Kuwait growth helps boost hotel sector

Economic growth has increased the number of hotels as well as the development of mixed use, service and time-share resort properties in Kuwait.

Despite suggestions that this growth is likely unsustainable, it is "likely to encourage hotel investment," according to an international report on outlook, trends and opportunities in the Middle East hotel market.

The HVS International report by authors Elie Younes and Bernard Forster also said the occupancy at quality hotels in Kuwait City had soared to approximately 85 per cent in 2003, up by 60 per cent over 2002 levels.

Buoyant occupancy combined with a solidly strong average room rate of $185 resulted in revenue per occupied room of $157, a rise of approximately 65 per cent on 2002.

For the first time, the Kuwait market out-performed all other markets in the region, the report said.

Investors were warned to be cautious about further hotel development in Kuwait. The anticipated effects of new supply combined with the uncertain stability of the strong average rate performance and the expected receding levels of visitation in the aftermath of the Iraq war represent the major components of the additional investment risk.

"To date, 85 applications for new hotels have been confirmed and that does not include resorts and serviced apartments," said an industry source.

"Kuwait already expects to see 500 more rooms in 2005 and if all these hotels were to be built, the country will have a total of 22,000 rooms in the next five years.

"Any new developments should go gradually or we will see a glut."

Funding for new projects is largely local as Kuwaitis are reinvesting in their own country after the threat from Saddam Hussain vanished after his capture. The war in Iraq had a positive impact on both the country's political stability and its economic wealth.

Kuwait experienced strong GDP growth of 4.6 per cent in 2003, driven mainly by the positive economic impact of the war.

The writer is a Kuwait-based journalist