Revenue declines in May for Mena region's upmarket hotels, says EY

Saudi Arabia is strongest performer while Abu Dhabi records highest occupancy rate

Makkah and other Saudi Arabian cities bucked the trend in terms of hotel revenues, witnessing year-on-year increases in RevPAR in May 2018, an EY report said. Courtesy Emaar Hospitality Group 

The majority of four and five-star hotels in the Middle East and North Africa witnessed annual revenue and occupancy rate declines in May, however hotels in Saudi Arabia and Abu Dhabi bucked the trend in part due to an influx of pilgrims in the holy month of Ramadan, according to advisory firm EY.

“Due to Ramadan beginning in mid-May this year and the onset of the summer season, the overall decline in performance in the region is unsurprising,” said Yousef Wahbah, EY’s Mena real estate, hospitality and construction sector leader.

“Saudi Arabia, however, benefitted from the large influx of pilgrims during the holy month. Over two million pilgrims were expected to have visited the holy city of Makkah, resulting in increased [occupancies] across Makkah, Madinah and Jeddah, with declines only in Riyadh.”

However, the region’s hospitality market will continue to see a drop in key performance indicators including occupancy rates, average daily rates (ADR) and revenue per available room (RevPAR) during the summer season, “as business travel declines and conferences and events are at a minimum”, he said.

Abu Dhabi maintained the highest occupancy for the month of May at 76.6 per cent, rising 8.9 percentage points from May 2017, according to EY’s latest Mena Hotel Benchmark Survey report. ADR decreased by 11.9 per cent year-on-year to $89 in May, although overall the emirate maintained its RevPAR of $68 from last year.

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Dubai’s hospitality market witnessed a dip across all indicators once the peak season of events and conferences reached a close at the end of April. Occupancy rates declined by 16.4 percentage points from 77.3 per cent to 60.9 per cent and ADR dropped by 0.7 per cent to $236, resulting in a 21.7 per cent year-on-year drop in RevPAR to $144, EY said.

Saudi Arabia, on the other hand, witnessed growth in hotel revenues in most cities examined in the report. Jeddah recorded the highest ADR in the region of $351, resulting in the highest RevPAR of $259 in May, while Makkah hotels saw the sharpest increase in earnings – a 60.4 per cent year-on-year increase in RevPAR to $143 in May 2018.

Madinah hotel RevPAR increased by 18.3 per cent to $135 and occupancy increased by 4.2 percentage points to 68 per cent in May 2018. Meanwhile, Jeddah hotel RevPAR rose by 23.2 per cent to $259 in May with occupancy rates above 73 per cent, the highest of hotels in the kingdom.

Riyadh saw a 35 per cent annual decline in hotel revenues to $78 in May 2018.