Tourism in the Middle East: It is coming back

For a series of unfortunate circumstances, mostly related to the way the Middle East was perceived in the eyes of an international distracted observer, the tourism industry suffered some bad hits over the past few years.

But gloomy days seem to be over. The upcoming Expo in Dubai is going to be the centrepiece of a return to growth when it comes to both the number of tourists and the hospitality revenues.

A substantial growth of tourists in this part of the world started to be noticeable around 2008. The sharp growth came to a peak in 2012/2013 when Dubai led as hot-spot for the entire region. Concurrently, a large number of new hotels and other hospitality structures bloomed in a very short period of time, increasing competition and forcing operators to “throw” discounts to the market.

Despite the growing supply, until to date, Dubai hold strong the position of the world’s most sought after luxury destination. It has also established itself strongly within the top 5 most visited cities in the world.

But 2016 and 2017 were gloomy years for the hospitality of the Middle East and some of the popular destinations are still struggling with the recovery. Doha for instance is still at 16 per cent less Revenues Per Available Room compared to the period prior the down-trend of 2015-16, leading the cities with the slowest recovery from the crisis.

Jeddah and Manama are in a better position compared to Doha, but still down 9.9 per cent and 9.9 per cent respectively compared to the time when tourism seemed ever-growing. Despite the similarity in percentage performance, the US dollar value is completely different.

A room in Doha is still averagely priced at around $90, whereas a night in Jeddah is well over $250, ranking the most expensive place in the world to visit as a tourist. Manama sits in the middle at $166 a night.

Much closer to a recovery are Abu Dhabi (still 5 per cent below the good recent times) and Riyadh, almost back to normality, with a 3.2 per cent negative balance compared to 3 years ago. Similarly to the above mentioned pair, Abu Dhabi and Riyadh still differ in dollar value. A night in Abu Dhabi is priced at an average $120, while in Riyadh more than $190.

On the positive side of the scale, Amman rose back by 5.4 per cent in a solid recovery trend. Dubai has over-performed the capital of Jordan, in terms of recovery, with a strong 6.7 per cent growth. Amman is currently pricing rooms at an average of $141 while Dubai is about to reach $185 a night.

Then Oman: Muscat has grown significantly over the past few years as one of the most desired destinations in the world. The current balance, compared to the pre-crisis time, is an outstanding +8.2 per cent. In fact, even during crisis time, when the world ‘feared’ the Middle East, Oman maintained the well known peaceful appeal as an oasis of tranquillity holiday destination. Muscat is in line with the rest of the cities, averaging $165 a night, comfortably sitting between the other capitals in the region.

However, the top performer in the ranking is Beirut. Room price has grown to over $150, a share 11.7 per cent increment compared to the pre-2015-16 tourism crisis.

Most of the cities still struggle with occupancy, stubbornly stable at a few points above 50 per cent with the exception of Dubai, leading at 77.2 per cent occupancy rate, Abu Dhabi at 72.1 per cent and Muscat at 60.1 per cent.

It is also important to highlight that supply has been struggling to understand demand.

For instance, collectively in the region in 2011, the demand grew by 8 per cent, but the supply was only 4.8 per cent. The subsequent year, demand entered in double digits at 10.4 per cent, while supply remained at a mere 6.2 per cent.

Only when the plateau began in 2013 and 2014, and the demand remained constant at 8 per cent growth, supply stayed stable at around 5 per cent, although still below demand.

Then the crisis hit and supply became double than the demand for 2 years in a row. 4 per cent vs 2 per cent or less. In 2017 the numbers still showed a higher supply than demand, but definitely more balanced compared to the previous years.

According to the Arabian Hotel Investment Co, the whole industry is now getting out of the gloomy period and tourism is starting once again to return to the region. It is an encouraging sign, given that hospitality represents such an important component of the culture and the economy of the Middle East.