MENA Hotel Market Sentiment in April 2020

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By Nicholas Paillart, Chief Marketing Officer – Tratok.

As the hospitality sector faces an existentialist crisis unprecedented in its history, one which has not only crashed occupancy, ADR and RevPAR levels to all-time lows, it is important to reach out to the hospitality industry to understand their views on the current situation, how they have responded to the pandemic and their thoughts on the market moving forward.

Colliers International conducted a survey which the Research and Marketing Team at Tratok are pleased to analyze for you. Survey participants are from more than 25 cities in MENA. The majority of investments owned by respondents are in Saudi Arabia, the United Arab Emirates and Egypt. 65% of participants own operational hotels. The balance have hotels under development.

As a result, to the impact of the crisis on national and international travel, 79% of hotel owners have resorted to complete or partial closure of their hotels due to the low occupancy rates. Combined losses are in the hundreds of billions of dollars. 29% of hotel owners participating in the same survey have found their properties being used for quarantine or healthcare-related services. In the absence of revenue, property owners have resorted to various ways of cutting costs with 88% resorting to reducing staff and/or salaries and 83% to initiating staff leave.  Only 8% of properties surveyed are still operating “business as usual”. As interesting as this would be, unfortunately, the survey does not specify where these 8% of properties are located. 40% of hotel owners have indicated with cooperation between the owners and operators was very good.

In terms of the development and construction of new properties, the optimism of the hospitality sector is re-assuring, as 65% of hotel owners and or developers have no plan of scaling back their plans whatsoever. In fact, the research revealed that 39% of hotel owners and developers believe that the occupancy for 2020 will be between 21-40%, while 33% believe that the occupancy will be between 41-60%, with regards to their respective markets. However, 46% of respondents believe that recovery to 2019 levels will only begin in Q4 2020, with 28% believing the market will recover in Q3.

The conclusion is that a vast majority (74%) of those surveyed agree that the industry must be better prepared in the future for a similar type of event by implementing better crisis management planning. This means having more cost-efficient and leaner operations in place, embracing the latest technological and operational advances available. The economic and human toll incurred is immense, even unsurmountable for many, unless a revolutionary change in operations occurs. The leniency and tolerance towards legacy inefficiencies which have plagued the industry for so long, crippling cashflow, today, can no longer be tolerated. The new world we have awoken to is not one about profit and loss but about surviving the crisis or not. This will require some serious introspection by the industry – who they are and who they serve, rather than who they have been serving. Who have been the beneficiaries of the system for the last 20 years, and at what cost to the stakeholders? In a market that will take between 12 to 18 months to bounce back, according to respondents, it will be important to ensure the little revenue generated is distributed to those who deserve it, to those who make the industry run, rather than those who milk it.