourism related revenue and employment. The Middle East's travel and tourism sector witnessed a tremendous growth with a 46.9% increase in its contribution to GDP in 2023, which is the highest of any region in the world. This growth is being driven by a 14.5% increase in the number of jobs supported by the sector, and a more than $107 billion increase in its overall contribution to the GDP. Moreover, the sector has also created 0.9 million new jobs.
“The influx of new hospitality and tourism-related projects in the region is also fostering new trends that add value and efficiency and yield better investment returns,” added Saleem.
“Simplified visa processes, aggressive marketing campaigns, green initiatives, innovation and technology, increased connectivity with new players in the airline sector, personalised guest interaction and a booming holistic health and wellbeing industry are all playing a key role in the growing success of the Middle East’s tourism industry.”
Exponential growth
Commenting on the growth of the hospitality sector, Hala Matar Choufany, President, Middle East, Africa and South Asia HVS Middle East, said: “We have experienced exponential growth over the last 15 years supported by a massive increase in hotel supply across different categories. The number of quality hotel rooms in the region grew fivefold from circa 100,000 in 2010 to 540,000 in 2022, with occupied room nights growing from 27 million to 135 million.
An additional 180,000 keys are expected to enter the region over the next five years, which is forecast to increase occupied room nights to 184 million by 2028.
“Significant government budgets have played a key role in encouraging private investments and attracting foreign direct investment in the region. Today, the Middle East is expected to achieve higher growth compared to other regions, presenting attractive financial returns and providing long-term investment opportunities.”
Hospitality transactions
A substantial volume of hospitality related transactions is currently at an advanced stage of negotiation, with high profile properties expected to change hands in the coming months, according to global real estate consultancy Colliers.
James Wrenn, Executive Director and Head of Capital Markets, Mena at Colliers, said: “There’s a strong appetite for the hospitality asset class – particularly in Dubai and Ras Al Khaimah – from regional and international investors, buoyed by strong operating performance last year and the continued enhancement of the UAE as a top-tier international tourism destination.”
According to Wrenn, global sentiment remains subdued as the effects of high inflation, rising interest rates and looming fears of recession has affected the confidence of investors and reduced activity levels.
Yields need to soften
“Buyers are now scrutinising transactions more closely and there remains a gap between buyer and seller expectations. Across many markets it is generally accepted that yields will need to soften further to enable pricing to stabilise in-line with interest rates.”
Hospitality investment and the seemingly endless opportunities in the region’s tourism sector will be under the spotlight at FHS, with more than 100 top level speakers addressing key factors shaping the future of the industry, all under the theme “Focus on Investment.”
FHS is organised by The Bench and supported by host sponsors Abu Dhabi Convention & Exhibition Bureau, Miral, and Hilton Abu Dhabi Yas Island.--TradeArabia News Service
