The number of tourists travelling to the Middle East increased more rapidly than anywhere else in the world in 2008. Despite the global recession, air traffic continues to rise – by 2.7% in the first quarter of 2009 – making the Middle East the only place still experiencing growth.

The region celebrated its fifth consecutive year of double-digit growth in revenue per available room (RevPAR) in 2008 and, even though the weakening economy is hurting hoteliers, there are still success stories. In 2008 the early promise for the region as a whole slipped away by September, when the financial woes of the rest of the world caught up with the Middle East.

Business dipped into the red in December – down 5.9%. As liquidity disappeared, development projects stalled.

In 2009, with a recession in some countries and talks of a depression in others, consumer and business spending is in sharp decline, with less available for travel. As a result, tourism’s contribution to gross domestic product (GDP) – historically put at 11% – has already fallen to 10%, according to the World Travel and Tourism Council (WTTC), and is expected to contract by 3.6% this year.

Little change is forecast for 2010. However the Middle East economy is less damaged than many others and has attributes that should shorten the time it takes to recover.

“The Middle East celebrated its fifth consecutive year of double-digit growth.”

GDP is forecast to grow by 1.5% in the region, pulling up the world’s average, with Qatar expected to see growth of almost 11%. Significantly, although RevPAR is suffering globally, this region is experiencing the slowest declines, of about 13%.

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData
Visit our Privacy Policy for more information about our services, how we may use, process and share your personal data, including information of your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.

Three months into 2009, the Middle East is still the best performer, with the highest occupancy, average room rates and RevPAR. However RevPAR dropped by 12.9% to $142 in the first quarter, ending the five-year double-digit story, and this was mostly due to a 9% drop in occupancy.

Year-to-March, average room rates across the region fell 4.3% to $228.

However not every destination faces the same challenges or has reached the same stage in its business cycle. Hotels across the world are feeling the impact of the recession, with European hoteliers seeing the largest declines in RevPAR – down $28 to $65, although this is partially due to the exchange rates.

Egypt demand drops away

The number of tourists visiting Egypt rose 15.7% last year, taking the country closer towards its goal of 12 million visitors by 2012. Russia remains the country’s top source market, while people from across Europe continue to be attracted by the year-round sunshine.

Egypt’s marketing campaigns portray the country as a sunny, safe and affordable destination, and better value for money than its neighbours.

The resort of Taba saw the biggest increase in RevPAR in Egypt last year – up 59.9% to $31. But even destinations that are great value for money such as Taba can’t escape the economic slump.

From November 2008, Taba started to suffer and during the first quarter of 2009, there was a 27.7% decrease in occupancy. Average room rates also fell, down 2.1%, pushing RevPAR down by more than 25% so far this year.

“The number of tourists visiting Egypt rose 15.7$ last year.”

Hotel performance is similar in Luxor and Sharm el-Sheikh, with average room rates up; but RevPAR has fallen 26.7% and 15.4% respectively because of lack of demand. Meanwhile, occupancy was down 16.6% and average room rates fell 1.4% in Cairo, pushing RevPAR down 17.7% to $85.

Beirut benefits

Lebanon had a strong 2008, with tourist arrivals up almost 30% from January through November. Hoteliers in Beirut had the fastest-growing RevPAR in the world – up 101.1% to $95 – and this year the city is enjoying the best RevPAR improvements in the region.

It is one of the few destinations in the Middle East to see growth in occupancy, average room rates and RevPAR, which was up 157.6% to $110 year-to-March 2009.

Staying longer in Saudi Arabia

Saudi Arabia wants to diversify from oil and is rapidly expanding its tourism industry. International arrivals are up and, according to the World Tourism Organisation (UNWTO), data shows a rise of more than 74% in the first five months of 2008.

The Kingdom is concentrating on religious tourism, with a focus on Hajj and Umrah pilgrims. Visa laws have been changed to allow pilgrims and religious tourists to extend their stay for three months.

Last year Riyadh achieved some of the strongest average room rates and RevPAR levels in the world at $244 and $175 respectively. Occupancy dropped 15.4% to 69.1% in the first quarter of 2009, but average room rates are still rising – up 18.5% to $283.

Across Saudi Arabia room rates are up 25.6% in Jeddah, 5.1% in Medina and 11.1% in Makkah. A commitment to tourism is being supported by investors, hotel companies and developers, and – according to Lodging Econometrics (LE) – 2,302 new rooms will come on to the Makkah market this year, with 221 more in 2010.

UAE – an expensive choice

After a run of success in the past few years, 2009 is proving tough for the UAE. Its own economic slowdown, plus European recession and falling consumer confidence, are worrying hoteliers.

As 45% of hotel rooms in the UAE are usually filled by European visitors – and 15% of these come from the UK – financial problems in Europe make a big difference to UAE hotel bookings.

As the UAE currency is dollar pegged, a stronger dollar makes the UAE an expensive destination for UK travellers.

Dubai campaign launched

Dubai, a magnet for millions in the past few years, is having to cope with decreased demand because of the recession as well as thousands of new rooms coming on to the market. Having enjoyed the highest average room rates and RevPAR in the Middle East in 2008, the emirate’s fortunes are changing and, in the first quarter of this year, RevPAR fell 36% to $203.

This enabled Abu Dhabi and Doha to overtake Dubai in terms of actual RevPAR. With more rooms available in Dubai, occupancy fell throughout 2008 and early in 2009, down 16.7% to 72.4%.

Declining room rates are damaging overall performance, with a drop of more than 23.2% in the first quarter of 2009. The trend is likely to continue, with 13,250 rooms coming on to the market this year and 10,208 in 2010.

“Lebanon’s RevPAR was up 157.6$ in March 2009.”

Dubai’s Department of Tourism and Commerce Marketing (DTCM) aims to re-energise demand by collaborating with Emirates Airline and Group, Dubai hoteliers and destination management companies. They launched the global ‘Keep Discovering Dubai’ marketing campaign in March, backed by a three-month programme.

The initiative is designed to help Dubai continue towards its target of 15 million international tourists by 2015.

Abu Dhabi’s triple tops

Abu Dhabi achieved a triple accolade in the first quarter of 2009, recording the highest occupancy, best average room rates and top RevPAR in the region, and overtaking its nearest rival Doha by $69. Even though occupancy has been in decline since November 2008, the emirate still managed RevPAR growth of 16.8%, due to a 24.3% jump in average room rates during the first quarter of the year.

The emirate has absorbed fewer new rooms than Dubai but, according to LE, 1,625 rooms are on their way this year and 6,985 in 2010.

Doha – new pearl of the Gulf

In Doha RevPAR was up 25.5% in 2008, driven mostly by increases in average room rates. So far this year RevPAR is up 1.8% to $221, giving Qatar’s capital the second-highest RevPAR in the region and the sixth-best growth.

Occupancy has declined over four consecutive months and is down 5.9% to 73.6%, while average room rates went up 8.3% to $300 in the first quarter of this year. Over the next five years, Qatar will invest $17bn in tourism, according to the Qatar Tourism and Exhibitions Authority (QTEA).

Central to the plan is its goal to encourage 5% of transit passengers using Doha International Airport to stay in the city for 48 hours longer than planned.

Bahrain – culture capital

About 90% of Bahrain’s tourist arrivals are from inside the region but the country plans to attract more international visitors. Recently Bahrain’s Minister of Culture and Information pledged investments of more than $100m to position the country as the culture capital of the Gulf.

There are plans to showcase Bahrain’s pearl industry, restore the country’s heritage and promote the work of the Bahrain National Theatre. The WTTC has named Bahrain as one of the top ten countries expected to generate extra tourism demand this year.

It presently welcomes more than 5 million tourists a year – a figure that rose by more than 10% in 2008. Hotel performance in Bahrain’s capital city Manama remains positive, with RevPAR up 3.5% to $167 in the first quarter of 2009.

Syria’s peace dividend

“Last year arrivals to Syria were up 15$.”

Syria, which is enjoying an increasingly peaceful relationship with its neighbours, plans to develop its tourism base. Last year arrivals were up 15% to 5.9 million, according to the Syrian Ministry of Tourism, and the country is running advertising campaigns and ramping up tourism investments with the aim of attracting 8 million visitors by 2015.

Syria is also on the WTTC’s top ten list.

Staying ahead

Although the downturn has tarnished the Middle East’s performance, its tourism industry is still growing faster than any other region. Its ability to offer year-round sunshine away from economic gloom is one factor in its favour.

Its geographical position, mix of source markets, growing importance as an aviation hub and the size of investments in the region will help ensure a brighter future. In the meantime it will be a balance between maintaining the standards of quality that travellers expect but at a lower cost, offering value while maintaining profitability, and controlling budgets while laying foundations for the future.