In Beirut, occupancy rates rose 13.5 per cent to 68.3 per cent, thanks to “the lifting of travel bans and favorable climate conditions attracting visitors,” EY said. Bilal Hussein / AP Photo
In Beirut, occupancy rates rose 13.5 per cent to 68.3 per cent, thanks to “the lifting of travel bans and favorable climate conditions attracting visitors,” EY said. Bilal Hussein / AP Photo

Mena hotel performance to remain weak, with few exceptions, EY says



The Middle East and North Africa (Mena) hospitality market is expected to remain weak with exception of few cities in the region that could see some improvements in the coming months, following mixed results in October across destinations, according to a new survey report.

"The Mena hospitality market is expected to continue the trend of a softer performance but will look to see improvements in a few cities over the next few months due to annual exhibitions, events, and festivals," said Yousef Wahbah, Mena real estate, hospitality and construction sector leader at advisory EY.

“Overall, internationally branded four and five star hotels in the Middle East witnessed a split among the increases and declines of KPIs [key performance indicators] in October 2017 when compared to the same month last year.”

Beirut had the highest year-on-year increase in hotel occupancy rates in October , while Doha had the steepest drop, the survey showed.

Geopolitical tension, and slowing economies in some markets are putting pressure on the hospitality sector in the region. Low oil prices, the strong dollar and ever-increasing supply of hotel rooms has also dented the performance in key cities in the Arabian Gulf region.

In the UAE, Abu Dhabi’s hotel occupancy rose 8.9 per cent to 86.7 per cent, thanks to an increase in guests coming through cruises and the emirate's hosting of the 44th World Skills Competition.

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The occupancy levels in Dubai, one of the region's top tourism and commercial hub, however,  fell 2.4 per cent to 79.6 per cent. An increase in hotel supply has prompted hotels to lower their average daily rates (ADR) to maintain occupancy levels, according to EY study.

Doha's occupancy levels fell 11.1 per cent to 57.3 per cent. Tourism is one of the worst affected sectors in the gas-rich nation after the Arab quartet of Saudi Arabia, the UAE, Bahrain and their North African ally Egypt in June cut diplomatic and transport ties with the Doha for its support to terrorist groups in the region.   Saudi Arabia and the UAE are among the main source markets for Qatar's hospitality sector.

In Saudi Arabia, occupancy increased in Riyadh and the holy cities of Mecca and Medina by 5.9 per cent, 13.9 per cent and 1.8 per cent, respectively.

In Beirut, occupancy rates rose 13.5 per cent to 68.3 per cent, thanks to “the lifting of travel bans and favourable climate conditions attracting visitors,” EY said.

The biog

Name: Salvador Toriano Jr

Age: 59

From: Laguna, The Philippines

Favourite dish: Seabass or Fish and Chips

Hobbies: When he’s not in the restaurant, he still likes to cook, along with walking and meeting up with friends.

A QUIET PLACE

Starring: Lupita Nyong'o, Joseph Quinn, Djimon Hounsou

Director: Michael Sarnoski

Rating: 4/5

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

COMPANY PROFILE

Name: SmartCrowd
Started: 2018
Founder: Siddiq Farid and Musfique Ahmed
Based: Dubai
Sector: FinTech / PropTech
Initial investment: $650,000
Current number of staff: 35
Investment stage: Series A
Investors: Various institutional investors and notable angel investors (500 MENA, Shurooq, Mada, Seedstar, Tricap)

Also on December 7 to 9, the third edition of the Gulf Car Festival (www.gulfcarfestival.com) will take over Dubai Festival City Mall, a new venue for the event. Last year's festival brought together about 900 cars worth more than Dh300 million from across the Emirates and wider Gulf region – and that first figure is set to swell by several hundred this time around, with between 1,000 and 1,200 cars expected. The first day is themed around American muscle; the second centres on supercars, exotics, European cars and classics; and the final day will major in JDM (Japanese domestic market) cars, tuned vehicles and trucks. Individuals and car clubs can register their vehicles, although the festival isn’t all static displays, with stunt drifting, a rev battle, car pulls and a burnout competition.

Honeymoonish

Director: Elie El Samaan

Starring: Nour Al Ghandour, Mahmoud Boushahri

Rating: 3/5


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