Experts talk diversification within the GCC’s hospitality sector

Trends in the GCC region’s hospitality market are shifting, making way for mixed-use developments that offer guests more than the typical hotel experience

Waldorf Astoria Palm Jumeirah is an Al Habtoor Group development.
Waldorf Astoria Palm Jumeirah is an Al Habtoor Group development.

In its 2016 report, investment banking advisory firm, Alpen Capital, cited the GCC’s active tourism industry as a contributing factor to its hospitality industry’s “growth trajectory”.

The company also highlighted the Gulf’s growing number of hotel properties, forecasting that its hospitality market will report “7.6% compound annual growth rate (CAGR), from an estimated $25.4bn in 2015 to $36.7bn in 2020”.

Expressing a similarly positive outlook not only for the GCC but also the wider Middle East market, Diane Thorsen, design director and principal at Perkins+Will, tells Construction Week that there’s strong competition among operators, as well as an “increasing desire to create unique offerings for guests”.

“[At Perkins+Will], we are receiving a [high] volume of requests for proposals (RFPs), and have been advised that 16,000-plus keys are planned for delivery in the region by 2020,” she explains.

Thorsen goes on to note that despite the region still being widely regarded as a luxury destination – in February 2017, UK-based airport transfer website, Hoppa, ranked Dubai as the 13th most expensive tourist destination in the world – a definite shift can be observed in planned projects.

She elaborates: “More mid-market sectors with diverse typologies are finding their way into the mix to attract a wider range of tourists, which, in turn, is bringing exciting projects to designers.

“Mergers within the industry shaped and altered the trends substantially, as did the direct booking system and Airbnb. This has meant that, within our team, we have had to challenge one another to [approach] design from [the perspective of] the human experience,” Thorsen tells Construction Week.

This approach, Thorsen explains, is reshaping trends in the Middle East market, which appears to be developing a preference for community-centric projects that bring people together and offer guests a “home away from home” experience.

Offering the same observation on market trends is Nashat Louis, chief operating officer of ASGC, which counts Al Habtoor Group’s Waldorf Astoria Palm Jumeirah among its hospitality projects.

Remarking that developers are injecting more creativity into their projects to adapt to the region’s competitive hospitality environment, Louis says: “We see that creativity coming through in architectural design, interior modelling, technological sophistication, and site selection, [as well as] in the contribution that hospitality projects can have on overall community development.”

Describing the Middle East as “one of the fastest growing hospitality markets in the world”, Louis continues: “Within the Gulf, in particular, we see the hospitality and tourism industry being bolstered by a compelling wave of sports, entertainment, and leisure ventures. We therefore anticipate heightened interest from local developers to create mixed-use projects that combine hospitality, entertainment, retail, and residential elements that deliver guest-centric lifestyle experiences.”

Louis also points out that while project funding poses a challenge, with some investors and financial institutions remaining cautious, ASGC is noticing improved investor confidence and cash flow in major private developers, encouraging them to “press ahead with project plans and market releases”. This, in turn, is “adding to the strong activity coming from the government and quasi-government sectors”, he says.

Narrowing his focus to the Dubai hospitality market, Zander Muego, director of Thomas & Adamson, reveals that the sector remains strong, identifying Expo 2020 Dubai as the primary driver behind both new-build and refurbishment projects.

“While much of the new-build supply that is being created to cater for [Expo 2020] is already underway, we are seeing increasing numbers of enquiries relating to [the] renovation of existing hotel stock,” Muego explains.

“We expect the trend of increasing numbers of renovation projects to continue throughout 2018, while the focus remains on progressing and completing new-build projects that are already underway.

“The big issue that we are currently exploring, at a strategic level, is the medium-term outlook for the hospitality industry, particularly [in terms of] how demand will influence construction of new hotels beyond 2020,” he adds.

Talking about problems that the hotel industry is facing, Muego says that the biggest challenge, from a construction perspective, is “building skilled teams and finding competent contractors”.

“There is an oversupply in the construction sector – a huge number of companies are chasing the same work,” he laments. “But delivering quality hospitality products, be they hotels [or] food-and-beverage (F&B) outlets, within budgetary and timescale constraints, needs [competent] people and intelligent allocation of resources.”

That said, Muego stresses that there are plenty of opportunities in the market: “The opportunity exists for those, be it on a consultancy or contracting level, who can deliver great work economically.

“For those who can do this, there is a large and potentially profitable marketplace to engage in,” he concludes.

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