JEDDAH – Hotels in Jeddah experienced a 15 percent growth in RevPAR, driving a 13.8 percent profit growth in June, the latest HotStats survey of full service hotels in six MENA cities by TRI Hospitality Consulting revealed. Average occupancy at four and five star chain hotels in the city reached 85.4 percent, up by 5.8 percentage points, with average room rates (ARR) increasing 7.2 percent to $226.63 during the month, compared to the same period last year. Revenue per available room (RevPAR) for the month surged 15.0 percent to $193.62 leading to strong growth in profits in terms of gross operating profit per available room (GOPPAR) by 13.8 percent to $147.95. "Jeddah achieved the highest occupancy and profitability in the region in June as hotels capitalize on the strong summer demand. Jeddah is a summer holiday destination for domestic travelers as well as the summer seat of the Saudi government. The GOPPAR level of $147.95 achieved by hotels in June is the highest in the city in the past three years. Jeddah is well positioned to perform well throughout the remainder of the year and into early 2013 as the domestic demand is continued to be strong until the Levant is safe to travel. In addition, Jeddah hotels will also benefit from the limited future supply anticipated to enter the market in the short term," said Peter Goddard, managing director of TRI Hospitality Consulting in Dubai. Riyadh hotel occupancy levels remained stable in June, contracting marginally by 0.1 percentage points compared to this time last year. However, the ARR dropped 9.6 percent, causing a 9.8 percent fall in RevPAR. This reduction in top line revenues coupled with an increase in payroll by 2.2 percent resulted in GOPPAR falling 10.3 percent to $129.80. "The lower performance levels of Riyadh hotels in June reflect the annual performance cycle in which performance levels and profitability reduces in the summer months. The corporate and government segments which are the backbone of demand in the capital drop significantly, resulting in hotels applying discounts on rates to attract business. This is evident with the lower ARR's achieved in June and we expect this to continue into July and August due the holy month of Ramadan when business activity slows further," Goddard further said. In Egypt, RevPAR in Sharm El Sheikh increased 33.9 percent to $24.43 in June driven by an 11.7 percent growth in ARR to $43.15 and an increase of 9.4 percentage point in occupancy to 56.6 percent compared to the same month last year. In terms of profits, GOPPAR for the month saw an impressive growth of 91.1 percent to $11.96. Cairo hotels recorded a 2.3 percentage point increase in occupancy to 43.0 percent in June however ARR fell by 8.7 percent to $108.58. The increase in occupancy was not enough to absorb the decrease in rates with RevPAR falling 3.5 percent to $46.64. As a direct result profitability fell 17.3 percent to a GOPPAR of $38.34. Hotels in Dubai saw a boost in profits while Abu Dhabi continued to see rates and profits fall in June, the survey said. ARR in Abu Dhabi fell 8.5 percent to $115.68 in June resulting in a reduction in GOPPAR by 12.6 percent to $53.76. The reduction in ARR is a direct consequence of the increased competition in the capital and when coupled with an increase in payroll by 2.7 percentage points, resulting a sizable impact on overall hotel profitability. The modest increase in occupancy levels was the only positive indicator during June and is attributed to the increase in tourists visiting the city. "Abu Dhabi hotels are yet to show any indication of a stabilization in ARR's this year, although occupancy levels have started to plateau. The 13 percent increased room supply has been absorbed by the 14 percent increase in tourists nights reported by the Abu Dhabi Tourism Authority (ADTA) in the first five months of 2012, however new entrants continue to undercut rates in order to penetrate the market. As the market is expecting more than 20 new hotels over the next three years, the continuing rate war is likely to cause further damage to hotel owners unless some kind of consensus emerge amongst the hoteliers to maintain rates" Goddard noted. Dubai hotels continued their strong performance for 2012 in June with a 9.2 percent increase in ARR to $191.24, causing a 10.3 percent increase in RevPAR to $147.55. Occupancy levels remained stable with a 0.7 percentage point increase over the same period last year. The highlight of the performance of Dubai hotels was a 50.4 percent increase in GOPPAR to $86.26, driven by an 8.3 percent increase in total revenue per available room (TRevPAR) and a 1.0 percent reduction in payroll expenses. "Dubai was back in action again this June as a favorite summer holiday destination for domestic and regional travelers. A further boost in demand was provided by the Dubai Summer Surprises, an annual shopping and entertainment festival, which is a major attraction for families. Our data for Dubai hotels in June highlights the strength of the overall market, particularly the hotels' ability to command a substantial increase in ARR on the back of strong demand. Hoteliers have identified that the market can support an increase in rates, especially when offered with various value added products and services. We believe Dubai performance levels will remain strong until early part of 2013 when we expect the market to witness a considerable addition to supply," Goddard added. – SG
