Hoteliers and investors are cautiously optimistic about opportunities in the industry, with some signs of recovery evident after a challenging year. "Certainly on the financing side there are investors out there who want to put their equity to work because they're getting very poor returns from cash," Arthur de Haast, the global chief executive of Jones Lang LaSalle Hotels, said yesterday at the Arabian Hotel Investment Conference in Dubai.
"There's still a fair bit of concern about both the equities market and the bond markets, so buying into real assets is something that is going up the list, but they are being careful about where they buy and what they're buying. "But they are being constrained because there is still very limited debt available and not many have enough cash that they can just buy everything with equity." In particular, Mr de Haast said, financing would be a problem for new projects.
"New build is very, very difficult at the moment," he said. "There is very limited financing available for new build." A survey of the hotel and hospitality industry in the MENA region by DLA Piper, the international legal practice, found 76 per cent of respondents described their 12-month outlook on the Middle East hospitality sector as "bullish", compared with only about a third of respondents in Europe and the US. Kingdom Hotel Investments, based in Dubai, said the last investment it made was in September 2007.
"I think everybody is pretty optimistic about the outlook and recovery," said Sarmad Zok, the chief executive of Kingdom Hotel Investments. "Without doubt, Asia is the bright spot that will lead us to a recovery and probably has the brightest outlook relative to the others over the next 10 to 15 years, partly because it's also driven by fundamentals that have a bit more gravitas than the Middle East or Africa.
"You have population, you have productivity, you have exports, you have trade and you have of course China, which provides a catalyst. "Other than Saudi Arabia and Egypt, there aren't many countries with significant populations. Africa has been neglected by investors for many years but with China seeking access to commodities, all the commodity-producing African nations are seeing significant amounts of growth." Hotel operators also said Asia was a key market.
"I think Asia is clearly number one growth for us," said Eric Danziger, the chief executive of Wyndham Hotel Group. China was an important market for development, followed by countries such as Thailand, Korea and India. Asia was followed by aggressive plans for the Middle East, Mr Danziger said, but the industry was still feeling the effects of the economic crisis. "We're not out of the woods yet," he said. "I describe where we are today as 'less bad'."
Joe Sita, the president at IFA Hotel Investments, said: "In the region, on the one hand the local banks have closed up shop when it comes to lending, particularly in hotels, talking about the UAE and Dubai. "On the other hand, we've seen some strong interest from a limited number of international banks." Mr Sita said that was because Dubai's hotel industry was starting to show signs of improvement after hotel projects in Dubai and the region had been cancelled or stalled because of the financial crisis.
Rotana, the Abu Dhabi-based hotel management company, said it was not considering an initial public offering in the near future, as it focused on its regional expansion plans and waited for investor appetite to improve. "We had this in mind a few years ago and when the crisis started we put it aside. We are very happy with our existing partners," said Selim el Zyr, the president of Rotana Hotels. Rotana has 36 hotels in operation and plans to have 70 by 2012.
rbundhun@thenational.ae
