Hotel operators aim to bounce back in Saudi Arabia and Egypt

International hotel operators Hilton and Starwood expect better performance next half to lift declining revenues in Saudi Arabia and Egypt.

Hilton Abu Dhabi, above, undertook a Dh8 million land reclamation project to increase the size of its beach. Silvia Razgova / The National

International hotel operators are banking on an improved political situation in Cairo and the completion of construction work around the Grand Mosque in Mecca over the next year to improve on weaker first-half earnings in Egypt and Saudi Arabia.

Visa restrictions and fears of the Mers coronavirus in Saudi Arabia and warnings from European countries over travel to Egypt had limited tourism during the first six months. Germany lifted its Egypt warning during the period.

Hilton, Starwood Hotels and Resorts and InterContinental Hotels Group operate some of their largest properties in terms of number of rooms in Saudi Arabia and Egypt. IHG, for instance, is building a 1,238-room Holiday Inn, its biggest, in Mecca. It is expected to open in 2016.

The New York-listed Hilton reported weak performance in Egypt, Saudi Arabia, Singapore and Thailand in the first half, said Kevin Jacobs, the company’s executive vice president and chief financial officer.

Revenue per available room across the Middle East and Africa dropped 3.4 per cent during the quarter, he said.

“Our outlook largely assumes a steady state and we anticipate flat [revenue per available room] in the region for this year as a positive booking pace and easy comparisons in Egypt somewhat mitigate challenges elsewhere in the region.”

Hilton operates five hotels in Saudi Arabia and 19 in Egypt.

“We remain committed to both markets in the long term and are already seeing an upswing in visitors to Egypt as various travel bans are lifted,” said Rudi Jagersbacher, Hilton’s president in Middle East and Africa.

This year, Saudi Arabia will again issue fewer visas than it did in 2012, amid major expansion work around the Grand Mosque. Last year, 1.9 million pilgrims performed Haj, down from 3.1 million in 2012.

Saudi Arabia has reported 721 cases of Mers and 298 deaths, according to the European Centre of Disease Prevention and Control this month.

Starwood, which operates 10 hotels in the kingdom, also reported that the construction work and disease fears weighed on revenue growth in the country.

“As that construction is completed likely next year business in the kingdom should improve,” said Frits van Paasschen, the president and the chief executive of Starwood. The company has eight hotels under construction in the country.

In Egypt, Mr van Paasschen said revenue per available room fell by 20 per cent. Starwood operates 11 properties across the country, and has three more in the pipeline.

Across four- and five-star hotels in Cairo, occupancy rates decreased by four percentage points to 41.3 per cent in the first half as the average room rates rose to US$111.69 from $109.45, according to TRI Hospitality Consulting Middle East. In the Red Sea resort town of Sharm El Sheikh, occupancy levels fell by seven percentage points to 58 per cent and room rates fell to $40.74 from $47.18 in the first six months of last year.

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