x Abu Dhabi, UAESaturday 20 January 2018

Budget hotel boom on the horizon

Only 15% of hotels in the Middle East are currently classified in the budget category.

Price is right: budget hotels are set to grow significantly during the financial crisis.
Price is right: budget hotels are set to grow significantly during the financial crisis.

A boom in budget hotels is expected in the UAE as investors and operators race to cash in on the worsening economic climate, says Christophe Landais, the managing director of Accor Hospitality group. A recent Middle East study released by Lodging Econometrics reports that only 15 per cent of hotels in the region are classified as budget hotels.

"That's why I believe that this is a boom time for the budget operators to fill in this gap, and it's true that we have had some delays due to shortage of construction materials in some of our hotels," said Mr Landais. "But in many cases right now, the developers we work with are speeding up the process of building the hotels in order to take advantage of the current market." Budget hotels once struggled to get the attention of investors, but they were now in the limelight, said John Airey, the executive director of Nakheel Hotels, which bought the regional franchise of easyHotels, the British no-frills brand, in 2006.

"That's it, the gloves have come off and the tables have been turned in this market, and we will see a lot more doors open for budget hotels because this is the product that people want right now," Mr Airey said. With swelling tourist numbers to the UAE, budget hotels could be the answer to the shortage of rooms being experienced in Dubai and Abu Dhabi. The Abu Dhabi Tourism Authority's five-year plan aims to see 2.7 million visitors to the capital by 2012, while Dubai is aiming to attract 15 million tourists by 2015.

Mr Landais said his France-based company was committed to opening 44 hotels in the Middle East by 2012, up from its current 24 hotels in the region. This month alone, the group opened two properties, a Novotel and Ibis in Dubai's Deira City Centre, and it plans to open at least 16 more of the two mid-scale brands in the coming four years. Mr Landais said Accor was also looking at signing management contacts for four more properties in Dubai by the end of this year.

He said he was confident that the business model used for budget hotels was more resilient to the negative impacts of the crisis. "In Europe, where the economic slowdown has a greater impact, compared to this part of the world, our budget chains like the Novotel and Ibis have been doing really well because they offer lower prices at a time when customers are seeking them. "In the UAE and Middle East region in general we haven't felt any negative impact yet.

"For example, we opened an Ibis in Kuwait last March and the occupancy level is about 98 per cent right now. But again, I know that the impact of the slowdown will be felt by everyone here by next year." Amine Moukarzel, the senior vice president and managing director of the Dutch-Swiss Golden Tulip group, said the company had big expansion plans and aimed to have 55 hotels in the region by 2010 under its Tulip Inn and Golden Tulip brands.

"Investors right now know that the cost of building one luxury hotel is the same cost you would need to build two or three mid-scale properties," said Mr Moukarzel. "And by having two or three properties spread over a wider area you would also spread risk and make sure you get higher returns, even if the market is at a low point." Action Real Estate, a Kuwait-based developer, is also focusing on developing the lower end of the hospitality market.

The company currently has two hotels in Kuwait and Australia, which are managed by Accor under the Ibis brand, while 12 more hotels will be added by the end of 2010 in Oman, the UAE, Kuwait, Jordan and Bahrain. "The GCC still has the perception of being a luxury destination, and it's part of the tourism experience to stay at a five-star hotel when visiting the GCC," said Rawaf Bourisli,, the general manager of Action Real Estate.

"But I believe during these difficult times, when people are short on money, staying at a budget hotel is something everyone is looking for." @Email:abakr@thenational.ae