Dubai: The hospitality industry in the Gulf Cooperation Council (GCC) countries is forecast to grow from $22.8 billion (Dh83.7 billion) in 2013 to $35.9 billion by 2018, at an annual rate of 9.5 per cent, according to a new report by investment bank Alpen Capital.

The UAE’s hospitality industry is expected to grow at a compound annual growth rate of 10 per cent between 2013 and 2018.

The growth of the industry in the region will be fuelled by the shift in global activity from the West to the East, a rise in leisure travel, higher demand for serviced apartments, a shift towards budget travel and a quicker construction pipeline, said Sanjay Bhatia, managing director of Alpen Capital in Qatar.

The sector’s growth is also expected to be driven by international tourist arrivals, especially those from Asia, and a stronger MICE [meetings, incentives, conferences and exhibitions] segment, among others, according to Sameena Ahmad, managing director of Alpen Capital in the Middle East.

The GCC has made major investments in expanding airports there. For instance, in Dubai, a Dh117.5 billion expansion of Al Maktoum International at Dubai World Central is expected to begin by the end of the year. The airport will be able to serve 120 million passengers within six to eight years.

Airports across the region are expected to handle as many as 250 million passengers by 2020, Reed Exhibitions said in a statement, quoting a study.

Challenges ahead

However, as GCC countries boost their hotel room capacity in the run up to major events there, they face the challenge of sustaining demand after those events take place, he warned. The region has made major investments in infrastructure for events, such as the World Expo 2020 in Dubai. The six-month long trade exhibition will be the main driver of the hospitality industry in the UAE, which has a leisure travel market valued at $23 billion, as per the report.

“There’s enough demand today to take care of new hospitality projects coming on stream,” Bhatia told Gulf News.

In Dubai, hotel room supply and demand could be balanced after Expo 2020, Bhatia said.

Average hotel occupancy rates in the GCC are expected to be between 68 per cent and 74 per cent between 2013 and 2018, while average daily rate is likely to be between $225 and $263 during the same period.

Other obstacles faced by the GCC include competing with newer projects and attracting skilled labour to the region.

“However, we feel that the growth of the sector will be driven by supportive policy initiatives undertaken by GCC governments to enhance infrastructure; thereby positively impacting the continued investor appetite for the region and tourism,” Bhatia said.