Experts warn of overcapacity in Bahrain hotel industry

Manama : The region is seeing an influx of new hotel rooms in spite of reduced demand and economic struggle, according to a report.

The branded hotel market in Manama experienced stronger average room rates for the fourth consecutive year, reporting a two per cent increase to US$230 in 2015.

However, the Middle East Hotel Survey by HVS notes that occupancy levels dropped by two percentage points, to 53pc, thus pulling down revenue per available room (RevPAR) by 3.6pc in 2015 from the previous year.

The decline in occupancy came as a result of reduced corporate demand on the back of falling oil prices and slower economic activity, the report revealed.

Further it warns of overcapacity in Bahrain, “With over 2,500 internationally branded hotel rooms scheduled to enter the market in the next years, pressure on occupancy and average rate is likely to be observed. Some of the effects may be mitigated by the mega projects currently in the pipeline, such as Dilmunia, The Avenues Bahrain, King Hamad Causeway, Marassi Al Bahrain and Bahrain Marina, which are expected to induce further demand.”

The survey is based on 611 internationally branded hotels in the region, representing roughly 150,000 rooms. Drawing upon resources in the hotel industry, the survey covers a total of 42 cities in 13 countries, and spans over a history of 20 years, according to HVS. “The majority of hotel markets witnessed a downturn during 2015 with the exception of a few, including Cairo, Kuwait City and Abu Dhabi. In 2015, the highest occupancy levels were achieved by Ajman, followed by Dubai and Abu Dhabi, while the highest average room rates were achieved in Riyadh, Kuwait City and Jeddah, albeit at the expense of lower occupancy levels. The most lucrative hotel markets in 2015 were Dubai, Jeddah and Muscat, managing to secure the highest regional RevPAR, at US$180, US$172 and US$140, respectively,” the report said.

Around 150,000 rooms are currently operating in the region and leading hotel operators are expected to release a further 100,000 rooms between 2016 and 2020. Over 18,000 new rooms are scheduled to be introduced to the market during 2016 alone. The inventory is in various construction phases, and roughly 73pc constitutes additional supply in the United Arab Emirates and Saudi Arabia, with the latter accounting for 41,000 new rooms. Oman boasts the third largest internationally branded pipeline, with roughly 5,000 new rooms in the planning and construction phases, according to HVS.