BAHRAIN: Increasing Hotel Capacity By 4,000 Rooms

Bahrain will receive 15 new hotels, valued at $10 billion, by 2020, according to a statement from the Bahrain Economic Development Board (EDB) on Wednesday.

Brands like The One&Only, Fairmont, The Address, and Wyndham are set to mark their entry in to the Gulf country over the course of the next three years.

These hotels will add to Bahrain’s existing portfolio of over 190 hotels and resorts. This includes 18 five star hotels and 48 four star hotels. In total, the country’s hotels currently offer a capacity of 16,500 rooms.

In a separate statement, Khalid Al Rumaihi, Chief Executive of the EDB, said the new hotels were expected “to increase hotel capacity by around 4,000 rooms in the country by 2020 and fill gaps in the market.”

“These developments will both help to meet rising demand and attract new visitors to the kingdom. Bahrain showed strong growth in tourist numbers in 2016, witnessing a 6 per cent increase in the number of tourist arrivals,” he added.

Bahrain received 12.2 million people in 2016, and in 2015, the kingdom’s tourism sector accounted for 6 per cent of the total GDP, contributing revenues of $1.9 billion to its economy.

The country’s tourism market is predicted to grow at a compound annual growth rate (CAGR) of 4.8 per cent.

Following Marriott International’s announcement that they would be opening 15 new luxury properties across the region, the company’s president for the Middle East and Africa said on Wednesday that despite some oversupply concerns, he sees huge opportunity in the market.

“Whilst some of the Middle Eastern markets appear to be oversupplied, the fact of the matter is the ratio of branded rooms to population is exceptionally small,” Alex Kyriakidis, President and Managing Director of Marriott International, Middle East & Africa, said.

Kyriakidis said that Marriott would add 60,000 rooms across the region between now and 2022.

The majority of these, he said, would be located in the UAE, Saudi Arabia, and Egypt.

Regarding Saudi Arabia, Kyriakidis said “there is a pent-up demand for travel”, adding that “you have religious tourism, which has an exponential growth trajectory with the Muslim population growing around the world, in addition to domestic travel.”

“The kingdom is a huge focus for us, particularly the holy cities,” he said.

Marriott currently operates 11 hotels across the kingdom, which has a population of 31 million people, including two Ritz-Carlton properties.

In the UAE, Kyriakidis sees Marriott International diversifying its business away from the “upper upscale” brands such as Marriott, Le Meridien, Sheraton, and Westin.

“We see lots of opportunity in the select segment of the market, to compliment the upper upscale and luxury, and make Dubai more affordable, particularly for families to visit,” he said.

The select segment is a term Marriott International uses to describe its midscale offering, including brands such as Courtyard Hotels, Four Points, and Aloft Hotels.

Kyriakidis added that the intention was to “diversify our product within the UAE.”

For Egypt, the senior official noted that travel to the country had been “marred by safety and security concerns.”

Nevertheless, he said that the company is seeing “a significant uptake in travel to the country now by virtue of the fact that its currency is not dollar pegged.”

In November 2016, Egypt devalued its currency by 48 per cent in an attempt to end its economic crisis, which Kyriakidis said had “made their country considerably more affordable for tourism” and in turn stimulated “demand from around the Arab world.”

Turning his eye to the UAE’s capital, he conceded that “we’re in a tough time right now because of the oil price,” but said that Abu Dhabi is “beginning to rethink its strategy about how to generate economic activity, and clearly leisure and tourism is at the heart of that.”

“We are thinking strategically about the capital,” Kyriakidis added.

Even as the hotels market in the Middle East and globally is seeing a strong shift from luxury to mid-range, the InterContinental Hotels Group (IHG) has not stopped expanding in the luxury segment of the market, although it is still strongly focused on the midscale side of the business.

The hotels group, largely known by its Holiday Inn, InterContinental and Crowne Plaza brands, is looking to bring its boutique lifestyle luxury brand, Kimpton Hotels & Restaurants, to the region.

This time it would be a unique offering in the luxury end of the market, says Pascal Gauvin, IHG’s Chief Operating Officer for India, Middle East and Africa.

“It’s an American brand. We are now starting to export it outside of America. We would love to start with Dubai in this region,” he told Gulf News in an interview.

IHG bought the brand in 2014, and started to take the Kimpton brand outside of the US only in January this year.

It has signed for a property each in Amsterdam, which is about to open sometime this year, and Paris, Gauvin said.

“We only want to do the big capitals for this band. And of course, for this region, we want to start with most probably Dubai and then take it to all the other big cities in the region.”

Asked if Dubai would see a signing for Kimpton sometime this year, Gauvin said: “I can’t tell you when we are going to sign one in Dubai. It depends on the investors’ appetite.”

He was quick to add that IHG has already in discussions with investors to bring the brand to this market.

“We are talking to some investors already. The ones that we have started seeing are really keen on exploring possibility with the brand. People who are interested are the ones who already know the brand from the US, and they are very glad that we have started exporting the brand,” Gauvin said.

Contrary to belief by some that the luxury end of the segment might be reaching a saturation point in a market such as Dubai and the overall region, Gauvin said he was optimistic about the growth in this segment.

“Luxury will always be luxury, because by DNA, this is where this region started and so we will remain quite strong in the luxury [segment] … but maybe a different luxury than what we see today. It’s more boutique lifestyle luxury more than the large brand luxury,” he said.

IHG has another lifestyle brand, Hotel Indigo, which caters to the upper scale of the market, and reflects the neighbourhood around, as Gauvin puts it.

“But Kimpton is the other way — it’s more inward thinking. So we want to cocoon them [the guests] inside the hotel. Restaurants here will play a very important part,” he said.

Hotel Indigo, meanwhile, is under construction in two markets in the region — in Dubai and Riyadh. “IHG is planning to bring new brands to this region,” Gauvin said.

IHG has 79 existing hotels in the Middle East with 26 in the pipeline. “In three to five years, they will all be open. And that’s 47 per cent growth,” Gauvin said.

“There is a diversification taking place in the market. And that’s why we are bringing in a lot of midscale brands such as the Holiday Inn, to Dubai in particular, but in the region in general,” Gauvin said. “We were an emerging market for many years, and it’s maturing [now], especially the UAE, specifically Dubai. So it’s really time to focus on our midscale brands.”

He added that IHG would continue to expand its InterContinental and Crowne Plaza brands.

A surge in Airbnb-driven short-term bookings eating into Dubai’s hotel industry margins? Not likely as there is enough space to accommodate all of the demand — and not necessarily competing — from the various guest categories, according to findings by the consultancy PwC.

“It’s the Generation Z that is so taken up with a “shared economy”,” said Martin Berlin, Middle East Partner and Global Deals Real Estate Leader at PwC. “This is the audience that will find a stay with an Airbnb app most appealing; but this is effectively creating a user base in cities where they didn’t exist before or wasn’t fully developed.”

PwC has issued its Megatrends report on the hospitality sector, where it defines the user groups the hospitality industry should be planning for — the “silver generation”, the millennials and Generation Z. And each group has their marked preferences on where they want to make a room booking and how they want to make it.

Until now, the millennials and the Genz Z born after 2000 were clubbed together under the impression that their tastes bore close resemblances and with little differentiation. But the PwC report prefers to see some subtle differences between them.

“Although there is limited knowledge about the travel preferences of the Gen Z tourist, it is predicted that due to higher access to information and higher education levels, this travel segment will bring forth a new age of innovation within the travel and tourism industry,” the report states. While Gen Z would prefer non-traditional hotel concepts such as Airbnb, the millennials — more so those further up on their career paths — are “partial to smaller boutique brands and shared economy structures such as Airbnb”.

But the region’s hotel industry will still have a fight when it comes to retaining their hold on the business traveller. There are options opening up via short to longer term staying options offered by non-hotels for a corporate guest.

The PwC report reckons as much. “The hotel industry’s prized possession — the business traveller — is soon to be targeted by Airbnb,” it states. “Hoteliers need to take strong proactive action to retain business travellers and attract customers across all ages and demographics.

“This would require adapting their services to become more consumer-centric in order to create unique guest experiences. Hoteliers also need to invest in creating strong identities for smaller lifestyle chains rather than larger cookie-cutter brands. It is important for the hotel industry to be proactive rather than reactive when it comes to locking horns with this disrupter.”

Dubai’s developers are changing tack, with a horses-for-courses policy rather than keep committing to hotels either too heavy with luxury trappings or a bare-bones budget option. Damac has now introduced investment options on hotel apartments overlooking its Trump golf course, with prices starting from Dh395,000.

Meraas, the Dubai Government owned master-developer introduced four concepts in one go as part of its drive into developing a hospitality presence.

According to Berlin, “Dubai will still be a top attraction for the “silver” tourist, and with their preference for longer term stay options. The laws on short-stay homes have already been passed in Dubai and it’s just a matter of time before other Gulf cities come with their own versions to govern this category. It will only mean further growth opportunities.”

Even on how marketing campaigns should approach them, Gen Z are overtly dependent on connectivity while millennials want to know more — and are not immune to influence by — social media.

For Middle East hoteliers, there are lessons on marketing tactics they will need to imbibe. “The shift from the intermediaries to the influencers is one of the largest marketing shifts the travel and tourism industry has foreseen,” the report notes.

“The Gen Z and the millennial tourists are no longer swayed by travel brochures but are most likely to make decisions based on social media influence. Therefore, it is imperative for players in the travel and tourism industry to increase the importance of social media platforms in their marketing strategies.”