Saudi Arabia Hotel Market Leads GCC's RevPAR Growth in Q1

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According to STR Global, major markets across the Gulf Cooperation Council (GCC) reported mixed results in revenue per available room (RevPAR) during the first quarter of 2012, following a mostly positive performance for year-end 2011.

Jeddah, Saudi Arabia; Al Khobar, Saudi Arabia; and Dubai, United Arab Emirates, all experienced continued RevPAR improvements during the first quarter of 2012. Despite increases in demand across all but one market, continued supply growth limited RevPAR performances in the other major GCC markets.

"The majority of markets across the GCC have weathered the recent storms fairly well", said Elizabeth Randall, managing director of STR Global. "We have seen demand growth for most markets in the region, highlighting the stronger underlying fundaments of stability and attractiveness to regional and international visitors. Increasing room inventory has been a dominant factor influencing performance in the past and will continue to do so as the region remains attractive for hotel owners and operators. Dubai and Abu Dhabi are interesting case studies to show how hotel markets can cope with balancing demand and supply".

RevPAR change year-on-year for selected cities (%), local currency



Excluding Makkah and Medina, both in Saudi Arabia, Jeddah is the star performer in RevPAR growth for the first quarter. The city benefited from demand growth (+17.3 percent) and a temporary reduction of available rooms as the Westin Jeddah is closed for refurbishment between October 2011 and summer 2012.

Al Khobar saw RevPAR in Q1 2012 increase to SAR414.16 (+18.0 percent), led by occupancy reaching 57.3 percent (+13.4 percent) compared to the previous year. Occupancy growth primarily was driven by increased demand (+21.2 percent) amid fairly low increases in new supply (+6.9 percent), which in previous years increased by double digits. Elsewhere in Saudi Arabia, Riyadh's supply growth (+11.5 percent) in Q1 2012 outpaced demand (+3.1 percent). This resulted in an occupancy decline of 7.5 percent to 63.2 percent.

In the United Arab Emirates, Dubai and Abu Dhabi represent two different cycle stages, particularly when looking at supply growth over the last 15 months. In Q1 2012, both cities benefited from a fairly similar demand growth, with Dubai growing by 11.0 percent and Abu Dhabi by 9.7 percent. However, considering the supply growth since 2011, the impact on RevPAR performance has been quite different. In Abu Dhabi since December 2011, the city has seen double-digit supply growth, reaching 16.7 percent in Q1 2012. The additional room inventory resulted in declining occupancy by 6.0 percent to 64.1 percent. Abu Dhabi's average daily rate (ADR) during the first quarter of the year was AED633.85, a decrease of 11.7 percent compared to the previous year. In Dubai, new supply growth was less pronounced at 2.6 percent in Q1, resulting in an 8.2-percent occupancy increase to 86.6 percent. During the same period, ADR increased 8.7 percent to AED964.86, benefiting RevPAR growth of 17.6 percent.

Year on year Supply and Demand change



Other GCC markets see RevPAR declines

In Doha, Qatar, occupancy declined by 10.5 percent to 63.6 percent in Q1 2012, led by double-digit supply growth (+17.4 percent), which outpaced demand growth of 5.1 percent. The competitive environment has led ADR to decline to QAR827.8 (-4.5 percent) in Q1 compared to the previous year.

Manama, Bahrain, following the unrest since February 2011, continued to see RevPAR performance declining to BHD35.87 (-9.0 percent) in Q1 2012, compared to the previous year. Whilst March 2012 saw an increase in occupancy (+112.1 percent), the increase was from a low occupancy base in March 2011 of 21.2 percent. Demand for the destination improved 1.1 percent for the first quarter this year.

Kuwait saw occupancy reaching 57.3 percent (-6.6 percent) in first-quarter 2012 compared to the previous year. During the same period, ADR declined by 1.9 percent to KWD63.00. Kuwait was the only market reporting a demand decline (-5.0 percent) for the first quarter.

Whilst ADR declined by 7.3 percent to OMR94.98 in Muscat, Oman, the city's hotels saw occupancy reach 67.3 percent (+3.5 percent) resulting from increased demand (+8.0 percent) for the first quarter of 2012. Muscat's demand increase outweighed its supply increase of 4.3 percent.

STR Global tracks more than 93,200 rooms across the GCC region and reports on all major cities including Makkah and Medina.